U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] 15, ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the fiscal year ended December 31, 1996
[ ] 15, TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________ to _________________
Commission file 02-69494
GLOBAL GOLD CORPORATION
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(Name of small business issuer in its charter)
Delaware 13-3025550
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
438 West 37th Street, Suite 5-G, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 563-5933
Securities registered under Section 12(b) of the Exchange Act:
Title of each class (Name of each exchange on which registered)
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None
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Securities registered under Section 12(g) of the Exchange Act:
None
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(Title of Class)
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(Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
|_|.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to be best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ending December 31,
1996 were $389.
The aggregate market value of the voting stock held by non-affiliates of
the Company computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within
the past 60 days was $219,807.(1)
As of December 31, 1996 there were 2,198,074 Shares of the registrant's
Common Stock outstanding.(2)
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(1) The Company's Common Stock is not publicly traded. However, the Board
of Directors of the Company determined that fair market value of the Common
Stock was $0.10 per share.
(2) This number is computed after taking into account the 1 for 10 reverse
split of the shares of Common Stock of the Company, effective as of December 31,
1996 (the "Reverse Split").
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ITEM 1. DESCRIPTION OF BUSINESS
(A) General Overview
The Company is presently engaged in the development of a gold mining
project in Armenia, and is currently considering pursuing a gold and copper
mining project in Georgia (both of which countries are members of Commonwealth
of Independent States). The Company is currently in the pre-development stage
and has not received any revenues from mining activities. Prior thereto, the
Company did not engage in any substantial business activities, except as
described in the section 1(D) entitled "Prior History of the Company."
(B) Armenian Mining Project
(a) Armenian Joint Venture Agreement
The Company, the Ministry of Industry of Armenia and Armgold, S.E., the
Armenian state gold enterprise, executed and delivered the Armenian Joint
Venture Agreement, dated as of May 1, 1996. The Company thereafter assigned its
rights and obligations thereunder to Global Gold Armenia Limited, its
wholly-owned Cayman Islands subsidiary ("GGA"). The Armenian Joint Venture
Agreement contemplates the formation of the Armenian Gold Recovery Joint Venture
Co. Ltd., a limited liability company under Armenian law ("AGRC"), which will
construct, operate and market the gold production and provide capital and
financing in a multistage development of the Armenian gold industry. Stage 1 of
the Armenian Joint Venture Agreement involves the processing of an estimated 12
million tonnes of tailings from the Ararat processing plant, which the Company
believes average 1 gram of gold per tonne (based on the independent
metallurgical study obtained by the Company) (the "Tailings Project") and the
completion of a comprehensive feasibility study and business plans for the
development of the Zod mine. Based on the business plans to be approved by all
parties, Stage 2 will consist of engineering and building a gold processing
plant at the Zod mine, and Stage 3 will consist of engineering and building a
gold processing plant at the Meghradzor mine.
As an additional measure of legal authority, the Company requested that
the Government issue a decree confirming the right of the joint venture to
export gold and the power of the Ministry of Industry of Armenia and Armgold to
make the undertakings set forth in the Armenian Joint Venture Agreement,
including, without limitation, that such Armenian parties have good title and
unencumbered ownership of all property to be transferred to such joint venture
and the power to enter into the Armenian Joint Venture Agreement. The Armenian
Government issued such decree on June 29, 1996 requiring the Company to post a
$250,000 guaranty in favor of the Ministry of Finance insuring that it invests
at least $5,000,000 into the project within eight months of such date, and the
Company delivered such guaranty, which the Armenian Government advised counsel
to the Company orally and later in a letter from the Minister of Finance was
acceptable to it. Pursuant to the Joint Venture Agreement, the Ministry of
Industry and Armgold are responsible for obtaining all further permits or
decrees needed in connection with the project.
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Under the Armenian Joint Venture Agreement:
1. The profits or products of the AGRC will initially be used to pay any
applicable debt service and thereafter will be distributable to GGA and the
Armenian parties based on a sliding scale correlated to the percentage of gold
extracted from the tailings from 50% - 50% to 66 2/3% - 33 1/3%. By virtue of
the test results concerning the tailings ore, GGA anticipates that it will be
entitled to 66 2/3% of the profits of AGRC, while Armgold will be entitled to 33
1/3% thereof;
2. AGRC was granted a two-year tax holiday, followed by eight years at
half tax (which is equivalent to a 15% tax at current rates), as permitted under
Armenian law for foreign investment.
3. Each of GGA and Armgold owns 50% of the equity of the AGRC.
4. GGA has rights to participate in the development of the Zod and
Meghradzor mines, construction of a possible new refinery, the Ararat mill and
exploration work, in each case subject to certain conditions. However, GGA
rights in these projects depend on the approval of proposed business plans and
the conclusion of additional agreements with the Armenian authorities. In the
event that GGA does not conclude such agreements, it shall have a right of first
refusal with respect to each such project.
5. GGA was required to provide $5,000,000 of equipment for the project at
the Ararat tailings site and to provide through December 31, 1996 an additional
$4,500,000 in connection with the operation of the tailings processing plan.
6. In addition thereto, GGA has to provide a number of additional services
for the project, including management, modern western technology, engineering
and design services, marketing, trading and other ancillary services as set
forth in the Armenian Joint Venture Agreement.
(b) Tailings Project
The parties have begun to implement the Tailings Project. On October 7,
1996, the Armenian Government issued a license for a five-year period in
implementation of the development plan at the Ararat tailings site, effective
after the registration of the joint venture entity, AGRC, with the appropriate
Armenian governmental authorities in accordance with applicable Armenian law.
The registration of such entity occurred on November 8, 1996. In addition, the
mining engineering firm retained in connection with the project obtained bulk
ore samples from the tailings site for testing in Canada. An independent
laboratory, which analyzed such samples, advised the Company, in its written
report in February, 1997, that the test results showed that approximately one
and one-tenth gram of gold exists in each metric tonne of the ore at the site
covered by the Tailings Project and recovery of gold could be approximately .55
grams per tonne, although there can be no assurance thereof.
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Pursuant to the decree issued in connection with the Armenian Joint
Venture Agreement, GGA was required to invest $5,000,000 in the Tailings Project
on or before February 1, 1997. Such requirement was met on or before such date,
and the Armenian Joint Venture Agreement's different financial requirements
(reflected in item 5 above) were waived by the parties. Thus, as of February 1,
1997, GGA had a definitive agreement authorized by an Armenian government decree
granting it fixed rights to process tailings from the Ararat site.
Pursuant to the Armenian Joint Venture Agreement, AGRC is now engaged in
the final engineering and initial construction for the Tailings Project. AGRC
entered into a Tailings Dam Construction Contract with Armhydro for $640,000 on
January 31, 1997. AGRC also retained a Canadian engineering firm, under a
contract for Engineering, Procurement and Construction Management Services
Agreement dated January 31, 1997, under which the compensation payable to the
contractor under Phase I of the project is $4,500,000. Operation of the tailings
processing plant is planned for September, 1997, although construction and other
contingencies exist which may delay meeting such target date.
While the Company has been advised that proven reserves exist in the
Tailings Project and that the mining thereof can be done on a profitable basis,
there can be no assurance of such result.
(c) Financing of the Armenian Mining Project - First Dynasty Mines Ltd.
Throughout 1996 and into January, 1997, the Company had discussions with
many unrelated parties in connection with arranging for the financing of the
Tailings Project. As of January 31, 1997, the Company and GGA reached an
agreement with First Dynasty Mines Ltd. ("First Dynasty"), a Canadian public
company whose shares are traded on the Toronto Stock Exchange and on NASDAQ.
The Company, GGA and First Dynasty entered into a preliminary agreement
dated January 27, 1997 whereby First Dynasty has the right, subject to certain
conditions, to advance funds in stages necessary for the implementation of the
Tailings Project and the preparation of engineering and business plan materials
for the remaining Armenian mining projects (the "First Dynasty Agreement"). The
principal terms of the First Dynasty Agreement are set forth below:
1. All funds advanced by First Dynasty will be advanced to GGA as debt,
which is convertible into stock of GGA, at First Dynasty's option, as follows:
(a) The first $6,480,000 of debt is convertible into 25% of the
capital stock of GGA.
(b) The next $3,520,000 of debt, together with the advance described
in 1(a) above, is convertible into 51% of the capital stock of GGA.
(c) For every additional $.5 million invested for expenditures
advanced in respect
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of the development of the Zod and Meghradzor mines (excluding the $10
million Tailings Project expenditure) as a loan to GGA, such debt is
convertible into an additional 1% of the capital stock of GGA, up to a
maximum of 80% of the issued and outstanding shares of capital stock of
GGA. Thus, upon advancing a total of $24,500,000 in the Armenian mining
projects, First Dynasty would be entitled to acquire 80% of the shares of
GGA, if First Dynasty elects to convert all of its debt into equity.
2. Upon obtaining 80% of the capital stock of GGA, First Dynasty would be
entitled to acquire the remaining 20% of the outstanding of capital stock of GGA
by issuance of $10,000,000 value of its common stock based on the market price
of such shares at a deemed price of $2.50 per share, except that such
$10,000,000 value of such shares will be increased proportionately to the extent
that the mineable reserves at the Zod and Meghradzor mines (which are
established after drilling at a depth at a particular time as agreed) exceed
five million ounces (such that the $10,000,000 value is based on mineable
reserves of 5 million ounces).
3. Appropriate employment arrangements would be entered into between GGA
and Messrs. Gallagher and Garrison on mutually agreeable terms.
4. The parties agreed to enter into a shareholders agreement (which will
be designed to govern the ongoing affairs of GGA) to provide, among other
things, that (i) from the date of the release of the escrow of the Initial
Commitments (as defined below), First Dynasty will be entitled to appoint two of
the five directors of GGA with the right to designate three of the five
directors if First Dynasty acquires 51% to 80% of the capital stock of GGA and
thereafter increase its representation of directors proportionate to its
ownership; (ii) GGA would appoint one representative of First Dynasty to the
AGRC board initially, increasing to two of three appointed by GGA if First
Dynasty acquires ownership of at least 51% of the capital stock of GGA; and
(iii) there would be certain matters requiring joint approval of the
shareholders of GGA, subject to the Company's entitlement to one representative
on the AGRC board for so long as it holds at least 20% of the capital stock of
GGA.
5. The Company, GGA and First Dynasty agreed to enter into definitive
agreements with respect to the financing of the Armenian mining projects as soon
as reasonably practicable after the end of First Dynasty's due diligence period.
Such due diligence period lasts until March 30, 1997 or such other mutually
agreeable date (but not beyond April 15, 1997 unless otherwise agreed by the
parties). Such definitive agreement will incorporate the terms and conditions of
the First Dynasty Agreement together with certain representation of warranties
and covenants related thereto.
Pursuant to the First Dynasty Agreement, First Dynasty carried out certain
initial commitments described below (collectively the "Initial Commitments"):
a. First Dynasty loaned $675,000 to GGA to repay 50% of the
outstanding payables of $1,350,000 incurred by the Company and GGA.
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b. Upon the signing of the $640,000 Tailings Dams construction
contract with Armhydro, First Dynasty funded $5,000, and on or before February
10, 1997, advanced an additional $91,000, and, thereafter, First Dynasty has
agreed to fund the balance.
c. First Dynasty agreed to guarantee or co-sign for up to $3,500,000
of the equipment purchase contract and up to $1,000,000 of the engineering,
procurement, construction management agreement between AGRC and a Canadian
engineering firm. Also, First Dynasty agreed to advance funding for expenditures
thereunder as jointly agreed by the Company and First Dynasty from time to time,
subject to certain cancellation provisions agreed to by First Dynasty.
d. First Dynasty further agreed to loan $675,000 to GGA, to cover
the balance of the outstanding payables, on March 31, 1997 (if sufficient
outstanding warrants to purchase First Dynasty common stock were exercised prior
to the first expiration date thereof of March 13, 1997) or 90 days after the
signing of the First Dynasty Agreement.
The initial payment of $675,000 was in fact advanced by First Dynasty and
disbursed according to the agreement.
The Company and GGA are now negotiating the terms of the definitive
agreement by and among them. While the Company believes that a definitive
agreement will be executed and delivered by such parties, there can be no
assurance of such result.
(d) Mining Plans
GGA, in conjunction with First Dynasty, is currently negotiating with the
Armenian Government to obtain for AGRC, or separate, similar joint venture
companies, rights to mine and process gold at the Zod and Meghradzor mines on a
schedule which is faster than anticipated by the May 1, 1996 Joint Venture
Agreement, although there can be no assurance of the outcome thereof.
The gold mine in Zod, one of the world's larger gold mines, has been in
operation since about 1975. The mine has a structure of over 5 kilometers in
length; only 2 kilometers of the gold structure has been explored and tested,
and reserves have been established by Armenia and Russian geologists. Zod is
located in eastern Armenia within fifteen kilometers of the Soviet border
between Armenia and Azerbaijan according to various maps. The de facto border is
substantially farther away and the Armenian Government has represented that it
has good title to the mine. The Azerbaijan Government has recently stated that
it had sent notes of protest to the U.S. Embassy in Armenia questioning the
appropriateness of an American company carrying on activities so close to
occupied territories at the Zod mine. The U.S. Embassy has no record of receipt
of such protests. Engineering studies undertaken by the Government Armenia state
that there are proven gold reserves of approximately 5,000,000 ounces of gold.
However, these reserve figures have not been independently confirmed by the
Company at this time and there can be no assurance that reserves in such amount
exist, or, if they exist, can be mined on a profitable basis.
The ore at Zod has been mined historically by open pit and underground
methods. The ore from the mine site has been shipped to the Ararat processing
plant located approximately 275 kilometers from the mine site. Mining had been
conducted at the Zod mine site at an average annual
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rate before 1996 of approximately 60,000 tonnes of ore per year by both
underground and open-cut operations, but such mining operations ceased in
November, 1996 due to lack of funding. The Company believes that such average
tonnage constitutes less than the mine's capacity.
The Meghradzor mine is situated in Central Armenia some 75 kilometers
north of Yerevan. The mine has produced approximately 300,000 tonnes of ore
since commencing production in 1987. The ore produced by the mine is hauled by
railroad approximately 100 kilometers to the Ararat treatment plant. Like Zod,
Meghradzor has the benefit of excellent regional infrastructure including sealed
road and railroad access to the site and connection to the Armenian Power Grid.
Current production levels are less than 2,000 metric tonnes per month due to
many similar issues which face the Zod mine including low re-investment, poor
equipment availability, lack of consumables and the high costs associated with
railing of crude ore to Ararat.
As with Zod, underground exploration has been accomplished by extensive
underground mine development in addition to drilling, with the result that over
60 kilometers of underground workings exist.
Engineering studies undertaken by the Government of Armenia state that
there are proven gold reserves of approximately 700,000 ounces of gold. However,
these reserve figures have not been independently confirmed by the Company at
this time and there can be no assurance that reserves in such amount exist, or,
if they exist, can be mined on a profitable basis.
Based on projections furnished by independent engineering firms, the
Company believes that approximately $10,000,000 is needed in the first phase of
the project, $80,000,000 in the second phase of the project and $100,000,000 in
the third phase of the project. The funds for the first phase would be used
primarily to construct a new tailings processing plant. The funds for the second
phase would be used to construct a new processing plant at the Zod mine site
with a capacity of processing 1,000,000 metric tonnes per year and to redesign
the mine. Of the sum of $100,000,000 for the third phase, $60,000,000 would be
used to increase the capacity of the Zod processing plant to 2,500,000 metric
tonnes per year. The additional $35,000,000 in phase three is proposed to be
used to construct a processing plant at the Meghradzor mine with a capacity of
processing 200,000 metric tonnes per year. Also, an additional $5,000,000 on
phase three is proposed to be used to build a gold refinery in Armenia with a
capacity of refining 300,000 ounces of gold annually. However, since the Company
has not conducted any feasibility study with respect to these projects, the
ultimate financing needs for these projects might vary substantially from that
set forth above.
(C) Georgia Mining Project
(a) Existing Agreements
1. Current Status
Pursuant to the Asset Purchase Agreement between Eyre Resources N.L.
("Eyre") and the
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Company dated as of June 30, 1995 (the "Agreement"), the Company, through its
wholly-owned subsidiary, Global Gold Georgia Limited, succeeded by an assignment
dated December 1, 1995 to all of Eyre's rights in the Georgian Project (as
defined therein, as further described in Item 12 hereof).
Eyre signed a Foundation Agreement(3), dated April 22, 1995, together with
the charter of the
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(3) The Foundation Agreement provided that:
1. Eyre was to have a 50% interest in the GJV Co.
2. RCPA was to contribute buildings and equipment and certain rights
under its license for development of the Madneuli deposit and pay the expenses
of formation of the GJV Co. and provide and guarantee access to ore material and
relevant information.
3. The Company or its wholly-owned subsidiary, upon the assignment
of Eyre's interest in the Foundation Agreement, was to provide capital
investments, management, control, engineering, construction and other technical,
marketing and other services.
4. Contributions to the Charter Fund were to be $10,000, to be made
by the Company or its wholly-owned subsidiary upon the assignment by Eyre of its
joint venture interest to it and be deemed to be a contribution of 50% by the
parties to the Foundation Agreement.
5. The Foundation Agreement provided for management of the GJV Co.
pursuant to a Board of Directors of four individuals, two of which were to be
designated by each party, with the Chairman to be appointed by the majority
shareholder.
6. Prior to recovery of capital by the non-Georgian party, net
profits of the GJV Co. after expenses were to be distributed as follows:
(i) RCPA - 9.75%
(ii) The Company - 9.75%
(iii) Panquest - .25%
(iv) Sinking Fund - .25%, and
(v) Capital Repayments - 80%.
7. After recovery of capital, the net profits were to be distributed
as follows:
(i) RCPA - according to shareholdings (i.e. share of the
Foundation Fund, which shares could be changed only by unanimous vote of the
participants), less 2.5% to the Sinking Fund, and
(ii) The Company (or its wholly-owned subsidiary) - according
to shareholdings less 2.5% to Panquest.
8. The GJV Co. was to be entitled to certain tax concessions
provided to certain foreign investments.
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limited liability company to be formed (the "Foundation Agreement"), with
Research-Cum-Production Amalgamation "Madneuli" ("RCPA"), a legal entity formed
under Georgian legislation, pursuant to which the parties agreed to the
formation of a joint venture limited liability company called "Madneuli Copper
Gold J.V." (the "GJV Co.") under Georgian law to carry out the mining of the
Madneuli deposits and apply modern mining techniques in Georgia, including
carrying out prospecting activities, together with certain unrelated activities
that the Company currently has no plans to implement.
Legislation enacted by the Government of Georgia in 1995 required that the
license under which certain rights will be granted to the GJV Co. pursuant to
the Foundation Agreement to be re-registered with a newly-created licensing
bureau of the Ministry of Environmental Protection. The bureau in question
reviews the prior license and determines whether it was legally issued. If the
license holder fails to re-register, the license will be suspended until
re-registration occurs, which may result in the permanent suspension of the
license. However, no application for the re-registration of the license in
question was filed by Eyre. The director of RCPA who signed the Foundation
Agreement was removed from his position. Moreover, under newly enacted law, in
connection with re-registration of licenses, concessions may have to be obtained
from the Government of Georgia. Such concessions would be the subject of a
concessional contract requiring certain terms required under the new law.
As of the date hereof, neither the Company or Global Gold Georgia Limited
has any rights to the Madneuli mining project. The Company recently learned that
the Georgian Government is planning to privatize the development of the Madneuli
mine through a public bidding process which is slated to end on April 15, 1997.
Since the structure of the Madneuli mining project under the public tender
differs markedly from that contemplated under the Asset Purchase Agreement
between the Company and Eyre dated as of June 30, 1995, the Company has decided
not to submit a bid for the development of the Madneuli mining project. Thus,
there can be no assurance that the Company will be successful in acquiring any
rights or concluding any definitive agreements with respect to the Madneuli
mining project, or, if so, on terms acceptable to it. Furthermore, if the
Company does acquire any rights to the Madneuli mining project, there can be no
assurance that it will be able to obtain financing for the acquisition or
development thereof, or, if so, on terms acceptable to the Company.
(b) Madneuli Mine
The Madneuli deposit has been in operation since about 1975, and is
located approximately 75 kilometers to the southwest of Tiblisi, the capital of
Georgia. The ore body at Madneuli was discovered in 1952 and exploration
continued until production commenced in 1975. The mine currently employs
approximately 1400 people.
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9. Disputes arising under the Foundation Agreement were to be
subject to arbitration at the Arbitration Court in Stockholm, Sweden.
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The mine is an open-pit operation. Engineering studies undertaken by the
Government of Georgia indicate that there are proved and probable reserves of
26,000,000 metric tonnes of ore with copper of 1% and .7% of gram of gold per
tonne at the Madneuli mine. However, these reserve figures have not been
independently confirmed by the Company at this time, and there can be no
assurance that reserves in such amount exist, or, if they exist, can be mined on
a profitable basis. The Company believes that the mine is operating at
substantially less than its planned capacity.
(D) Recent Activities
(a) Investment in Jet-Line Environmental Services, Inc.; Restructuring of
Investment
Jet-Line Environmental Services, Inc. ("Jet-Line") is a privately-held
Delaware corporation organized in 1970, and is engaged in providing various
environmental clean-up services for a variety of customers, including fuel
service, laboratory services, disposable services, transportation and safety and
compliance services. A copy of Jet-Line's compiled and unaudited financial
statement for the calendar year ended December 31, 1996 showed a loss of
approximately $377,000 for such year.
On April 21, 1993, the Company loaned $300,000 to Jet-Line, which is
evidenced by Jet-Line's promissory note that originally was convertible into 20%
of Jet-Line's common stock, and 25% of its common stock upon the payment (upon
conversion) to Jet-Line of $75,000, at the option of the Company, as provided
therein (the "Jet-Line Note"). The Jet-Line Note, which matured on April 21,
1996 and which was restructured on May 13, 1996, is secured by a pledge of
transportation equipment and machinery and equipment used in Jet-Line's business
and a Jet-Line owned warehouse and office laboratory building totalling 22,500
square feet located on one acre of land. The total appraisal value of the assets
when made in part in December, 1992 and in part in early 1993 was in excess of a
total of $1,500,000, but the Company does not know the appraised value of such
collateral at present since no updated appraisal of such assets has been made.
Prior to such transaction, Jet-Line had no affiliation of any kind with the
Company or its stockholders.
The Jet-Line note is subordinated to an SBA loan from the Business Loan
Center to Jet-Line in the original principal amount of $550,000 (the "SBA
Loan"), which has been reduced to approximately $500,000 as of the date hereof.
Payments are permitted to be made on the Jet-Line Note to the Company to the
extent permitted under the United States Small Business Administration
Authorization and Loan Agreement for the SBA Loan made. However, if Jet-Line has
a default under the SBA Loan or suffers an adverse change in its financial
condition, assets or business, Jet-Line will not then be permitted to make
payments of the Company on the Jet-Line Note. Thus, since Jet-Line is currently
in default on the SBA Loan, the Company is not receiving any payment on the
Jet-Line Note. Moreover, since the inception of the Jet-Line Note, the Company
has not received any interest or principal payments thereunder and has merely
accrued interest thereunder.
On May 13, 1996, the Company and Jet-Line executed and delivered an
agreement (the "Loan Extension Agreement") with respect to the Jet-Line Note
under which
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(a) the parties extended the maturity of the Jet-Line Note until
December 31, 1996, including all unpaid interest, except for the interim
interest payments described in (b) below;
(b) Jet-Line agreed to pay $2,000 a month in interest commencing
with June, 1996 through December, 1996 and, in addition, make an additional
interest payment equal to 5% of its earnings before income taxes and without
regard to depreciation and amortization, up to a ceiling amount of $7,500 per
month, each month during the above seven-month period;
(c) the parties recognized that the Jet-Line Note is convertible in
whole or in part at any time, unconditionally into 20% of common stock of
Jet-Line issued and outstanding after such conversion;
(d) the Company would have the right to convert the Jet-Line Note
into an additional five percent of the issued and outstanding common stock of
Jet-Line outstanding after its conversion (thereby bringing its interest to 25%
of such stock) upon payment of $37,500 (instead of $75,000) at the time of such
exercise; and
(e) the Company also obtained the right to convert the Jet-Line Note
into an additional five percent of the Jet-Line common stock issued and
outstanding after such conversion (thereby potentially bringing its interest to
30% of such stock) upon the payment of an additional $100,000 in cash at the
time of such exercise.
However, in June, 1996, Jet-Line advised the Company that the Business
Loan Center, which issued a U.S. Small Business Administration guaranteed loan
to Jet-Line, objected to the implementation of any payments required to be made
under the Loan Extension Agreement on the ground that Jet-Line was in default
under its SBA-guaranteed loan. Accordingly, Jet-Line has not made any of the
monthly payments required under the Loan Extension Agreement.
Since Jet-Line has been experiencing operating losses, and lacks adequate
liquid resources, it is highly unlikely that Jet-Line will be able to pay the
full amount of the principal and accrued interest on the Jet-Line Note. In
addition, Jet-Line advised the Company in early March, 1997 that it received a
notice of the revocation of its license to operate its business in
Massachusetts, and of a $100,000 fine, from the Massachusetts environmental
authorities, and Jet-Line contested such revocation and fine in the
Massachusetts state courts unsuccessfully. As a result, Jet-Line has been
requested by such authorities to sell its facility in Massachusetts, and
Jet-Line is now engaged in negotiations with a potential buyer with respect to
such sale. The Company sent Jet-Line a written notice of default and demand for
payment on March 14, 1997, and a further demand letter on April 2, 1997, and is
considering whether to sell the assets in which it holds a first security
interest. The Company has also requested Jet-Line to seek an additional
financing and to use part of the proceeds therefrom to satisfy the Jet-Line Note
in full. However, there can be no assurance that Jet-Line will be able to
consummate such sale or obtain such a financing. Thus, there can be no assurance
that the Company will ultimately be paid the full principal amount of, and
accrued interest on, the Jet-Line Note.
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(b) Loan to Envirotherm
The Company made a loan of $25,000 to Envirotherm on October 17, 1994.
Such loan was guaranteed by Jeffrey Aspacher and B. Ryland Wiggs, two
shareholders of Envirotherm, who in 1996 and 1995 filed bankruptcy proceedings,
respectively. In addition, such loan was secured by an interest in certain
patent rights held by Mr. Wiggs. Also, the Company provided certain
administrative services to Envirotherm, including the furnishing of office space
to one of its officers. Under the parties' agreement, the sum of $27,500 was due
and payable on November 17, 1995, the sum of $30,000 was due and payable on
December 17, 1994, the sum of $37,500 on January 17, 1995, $50,000 on April 17,
1995, and, in the event of a default, the sum of $100,000 would be payable on
October 17, 1995. The loan was not repaid despite the Company's attempts to
collect the same.
Envirotherm is a Delaware corporation organized in September, 1994 and was
engaged in manufacturing and selling geothermal heating and cooling units and
other products. The Company began its first shipment of the products in July,
1995, experienced operating losses and went out of business in early 1996. As of
March 1, 1996, Envirotherm was dissolved under Delaware law by virtue of its
non-payment of Delaware franchise taxes.
As a result of Envirotherm's dissolution and inability to pay the loan,
the Company treated such loan as worthless as of December 31, 1996.
Mr. Gallagher owns 4% of the common stock of Envirotherm, which he
received for consulting services rendered by him subsequent to and independent
of the loan transaction described above.
(c) Offering of Convertible Notes of the Company
Pursuant to the Confidential Private Offering Memorandum dated May 17,
1995, as amended, the Company sold the maximum of $500,000 principal amount of
its 10% Convertible Notes, which had a maturity date of September 30, 1996 (the
"Offering"). The Offering of Convertible Notes, Warrants and Common Stock was
offered pursuant to the Memorandum solely to persons who are "accredited
investors" as defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), in a transaction exempt from
registration thereunder. The final date of the closing of the Offering was
December 31, 1995.
The Company undertook the Offering in order to raise additional funds for
the Company to enable it to engage in the development and commercial
exploitation of the Armenian and Georgian Mining projects, in an attempt to
generate a potential and substantial asset base and potential future
profitability for the Company as part of the Company's long-term strategy to
develop profitable mining operations abroad.
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All of the $500,000 principal amount of Convertible Notes was
automatically converted pursuant to their terms into an aggregate of 2,000,000
shares of Common Stock (prior to the Reverse Split) and warrants to purchase
4,000,000 shares of the Company's Common Stock (prior to the Reverse Split), at
an exercise price of $0.50 per share, which warrants will expire on December 31,
1997 after the several amendments made thereto extending the expiration date
thereof (the "Warrants"). Since all of the automatic conversion conditions were
satisfied in 1995, there were no Convertible Notes of the Company outstanding as
of December 31, 1995 or thereafter.
(d) Transaction with London & International Mercantile Limited.
On July 18, 1996, the Company, London & International Mercantile Limited
("LIM"), a financial institution organized under the laws of England and Wales
in 1980, and HCL Communications Ltd. ("HCL"), a newly formed corporation
organized under the laws of England and Wales in 1996, executed and delivered
two agreements with respect to the financing of the Company, which are
summarized below:
(1) Under Agreement 1, LIM issued a guarantee in the amount of
$250,000 in favor of the Ministry of Industry of Armenia guaranteeing the
performance of the Company's obligation with respect to the ordering of
$5,000,000 of equipment with respect to the Tailings Project.
(2) Under Agreement 2, LIM issued a guarantee in the amount of
$250,000 in favor of Kilborn SNC/Lavalin Inc. ("Kilborn") guaranteeing the
payment by the Company of any of its obligations to Kilborn in connection with
its performance of services related to the Company's implementation of the
Armenian Joint Venture Agreement.
(3) (x) As collateral security for undertaking each such guarantee,
the Company issued to LIM the following security for each guarantee: (a)
1,000,000 shares of the Company's Common Stock and (b) three warrants to
purchase 666,667, 666,667 and 666,666 shares of the Company's Common Stock,
respectively, or a total of 2,000,000 shares, at an exercise price of $3.00 per
share, (all computed prior to the Reverse Split) . The first warrant was to
expire on the earlier of (a) June 15, 1997, or (b) 60 days after the receipt by
the Company of the feasibility study from Kilborn reflecting that the Zod mine
in Armenia has proven reserves in excess of $1,000,000,000. The second warrant
was to expire on the earlier of (a) December 15, 1997 or (b) 60 days after the
receipt by the Company of the feasibility study from Kilborn reflecting that the
Zod mine in Armenia has proven reserves in excess of $1,000,000,000 (all
computed prior to the Reverse Split). The third warrant was to expire on the
earlier of (a) June 15, 1998 or (b) 60 days after the receipt by the Company of
the feasibility study from Kilborn reflecting that the Zod mine in Armenia has
proven reserves in excess of $1,000,000,000. Thus, the Company issued a total of
2,000,000 shares of its Common Stock and warrants to purchase 4,000,000 shares
of its Common Stock at an exercise price of $3 per share.
(y) Under each of the two Agreements, LIM was required to
return all of the shares of Common Stock of the Company and warrants to purchase
such stock issued to it as collateral if no payment was made under the
respective guarantees or, if HCL exercised its option to purchase a
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portion of such shares and warrants, the portion of such shares and warrants as
to which HCL did not exercise its option. If LIM made any payment under its
guarantees, the Company would be liable to pay such amount, and, in the event it
failed to do so, LIM would be entitled to use the collateral security held by it
to satisfy the amount due it. In such circumstances, the number of shares of
Common Stock of the Company and warrants LIM would be entitled to retain or sell
to satisfy the Company's obligations to it would be determined in accordance
with applicable English law.
(z) As a condition to LIM's issuance of its two Company
guarantees, LIM required Drury J. Gallagher, the Company's President, and Robert
A. Garrison, the Company's Vice President to guarantee personally, on a joint
and several basis, the repayment of any amount paid by LIM pursuant to its
guarantees.****
(4) The collateral security issued by the Company with respect to
the guarantee issued by LIM in favor of the Ministry of Industry of Armenia was
held in escrow by an English attorney, subject to the receipt of the written
acceptance by the Ministry of Industry of Armenia of the guarantee issued by LIM
which is a condition only between LIM and the Company. Since there had never
been any such written acceptance of such guarantee, such property was held in
escrow, although the Tailings Project had been implemented by the Armenian
Government as discussed previously and oral acceptance of such guarantee was
given.
(5) The Company also paid LIM fees of $23,750 for issuing such
guarantees, and owes LIM $5,657.50 for its legal fees and other expenses related
to the issuance of such guarantees.
(6) LIM, in turn, granted HCL Communications Ltd. an option for 61
days from July 18, 1996 to purchase the 2,000,000 shares of the Company's Common
Stock at $1.50 per share and the warrants to purchase 4,000,000 shares of the
Company's Common Stock at $3 per share held as collateral security by it (all
computed prior the Reverse Split). Under the Agreements by and among the
Company, LIM and HCL, any proceeds received by LIM upon the exercise of such
option by HCL were to be held by it as additional collateral security until the
release of the guarantees without any payments being made by LIM thereunder.
(7) The Company gave LIM the right to arrange a lease-purchase
rental, borrowing or other facility for the Company to acquire the equipment
needed for the Tailings Project, and the
- ----------
**** In consideration therefor, the Company on July 19, 1996 granted
non-qualified options to each of Messrs. Gallagher and Garrison to purchase
250,000 shares of the Company's Common Stock (computed prior to the Reverse
Split) at an exercise price of $1.00 per share, which expire on July 18, 1999,
under the Company's 1995 Stock Option Plan. On November 4, 1996, the Company
amended such exercise price to $0.50 per share because of the Company's failure
to obtain the anticipated financing of the Tailings Project from LIM by such
date. Such options were cancelled as of January 3, 1997. See Item 12(A) for a
description of the transaction covering such cancellation.
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Company undertook to accept such offer if the terms were commercially
competitive both as to the price of such equipment and the lease terms with
respect thereto.
(8) The Company also agreed, among other things, to use its best
efforts to arrange for the commencement of the public trading of its Common
Stock on the NASDAQ electronic bulletin board within 60 days from July 18, 1996
and to seek a NASDAQ Small Cap listing within 90 days of such date, provided
that the Company met the NASDAQ equity requirements in the latter case. However,
since the Company did not meet such NASDAQ equity requirements, it never sought
to have its stock traded on NASDAQ.
LIM advised the Company in October, 1996 that HCL would not exercise the
option described herein, that LIM had no intention to purchase any of the
Company's Common Stock or warrants to purchase such stock and that LIM did not
intend to arrange any financing or lease for the equipment needed in the
Tailings Project. Moreover, LIM's guaranty to Kilborn expired in error on
October 27, 1996. The Company decided not to implement the corrected extension
thereof for an additional three months, and instead obtained the return and
cancellation, pursuant to the applicable provisions of Agreement 2, of the
1,000,000 shares of the Company's Common Stock and warrants to purchase
2,000,000 shares of its Common Stock held as collateral security for such
guaranty by LIM (computed prior to the Reverse Split).
Moreover, since the Company and GGA met the terms of the decree issued by
the Armenian Government of the Armenian Joint Venture Agreement on or before
February 1, 1997, LIM had no liability under its second $250,000 guarantee. As a
result, the Company obtained the return and surrender, pursuant to the
provisions of Agreement 1, of the 1,000,000 shares of the Company's Common Stock
and warrants to purchase 2,000,000 shares of its Common Stock held as collateral
security by LIM for such guarantee (computed prior to the Reverse Split).
Thus, all shares of the Company's Common Stock and warrants to purchase
such stock issued to LIM as collateral security have been cancelled.
(e) Reverse Split
Various prospective investment banking firms and potential investors who
expressed an interest in providing funding for the Company's projects in 1996
requested that the Company undertake a reverse split of its Common Stock to
decrease the number of shares outstanding and thereby facilitate possible future
financings. Accordingly, the Company effected a 1 for 10 reverse split of its
common stock effective as of December 31, 1996. Such step was taken by the
written consent of the holders of a majority of the Company's issued and
outstanding shares of Common Stock. By virtue of the Reverse Split, each
stockholder's number of shares of Common Stock became 1/10th of the number
previously held. The Company filed its Certificate of Amendment to the
Certificate of Corporation with respect to the reverse split with the Delaware
Secretary of State on December 31, 1996.
(f) Employees.
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As of December 31, 1996, the Company had two employees, one of whom was in
charge of the overall business of the Company on a part-time basis, and one who
is principally involved in overseeing the Company's proposed mining activities
on a part-time basis, and two independent contractors who provide administrative
and clerical services on a part-time basis.
(E) Special Considerations
The following risk factors should be considered in connection with an
evaluation of the business of the Company:
No Prior Operating History; Failure to File Reports with the SEC
The Company was incorporated on February 21, 1980, and closed a public
offering of the Common Stock in January, 1981. Several months after the closing
of such offering, the Company withdrew the listing of the Common Stock for
trading on NASDAQ because of the theft of substantially all of the cash funds of
the Company derived from the proceeds of the public offering by its then
president, Samuel McNell in July, 1981. After the consummation of the public
offering, the Company failed to file any further annual or periodic reports
required under the Exchange Act. While the Company filed its Form 10-KSB for the
calendar years 1994 and 1995 and its Form 10-QSB commencing with the quarter
ended ended March 31, 1995 and each quarter thereafter through and including
September 30, 1996 and filed audited financial statements with the Form 10-KSB
for calendar year 1994 covering calendar years 1987, 1988, 1989, 1990, 1992,
1993 and 1994, and covering calendar year 1995 with the Form 10-KSB filed for
such year, there can be no assurance that the SEC might not assert claims
against the Company and its present and former directors and officers, which
actions might adversely affect the future conduct of the Company's business or
prevent the future trading of the Company's stock on public markets.
Furthermore, the Company's past failure to file reports with the SEC may have an
adverse impact on the Company's ability to have the shares of Common Stock
listed for trading on NASDAQ in the event that the Company is otherwise able to
meet the NASDAQ Stock Market listing standards in the future.
Development Stage Company
Since the Company never engaged in the active of conduct of a trade or
business, it has not generated any revenues to date, with the exception of
interest income on the funds recovered by the Company it in the lawsuits
prosecuted by it as a result of the theft of the Company's funds. The Company
may encounter problems, delays, expenses and difficulties typically encountered
in the development stage, many of which may be outside of the Company's control.
These include, without limitation, unanticipated problems and additional cost
relating to the development, production, marketing, and competition. The Company
expects to incur operating losses for the near term future and, in any event,
until such time as it derives substantial revenues from the sale of concentrates
containing gold and copper, if any. There can be no assurance that the Company
will develop successful operations.
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If, as anticipated, the Company, GGA and First Dynasty sign definitive
agreement covering the development of the contemplated Armenian mining projects,
the Company believes that it, in conjunction with First Dynasty, should be able
to obtain the financing needed for the development of such projects. However
there can be no assurance that the Company and GGA will be able to enter into a
definitive agreement with First Dynasty. Furthermore, even if such definitive
agreement is signed, there can be no assurance that such parties will be able to
obtain the requisite full financing needed for the projects, or, if so, on terms
acceptable to them.
Need for Additional Cash
The Company needs substantial additional funds to develop the mining
projects in Armenia (and Georgia as well if it obtains any definitive rights to
any mining project there) and to fund the operations thereof. If the Company
raises no additional financing either through First Dynasty or otherwise, the
Company still may be able to exploit certain opportunities to develop gold
projects in Armenia through the sale thereof. Although the Company believes that
such an opportunity is a valuable asset, there can be no assurance of such
result. If the Company and GGA do not enter into a definitive agreement with
First Dynasty, the Company and GGA may not be able to benefit in any significant
way from such project, and may be forced to sell its interest in such project to
other potentially interested parties. In addition, while the Company does not
intend to bid in the public tender concerning the Madneuli mining project, it,
in any event, does not have any financing for such purpose. Moreover, there can
be no assurance that any financing for the Armenian or Georgian projects will be
available for such purposes or that such financing, if available, would be on
terms favorable or acceptable to the Company.
Lack of Definitive Nature of the Company's Contracts for the Armenian Mining
Projects and Absence of Any Agreements with respect to any Georgian Mining
Project
At present, the Company and GGA, in conjunction with First Dynasty, is
negotiating for AGRC to develop the Zod and Meghradzor mines on definitive terms
acceptable to all parties. While the Company anticipates that a definitive
agreement will be obtained covering such development, there can be no assurance
of each result.
At present, neither the Company or its subsidiary, GGA, has any rights to
the Madneuli mining project in Georgia. Also, the Company has decided not to
submit a bid in the public auction thereof. Moreover, any agreement relating to
the Madneuli project may be subject to the approval of the various governmental
agencies and/or the legislature of Georgia. Furthermore, there can be no
assurance that any definitive agreements with the Government of Georgia will be
executed and delivered by the appropriate parties, or if so, will be approved by
all the required authorities or that, if approved, would be on terms and
conditions acceptable to the Company or GGA.
Lack of Adequate Insurance Protection of the Company's Potential Investments in
Georgia and Armenia
The Company plans to obtain insurance from Multilateral Investment
Guarantee Agency
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("MIGA") or other like organization to insure any ownership it may have in the
Armenian (and possible Georgian) mining projects against three risks:
expropriation, inconvertibility of currency and acts of war, unrest or riots in
the country. MIGA typically issues insurance commitments equal to the amount
representing the original investment, debt on the project and retained earnings
with respect thereto. If obtained, such insurance will not provide complete and
adequate protection for any investment the Company may make in such countries.
Moreover, there can be no assurance that such insurance will be available, or,
if so, will be available on terms and conditions satisfactory to the Company.
Prices of Materials
Since the Company's future projected revenues will be derived almost
entirely from the sale of concentrates containing gold, the Company's future
earnings, if any, will be directly related to market prices for gold. The prices
for such commodity has historically fluctuated widely and are affected by
numerous factors beyond the Company's control. There can be no assurance that
the Company can enter into any price protection program adequate to prevent any
potential loss from such fluctuation.
Reserves
While the Company believes that, based on geology reports and mine
engineering data made available by Armenian state enterprises, there are
substantial proved reserves in the Armenian mining projects, it should be noted
that any such quantities may not actually be realized by the Company. Moreover,
except in the case of the provable reserves verified in the case of the Tailings
Project, any reserves pertaining to the other contemplated Armenian mining
projects have not yet been independently verified by the Company, although an
engineering firm is in the process of preparing a feasibility report with
respect to the Zod mine. The deposits from which such reserves are presently
being or are expected to be produced or developed may not conform to geological
or other expectations, with the result that the volume and grade of reserves
recovered and the rates of production may be more or less than anticipated.
Further, market price fluctuations in gold and changes in operating and capital
costs may render certain ore reserves uneconomical to develop. No assurance can
be given that any reserves proved or estimated will actually be produced.
Location and Industry Risks
The Company's proposed mining operations will be subject to a variety of
potential engineering, seismic and other risks, some of which can not be
predicted. Such factors may cause personal injury to personnel at the projects
or critical property damage or significant interruptions to production, and may
not be covered by insurance. The mines may also be subject to the usual risks
encountered in the mining industry, including unexpected geological conditions
resulting in cave-ins, flooding and rock-bursts and unexpected changes in rock
stability conditions. While it is contemplated that customary insurance will be
obtained, there can be no assurance that such insurance will provide adequate
protection against any or all of the risks in question. Also, the Company's
proposed mining operations may encounter problems in transporting any
concentrates to potential markets (including obtaining requisite governmental
approvals and licenses) and conducting mining activities as a result of lack of
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fuel, electricity, water, equipment, spare parts or other necessary items.
Environmental Matters
While the Company intends to conduct its foreign mining operations in
compliance with all relevant environmental laws, rules and regulations of the
host countries, there can be no assurance that such laws, rules and regulations
will not be violated. Moreover, such operations are subject to the risk of any
future environmental laws, rules and regulations that the foreign countries or
subdivisions therein might impose, which could involve potentially onerous
restrictions on mining operations and significant increased operating and
engineering costs. The impact of any such possible changes cannot be predicted.
Holding Company Structure
The Company is a holding company which will conduct its business through
subsidiaries. As a result, the Company's cash flow and consequent ability to
make dividend payments and meet its debt obligations are primarily dependent
upon the earnings of its subsidiaries and on dividends and other payments
therefrom. Any right of the Company to participate in any distribution of the
assets of its subsidiaries upon the liquidation, reorganization or insolvency of
such subsidiaries would, with certain exceptions, be subject to the claims of
the creditors (including trade creditors) and preferred stockholders, if any, of
such subsidiaries, or may otherwise be restricted by virtue of a stockholder
agreement with respect thereto.
Competition
There is intense competition in the mining industry. If the Company does
engage in its proposed mining activities, it will be competing with larger
mining companies, many of which have substantially greater financial strength,
capital, marketing and personnel resources than those possessed by the Company.
Need for Key Personnel
The Company presently only has one employee intimately familiar with the
operation of mining projects or the development of such projects. While the
Company originally intended to rely on the management services to be provided by
a newly-formed mining management corporation, which has no history of
operations, Autosport (Asia) Pte. Ltd., a Singapore corporation controlled by
Eyre, to supervise the mining development services on behalf of the Company
pursuant to a mining supervision contract signed at the Eyre Closing, such
agreement was cancelled pursuant to the terms of the Initial Restructuring
Agreement. Accordingly, the Company now intends to rely on the services of
independent mining enterprises which will have a future interest in the
development of any mining project. There can be no assurance that any such
management corporation will have adequate resources or personnel to perform such
function. Although the Company believes that such management services which may
be provided by such independent mining company will be adequate to protect the
Company's
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interest in, and oversee the day-to-day operation of, the mining projects, there
can be no assurance of such result. While the Company does not believe the loss
of its president or any other director or officer of the Company will materially
and adversely affect its long-term business prospects, the loss of any of the
Company's senior personnel might potentially adversely affect the Company until
a suitable replacement could be found. While the Company has employment
agreements with two of its officers, Drury J. Gallagher and Robert A. Garrison,
such agreements are for only three-year terms which expire on June 30, 1998.
There can be no assurance that such agreements will be renewed or, if renewed,
will be on terms mutually acceptable to all parties.
Failure to Satisfy Nasdaq Listing Rules
Effective in August, 1991, the SEC approved the adoption by the NASDAQ
Stock Market of new maintenance standards for companies whose securities are
traded on NASDAQ. Under these new standards, among other things, a corporation
must have $4 million in total assets and $2 million in capital and surplus and a
minimum bid price of $3.00 per share in order to be eligible for a Nasdaq
listing. At December 31, 1996, the Company had total assets of approximately
$2,042,322 and stockholders' equity of $571,603. Without increases in assets and
capital surplus, the Company may not be able to be eligible to have its
securities traded on NASDAQ. Moreover, recent regulations issued by NASDAQ have
increased the thresholds that have to be met in order for a security to be
traded initially on the NASDAQ Small Cap and National Markets, which may
adversely the Company's ability to have its common stock traded on the NASDAQ
Small Cap or National Markets. Furthermore, the Company could experience
difficulties in commencing the trading of its securities on NASDAQ. If the
Company is unable to have its securities traded on NASDAQ, its securities will
continue to be eligible for trading on the NASDAQ bulletin board, although the
market for shares of the Company's Common Stock may be reduced and, hence, the
liquidity of the shares of Common Stock and/or the Warrants may be reduced.
Restrictions on Transfer
Pursuant to the Stockholders Agreement, the current five principal holders
of the Company's Common Stock, Messrs. Gallagher, Hayman, Hayman, and Ryan and
the Seitz Family Limited Partnership have agreed not to sell the shares of
Common Stock owned by them for a period of 24 months following the date of the
final closing of the Offering (i.e., until December 31, 1997), except they each
have the right to pledge a portion of their shares and to make transfers within
their family or to certain family-controlled entities. In addition, Eyre and the
Parry-Beaumont Trust have also agreed not to sell, pursuant to the Stockholders
Agreements, the 600,000 and 400,000 shares of the Company's Common Stock owned
by them (after implementation of the Initial Restructuring Agreement) for a
period of 24 months from the date of the final closing of the Offering (i.e.,
until December 31, 1997), except that they each have the right to sell 150,000
shares to non-United States persons (as defined under the Act) (all of which
numbers have been computed after the Reverse Split). Moreover, each purchaser of
Convertible Notes pursuant to the Offering also agreed not to sell the Common
Stock issuable upon the conversion of the Convertible Notes or upon the exercise
of the Warrants issued pursuant to such conversion for a period of 24 months
from the date of the final closing of the Offering
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(i.e., until December 31, 1997). Upon expiration of such agreements, up to
367,048 shares of Common Stock held by the five major existing shareholders,
600,000 shares of Common Stock held by the purchasers of the Convertible Notes
(assuming all the Warrants issued upon the prior automatic conversion thereof
are exercised in full) and 1,000,000 shares issued to Eyre and the
Parry-Beaumont Trust or a total of 1,967,048 (all computed after the Reverse
Split), may potentially be available for sale under Rule 144, subject in some
cases to a certain volume limitation. No prediction can be made as to the
effect, if any, that future sales of Common Stock or the availability of such
shares for sale will have on the market price of the Common Stock or the
Warrants prevailing from time to time. Sales of substantial shares of the Common
Stock or the Warrants, or the perception that such sales might occur, could
adversely affect the prevailing market price of the Common Stock or the
Warrants.
No Dividends
The Company currently anticipates that it will retain all of its future
earnings, if any, for use in the expansion and operation of its proposed mining
business, and does not anticipate paying any cash dividends for the near term
future. There can be no assurance that the Company will pay cash dividends at
any time, or that the failure to pay dividends for period of time will not
adversely affect the market price for the Company's Common Stock.
Control of the Company
Drury J. Gallagher, the Chairman Chief Executive Officer, and Robert A.
Garrison, the President and Secretary, currently own 1,108,451 and 1,000,000
shares, respectively, or a total of 2,108,451 shares of the Company's Common
Stock issued and outstanding as of January 31, 1996. In addition, Eyre and the
Parry-Beaumont Trust own 600,000 and 400,000 shares of Common Stock,
respectively, as of such date. As a result, if Messrs. Gallagher and Garrison
act in concert, they will be able to effectively determine the vote on any
matter being voted on by the Company's stockholders, including the election of
directors and any merger, sale of assets or other change in control of the
Company, since they will control together 2,108,451 of the 4,198,074 shares of
Common Stock outstanding as of February 3, 1997, or 50.2% of the issued and
outstanding shares of the Company's Common Stock. The same result wold follow if
Messrs. Gallagher and Garrison acted in concert with Eyre and the Parry-Beaumont
Trust.
Disagreement Among Significant Shareholders
In February, March and April, 1997, Eyre and the Parry-Beaumont Trust
questioned the validity of the issuance by the Company of 1,000,000 shares of
its Common Stock to each of Messrs. Drury J. Gallagher and Robert A. Garrison.
In addition, in February, March and April, 1997, Eyre and the Parry-Beaumont
Trust questioned the validity of the Second Restructuring Agreement (as defined
in Item 12(B)), including, without limitation, the waiver of their Acquisition
Warrants to purchase 400,000 shares of the Company's Common Stock (computed
after the Reverse Split). For a further description of the Second Restructuring
Agreement and such transfers, see Item 12(B) hereof.
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However, the Company believes that the Company properly issued the shares
of its Common Stock to Messrs. Gallagher and Garrison in exchange for valuable
consideration and that the claim of invalidity of such action has no merit.
Furthermore, the Company believes that the Second Restructuring Agreement is
valid, that Eyre and the Parry-Beaumont Trust waived their rights covered
thereby and that any claim of invalidity with respect thereto has no merit.
Moreover, the Company does not believe that any legal proceeding will be
commenced by Eyre and/or the Parry-Beaumont Trust with respect to these claims,
because, among other things, of the existence of certain claims which the
Company may have against one or more of such parties. However, there can be no
assurance that no such legal proceedings will be commenced, or, if so, the
outcome thereof, although the Company believes that any of the above claims by
Eyre and the Parry-Beaumont Trust are without merit.
Political, Economic and Other Factors
(a) General.
The value of the Company's assets may be adversely affected by political,
economic, social factors and changes in law or regulations of Armenia or Georgia
or other nearby countries and the status of foreign relations of those
countries. Developments in the respective regions of operations may also affect
the value of the Company's assets. Despite privatization programs that have been
implemented in Armenia and Georgia, the Governments of these countries have
exercised and continue to exercise significant influence over many aspects of
the local economies, and the number of public sector enterprises in these
countries is substantial. Governments and their economic policies may have an
unpredictable impact on the economies of these countries and the mining projects
proposed to be undertaken there. Future actions by the Governments of Armenia or
Georgia could have a significant effect on the market conditions, the mining
projects proposed to be undertaken by the Company and the local economies.
The economies of Armenia and Georgia were tightly controlled by a
Communist government and composed almost exclusively of state-owned enterprises
until 1991. Since then, the Governments of Armenia and Georgia implemented
economic structural reform programs with the objective of liberalizing their
exchange and trade policies, privatizing state-owned companies, controlling
inflation, promoting sound monetary and fiscal policy, reforming the financial
sector, and placing greater reliance on market mechanisms to direct economic
activity. A significant component of the program is the promotion of foreign
investment in key areas of the economy and the further development of the
private sector. There can be no assurance that the economic reforms will
persist, and any reversal thereof by the current or any future Government of
these countries could adversely affect the Company's proposed mining projects
there.
Adverse developments in one major sector of the economies of Armenia or
Georgia could adversely affect the economy as a whole. In addition, the Armenia
and Georgia economies generally are dependent upon international trade and have
been and may continue to be adversely affected by trade barriers and other
protectionist measures, exchange controls and relative currency values. These
economies may also be adversely affected by economic or political developments
in or controversies
23
<PAGE>
with neighboring countries and major trading partners. The economies of Armenia
and Georgia countries are heavily dependent on Russia and other neighboring
members of the Commonwealth of Independent States. Political or economic
difficulties in these states continue to result in difficulties in Armenia and
Georgia, which adversely affect the economic stability of those countries and,
consequently, the Company's proposed mining projects.
(b) Political Instability, Civil Unrest, Expropriation and
Inconvertibility of Currency
At present, Armenia and Georgia are experiencing civil unrest in regions,
which could adversely affect the mining projects proposed to be undertaken by
the Company in those countries. The continuing armed conflicts in the regions
may hinder, delay or make commercially impractical or impossible the development
and production of mining in those countries. Conflicts in the region exist,
particularly over the disputed territory of Nagorno-Karabakh for more than eight
years, over Abkhazia in Georgia more than three years, and over Chechnya more
than two years, and have occasionally resulted in attacks on and damage to
transportation corridors and gas and oil pipelines. Due to the significant risks
surrounding the volatile political situation and the shipment of goods to both
countries, investors bear the risk of project delays, including the commencement
of the further development of potential commercial operations.
In addition, there can be no assurance that the Armenia or Georgia will
not adopt policies adversely affecting the Company's proposed mining projects.
Lastly, there can be no assurance that the Company's proposed investments would
not be expropriated, nationalized or otherwise confiscated or that the
currencies of those countries would not become inconvertible or that
unanticipated taxes or other export duties would not be imposed, such as those
investors experienced by foreign-owned oil and gas projects in Russia.
(c) Exchange Controls; Export Restrictions
The ability of the Company to repatriate investment income, capital and
proceeds of sales realized from gold and copper concentrates or from its
investments in Armenia and Georgia is subject to regulation by government
authorities of those countries. There can be no assurance that the Governments
of these countries will not, whether for purposes of managing their respective
balance of payments or for other reasons, impose additional restrictions in the
future on foreign capital remittances abroad or otherwise modify the exchange
control regime applicable to foreign investors in such a way that may adversely
affect the ability of the Company to repatriate its income and capital or to
sell and/or refine the mined materials outside of those countries. The Company
could be adversely affected by delays in obtaining or the failure to obtain any
required government or central bank approval for repatriation of capital, or
proceeds from the sale of concentrates, as well as by the application to the
Company of any restrictions on investments.
(d) Financial Information and Standards; Regulatory Matters
Disclosure and regulatory standards in Armenia and Georgia are
substantially less
24
<PAGE>
stringent than United States standards. Issuers there are subject to accounting,
auditing and financial standards and requirements that differ significantly from
those applicable to United States issuers. Moreover, by virtue of significant
differences between the accounting practice in those countries and those in the
United States, the assets and profits appearing on a company's financial
statements in such countries may not reflect their financial position or results
of operations in the way they would be reflected had such financial statements
been prepared in accordance with United States generally accepted accounting
principles. Accordingly, the Company may experience delay and significant costs
in having financial statements prepared covering its proposed operations in
these countries.
(e) Governmental Concessions, Licenses and Permits Not Yet Received
While the Government of Armenia has granted various approvals and
licenses, and issued a decree, with respect to the Tailings Project, such
Government has not yet taken such action with respect to the Zod, Meghradzor and
exploration projects contemplated to be undertaken by the Company. The Company
cannot assure that the Governments of Armenia and Georgia will grant various
approvals, licenses, permits or concessions on a timely basis, and failure of
the Governments of Armenia and Georgia to do so could materially and adversely
affect the Company's investments. Moreover, the operations in such countries may
encounter other regulatory problems that could materially and adversely affect
the Company's operations there.
Withholding and Other Taxes
The Company's proposed mining operations in Armenia (and Georgia, if the
Company undertakes any project there) are subject to the income taxes of those
countries. Upon the repatriation of earnings from such operations, if any, such
income is subject to United States income tax. In addition, dividends
distributions of earnings from those countries may also be subject to
withholding taxes. The imposition of such taxes and the rates imposed are
subject to change. The income tax treaty with Russia may potentially reduce the
possible risks of double taxation in each of those countries and the United
States. Both Armenia and Georgia are currently negotiating separate income tax
treaties with the United States. While foreign income taxes paid or incurred by
the Company may be eligible for credit or deduction against the Company's United
States income tax, such benefits are subject to certain limitations and
restrictions. Although the Company expects that such foreign income taxes will
be available for credit for United States income tax purposes, there can be no
assurance of such result.
United States Income Tax Consequences Arising Out of the Agreement
The Company neither received a tax opinion nor sought a private letter
ruling from the Internal Revenue Service (the "Service") regarding the United
States income tax consequences arising out of the closing under the Asset
Purchase Agreement between the Company and Eyre on December 1, 1995 (see Item
12(B)). It is possible that the Service may contend that the Company and/or its
subsidiaries recognized substantial gain in such transaction, and there can be
no assurance of the outcome of such challenge. If the Service successfully
asserted such result, the amount due could have a material adverse impact on the
Company's business, assets and financial position.
25
<PAGE>
While the Company had a net operating loss carry forward as of December
31, 1994 of approximately $2,500,000 expiring in 1996, the closing of the
transaction under the Agreement and the Offering eliminated almost the entire
amount thereof as of December 31, 1995. Thus, if a substantial amount of gain
arose upon the closing under the Agreement, the Company's net operating loss
carry forward would not be available, in all likelihood, to offset such gain in
a material way.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company occupies office space of approximately 1,000 square feet, on a
month-to-month at-will tenancy basis, without the payment of any rent, on
premises owned by Penn-Med Consultants, Inc., whose sole stockholders are the
three largest stockholders of the Company, other than Eyre, the Parry-Beaumont
Trust and Robert A. Garrison. The Company has accrued rental payments of $3,000
a month, commencing as of January 1, 1996, for lease of space at the premises
and the provision of various administrative services, including telephone, fax
and xerox. There is no written agreement covering such arrangement.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its property is subject. However, Eyre and the
Parry-Beaumont Trust have questioned, in writing in February, March and April,
1997, the validity of the Second Restructuring Agreement (as defined in Item
12(B)) and the validity of the issuance by the Company of 1,000,000 shares of
its Common Stock to each of Messrs. Gallagher and Garrison. The Company believes
that the Second Restructuring Agreement is valid and that Eyre and the
Parry-Beaumont have waived the rights covered thereby. The Company further
believes that the Company properly issued the shares of its Common Stock to
Messrs. Gallagher and Garrison in exchange for valuable consideration and that
the claim of invalidity of such action has no merit. For a further description
of the Second Restructuring Agreement and such transfers, see Item 12 hereof.
The Company has also received requests from Panquest Lte. and from Eyre
relating to amounts alleged to be due to Panquest Lte. relating to the Company's
acquisition of rights from Eyre relating to the Armenian and Georgian projects.
No evidence has yet been supplied to the Company in this regard.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's stockholders approved the Reverse Split of Company's Common
Stock on the basis of one share of the Company's Common Stock for each 10 shares
of the Company's Common Stock issued and outstanding on December 31, 1996. Such
action was approved by a vote of the holders of more than a majority of its
issued and outstanding shares of Common Stock by a written consent executed by
such stockholders, effective as of December 23, 1996.
As a result, the number of the Company's issued and outstanding shares of
its Common Stock was reduced from 21,980,742 to 2,198,074, effective as of
December 31, 1996. The Company filed a Certificate of Amendment to the
Certificate of Incorporation with respect to the Reverse Split with the
26
<PAGE>
Delaware Secretary of State on December 31, 1996.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTER
(a) The Company's Common Stock is not publicly traded on any market.
(b) As of December 31, 1996, there were approximately 1,100 holders of
record of the Company's Common Stock.
(c) The Company did not pay or declare any cash dividends on its Common
Stock during its last two fiscal years ended December 31, 1995 and December 31,
1996.
(d) As of December 31, 1996, the Company was not prohibited from paying
any dividends on its Common Stock.
(e) The Company's transfer agent is American Registrar and Transfer
Company, with offices at 10 Exchange Place, Salt Lake City, Utah 84111.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
As at December 31, 1996, the Company's had net assets of $571,603, of
which $369 consisted of cash or cash equivalents.
The Company's plan of operation for calendar year 1997 is:
(a) To enter into definitive agreements with First Dynasty with
respect to all of the Armenian mining projects contemplated under the Armenian
Joint Venture Agreement, including, without limitation, completing any financing
needed for the Tailings Project;
(b) To commence the mining of gold pursuant to the Tailings Project;
(c) To earn the right to mine production and process gold at the Zod
mine in Armenia in accordance with the terms of the Armenian Joint Venture
Agreement and, in preparation therefor, conclude an engineering feasibility
study on the Zod mine;
(d) To collect payments of accrued interest and principal on and/or
restructure the $300,000 convertible note issued by Jet-Line to the Company; and
(e) To commence the public trading of the Company's Common Stock.
As of December 31, 1996, the Company had liquid assets consisting of cash
of approximately
27
<PAGE>
$369. It is anticipated that First Dynasty will provide or arrange for all of
the financing needed in connection with the Tailings Project and such initial
financing as is needed in connection with the development of the Zod and
Meghradzor mines (assuming GGA successfully negotiate rights to participate in
the development of such projects). However, without the additional financing as
described below, the Company would be unable to meet its monthly administrative
expenses which average approximately $10,000 per month (exclusive of accrued
officers' compensation), plus additional amounts for legal and accounting costs.
The Company expects to receive additional financing in 1997 from several sources
to cover the latter types of costs (and for general corporate purposes) and its
contemplated financing sources are as follows:
(i) Pursuant to the Offering of $500,000 principal amount of
the Convertible Notes of the Company, the Company issued Warrants to
purchase 4,000,000 shares of its Common Stock at an exercise price of
$0.50 per share. By virtue of the Reverse Split, the Warrants were
converted into Warrants to purchase 400,000 shares of the Company's Common
Stock at an exercise price of $5 per share. On January 23, 1997, the
Company amended the Warrants to reduce the exercise price to $1 per share
and to extend the expiration date until December 31, 1997. If the Warrants
were exercised in full, the Company would receive $400,000 in gross
proceeds. While the Company does not know with certainty whether the
Warrants will be exercised, it does anticipate that a substantial amount
thereof will be exercised, although there can be no assurance of such
result.
(ii) The Company anticipates that it will receive some
payments or interest on the Jet-Line Note, although there can be no
assurance of such result.
Nevertheless, there can be no assurance that any one or more of the above
financings will be provided, or, if so, on terms acceptable to the Company. In
the event that no contemplated financing is consummated, the Company does not
have sufficient financial resources to meet its obligations as of June 30, 1997.
Based on the Company's needs for additional financing of its operations,
Mr. Gallagher agreed to continue to advance funds to the Company for such
purpose through June 30, 1997 if he was paid in full by such date or earlier out
of the proceeds of any financing received by the Company in excess of $500,000
and provided that the Company also secured his loan with the Jet-Line Note,
which the Company agreed to do.
The Company does not intend to engage in any project research and
development during 1997 and does not expect to purchase or sell any plant or
significant equipment, except as contemplated in connection with the Tailings
Project and as additionally provided in the Armenian Joint Venture Agreement.
The Company does not expect to hire any additional full-time employees in
1997.
ITEM 7. FINANCIAL STATEMENTS
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<PAGE>
The audited financial statements, notes thereto and reports of independent
certified public accountants thereon for the fiscal years of the Company ended
December 31, 1996 and December 31, 1995 (by Marks Shron & Company, LLP) are
attached hereto as part of, and at the end of, this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT AND FINANCIAL
DISCLOSURE
Not applicable.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors* and executive officers of the Company are as follows:
Name Age Officer
---- --- -------
Drury J. Gallagher 58 Chairman, Chief Executive Officer,
Treasurer and Director
Robert A. Garrison 56 President, Chief Operating Officer,
Secretary and Director
Each Director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until his successor is duly elected and
qualified. Each director who is not a full time employee of the Company receives
no remuneration for his services as a director. Officers are appointed by the
Board of Directors.
The Board of Directors has not appointed any audit, compensation or any
other committee. Instead, the Board acts as a whole in all matters.
Mr. Gallagher has served as a director since 1981 and as Chairman,
President and Treasurer of the Company from 1982 until February 1, 1997 and as
Chairman, Chief Executive Officer and Treasurer since that date. Mr. Gallagher
is the general partner, owner and operator of 20 nursing homes in Pennsylvania,
and has served as Executive Vice President and Treasurer of Penn-Med
Consultants, Inc., which is engaged in the business of providing long-term
health care management, since 1992. From 1986 to 1991, he served as Vice
President of Pennsylvania Health and Nursing Care Corporation. He also served as
a member of the Board of Directors of Power Spectra, Inc., a public company
specializing in commercial and defense electronics from April, 1990 through
July,
- ----------
* Howard G. Seitz, Esq., resigned as a director of the Company, effective
June 15, 1996.
29
<PAGE>
1996.
Mr. Garrison has served as a director and Vice President of the Company
from June 26, 1995 until February 1, 1997, and became the President and Chief
Operating Officer on February 1, 1997 and was appointed its Secretary on
February 1, 1996. Mr. Garrison is co-founder, owner and President of INFISCO,
Inc., a financial advisory corporation that structures financings, including
project financing principally in foreign countries, since 1992. He was also the
President of AEGIS Commodities Corporation, a packager of commodity export
supported financing programs, serving as such from 1990 to 1992. He also served
as a Director and President and Chief Executive Officer of Sogam Holdings Inc.,
one of the world's largest mining corporations, and a business of Societe
General de Belgique, since 1985. Prior thereto, Mr. Garrison was the Vice
President and Treasurer of Pechiney Trading International Division of Pechiney
Engine Khulman, in Paris, France, and had been employed by AMAX, Inc., a major
mining enterprise, in various financial capacities. Mr. Garrison has also
written articles on financing in the mining industry and has structured foreign
asset-based financings.
ITEM 10. EXECUTIVE COMPENSATION
(a) The summary compensation table below indicates the cash or accrued
compensation by the Company as well as other compensation paid or accrued to the
President (the Company's chief executive officer) and the next highest
compensated executive officer at December 31, 1996 for services rendered in all
capacities during calendar years 1996, 1995 and 1994:
30
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
- ----------------------------------------------------------------- ----------------------------------------------------------------
Name and Other Annual Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Stock Awards Options/SARs(#) Payout Compensation
- ------------------ ---- ------ ----- ------------ ------------ --------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Drury J. Gallagher, 1996 $100,000(1) -0- -0-(2) -0- 250,000 shares -0- -0-
Chairman, Chief 1995 $ 50,000(1) -0- -0-(2) -0- 1,500,000/ 500,000
Executive Officer shares units
and Treasurer 1994 $ -0- -0- -0- -0- -0- -0- -0-
(the Company's Chief
Executive Officer)
Robert A. Garrison, 1996 $100,000(1) -0- -0-(2) -0- 250,000 shares -0- -0-
President, Chief 1995 $ 50,000(1) -0- -0-(2) -0- 500,000/500,000 -0-
Operating Officer shares units
and Secretary 1994 $ -0- -0- -0- -0- -0- -0- -0-
</TABLE>
- ----------
(1) Under the Company's employment agreements with Messrs. Gallagher and
Garrison (as amended),which commenced as of July 1, 1995, such officers were to
be paid an annual salary of $100,000, in equal monthly installments. However,
since the Company was unable to pay any of such salaries in 1995 and 1996, all
such amounts accrued, which totalled $150,000 per person, or an aggregate of
$300,000 as of December 31, 1996. The Company and the officers orally agreed in
July, 1995 to postpone the payment of such accrued salaries and any additional
amounts due under the employment agreements until the Company receives
additional funding of at least $2,000,000. All compensation numbers reflect the
compensation payable for the period from July 1, 1995 to December 31, 1996. For
the cancellation of $100,000 of such accrued compensation and options and stock
appreciation rights by each officer as of January 3, 1997, see Item 12(A)
hereof.
Mr. Gallagher entered into a three-year employment agreement with the
Company as of July 1, 1995. Under such agreement, Mr. Gallagher agreed to spend
up to one-half of his business time as President and be in charge of the
Company's day-to-day operations at an annual salary of $100,000. The agreement
also provides for the reimbursement of expenses incurred by him in the
performance of his duties.
The Company entered into a three-year employment agreement with Mr.
Garrison dated as July 1, 1995 under which he was to receive a salary from the
Company totalling $85,000 and be entitled to the stock options and stock
appreciation rights as described in Item 12(A). Under the agreement, Mr.
Garrison agreed to spend up to one-half of his business time as Vice President
and be in charge of the Company's day-to-day mining and Project financing
operations. The agreement also provides for the reimbursement of expenses
incurred by him in connection with the performance of his duties thereunder.
Mr. Garrison also entered into a substantially identical employment
agreement with Autosport under which he was to be paid an annual salary of
$15,000. However, since Autosport (as defined in Item 12(B)) terminated its
Mining Management Agreement with the Company pursuant to the Initial
Restructuring Agreement (as defined in Item 12(B)), Mr. Garrison's employment
with Autosport was also terminated. Thereafter, on April 12, 1996 the Board of
Directors decided to amend Mr. Garrison's employment agreement with the Company
to increase his annual salary thereunder from $85,000 to $100,000. Pursuant to
such Board action, the parties executed and delivered an amendment to Mr.
Garrison's employment agreement with the Company to such effect.
(2) Perquisites and other personal benefits paid or accrued to each of the
above-named officers were less than 10% of the total of their respective annual
salaries in 1996, and the same was true in 1995 in the case of Mr. Gallagher.
Mr. Garrison first joined the Company as of July 1, 1995.
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<PAGE>
(b) Stock Options and Awards
The following table sets forth information with regard to grants of stock
options and awards during the year ended December 31, 1996 to each of the named
executive officers of the Company, all of which grants were made under the
Company's 1995 Stock Option Plan:
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted
Underlying Options/ to Employees in Exercise or Expiration
SARs Granted (#) Fiscal Year Base Price ($/Sh) Date
-------------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
Drury J. Gallagher 250,000(1) 50% $0.50 7/18/99
Robert A. Garrison 250,000(1) 50% $0.50 7/18/99
</TABLE>
(c) 1995 Stock Option Plan
The description of the Stock Option Plan is set forth herein and is
qualified in its entirety by reference thereto.
Terms of the Stock Option Plan
A maximum of 500,000 shares of Common Stock (computed after the Reverse
Split and subject to adjustment as described below) has been reserved for
issuance by the Company pursuant to options to be granted under the Stock Option
Plan.
The Stock Option Plan will be administered by the Company's Board of
Directors unless and until the Board of Directors shall appoint the members of
the Stock Option Committee (the "Committee") who may also be the members of the
Compensation Committee. The composition of such Committee at present does not
satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder. During the 10- year
period ending in 2005, the Committee will have authority, subject to the terms
of the Stock Option Plan, to determine when and to whom to make grants under the
plan, the number of shares
- --------
(1) On July 19, 1996, the Board of Directors granted each of Messrs.
Gallagher and Garrison a non-qualified option to purchase 250,000 shares of the
Company's Common Stock at an exercise price of $1.00 per share expiring on July
18, 1999, which exercise price was reduced to $0.50 per share on November 4,
1996. As stated under Item 12(A) hereof, these options were cancelled as of
January 3, 1997.
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<PAGE>
to be covered by the grants, the types and terms of options and stock
appreciation rights ("SARs") to be granted and the exercise prices of options
and SARs, to interpret and implement the Plan, and to prescribe, amend and
rescind rules and regulations relating to the Stock Option Plan. The Committee's
determinations under the Stock Option Plan need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive, awards
under the Stock Option Plan (whether or not such persons are similarly
situated).
The Company's Board of Directors may amend, suspend or discontinue the
Stock Option Plan at any time except that, unless an amendment is approved (at a
meeting held within 12 months before or after the date of such amendment) by the
holders of a majority of the issued and outstanding shares of Common Stock
entitled to vote, no such amendment may (i) materially increase the maximum
number of shares as to which awards may be granted under the Stock Option Plan,
except for adjustments to reflect stock dividends or other recapitalization
affecting the number or kind of outstanding shares, (ii) materially increase the
benefits accruing to Stock Option Plan participants, or (iii) materially change
the requirements as to eligibility for participation in the Stock Option Plan.
Under the terms of the Stock Option Plan, "incentive stock options"
("ISOs") within the meaning of section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), "non-qualified stock options" ("NQSOs") and SARs may be
granted to officers, key employees, consultants, employees of consultants, and
advisors of the Company and any of its subsidiaries (as defined in the Stock
Option Plan), except that ISOs may be granted only to employees of the Company
and its subsidiaries. The Stock Option Plan limits the number of shares with
respect to which options or SARs may be granted to an individual over the term
of the Stock Option Plan to 100,000 (computed after the Reverse Split), but
permits exceptions thereto in the case of the option to be granted to Autosport
and the options and SARs granted to Messrs. Gallagher and Garrison.
To the extent that the aggregate fair market value (as defined in the
Stock Option Plan), determined as of the date of grant of an ISO, of Common
Stock with respect to which ISOs granted under the Stock Option Plan and all
other option plans of the Company or its subsidiaries exercisable for the first
time by an individual during any calendar year exceeds $100,000, such options
shall be treated as options which are not ISOs. The foregoing limitation does
not apply to NQSOs.
Initially, each ISO will be exercisable over a period, determined by the
Committee in its discretion, but not to exceed 10 years from the date of grant,
as required by the Code. In addition, in the case of an ISO granted to an
individual who, at the time such ISO is granted, owns shares possessing 10% or
more of the total combined voting power of all classes of stock of the Company
or its subsidiary corporations (a "10% Stockholder"), the exercise period for an
ISO may not exceed five years from the date of grant. In the case of NQSOs, the
exercise period, not to exceed 10 years from the date of grant, shall in all
cases be determined by the Committee. Options may be exercisable during the
option period at such times, in such amounts, in accordance with such terms and
conditions, and subject to such restrictions, as are set forth in the option
agreement evidencing the grant of such options. The Committee may, in its
discretion, with the grantee's consent, cancel any award of options or SARs and
issue a new award in substitution therefor or accelerate the
33
<PAGE>
exercisability of any award granted under the Stock Option Plan or extend the
scheduled expiration of an award.
The exercise price of an ISO or an NQSO (the "Option Price') may not be
less than the fair market value of the shares of Common Stock on the date of
grant, except that, in the case of an ISO granted to a 10% Stockholder, the
Option Price may not be less than 110% of such fair market value. The Option
Price of, and the number of shares covered by, each option will not change
during the life of the option, except for adjustments to reflect stock
dividends, splits, other recapitalization or reclassifications or changes
affecting the number or kind of outstanding shares.
The shares purchased upon the exercise of an option are to be paid for in
cash or, with the Committee's consent, in its discretion, by delivery of the
optionee's promissory note, upon such terms and conditions as the Committee may
prescribe, or, if so provided in the applicable option agreement, by delivery of
previously acquired shares of Common Stock with a fair market value equal to the
total Option Price, or in a combination of such methods.
Options and SARs may be transferred by an optionee or grantee only by will
or by the laws of descent and distribution and may be exercised only by the
optionee or grantee during his lifetime. Except as otherwise provided in the
applicable plan agreement, all of an optionee's or a grantee's outstanding
awards shall terminate upon his termination of employment or service for any
reason.
The Committee may grant SARs in conjunction with all or part of an option
or independently thereof. Upon the exercise of a SAR, a holder will generally be
entitled, without payment to the Company, to receive cash, shares of Common
Stock or any combination thereof, as determined by the Committee, in an amount
equal to the excess of the fair market value of one share of Common Stock on the
exercise date over the exercise price of the related option, multiplied by the
number of shares in respect of which the SAR is exercised, except in the case of
the SARs granted to Messrs. Gallagher and Garrison.
(ii) Tax Aspects of the Stock Option Plan.
The following are the principal Federal income tax consequences generally
applicable to awards granted under the Stock Option Plan. The grant of an option
or SAR will create no Federal income tax consequences for the recipient or the
Company or a subsidiary employing the recipient (the "employer") at the time of
grant. The holder of an ISO will have no taxable income upon exercising an ISO
(except that the holder may have income for alternative minimum tax purposes),
and the employer generally will receive no deduction when an ISO is exercised.
In general, upon exercising a stock option other than an ISO, the optionee must
recognize ordinary income equal to the excess of the fair market value of the
stock acquired on the date of exercise over the option price, and the employer
generally will then be entitled to a deduction for the same amount. In general,
upon exercising an SAR, the amount of any cash received and the fair market
value on the exercise date of any shares or other property received are taxable
to the recipient as ordinary income and deductible by the employer. The tax
treatment to an optionee of a disposition of shares acquired
34
<PAGE>
through the exercise of an option will depend on how long the shares have been
held and on whether such shares were acquired by exercising an ISO, an SAR or an
option other than an ISO. Generally, there will be no Federal income tax
consequences to the employer in connection with a disposition of shares acquired
under an option except that the employer may be entitled to a deduction in the
case of a disposition of shares acquired under an ISO if the applicable ISO
two-year holding period has not been satisfied.
With respect to awards granted under the Stock Option Plan that are
settled either in cash or in stock or other property that is either transferable
or not subject to substantial risk of forfeiture, the participant must recognize
ordinary income equal to the excess of (a) the cash or the fair market value of
the shares received (determined as of the date of settlement) over (b) any
amount paid for such shares by the holder of the award; and the employer
generally will be entitled to a deduction at the same time and for the same
amount. With respect to awards that are settled in stock or other property that
is restricted as to transferability and subject to substantial risk of
forfeiture, the participant must recognize ordinary income equal to the excess
of (a) the fair market value of the shares or other property received determined
at the first time the shares or other property becomes transferable or not
subject to substantial risk of forfeiture, whichever occurs earlier over (b) any
amount paid for such shares or other property by the participant; and the
employer generally will be entitled to a deduction for the same amount at the
time that the employee recognizes the income. Different tax rules may apply with
respect to participants who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Set forth below is information as of December 31, 1996 pertaining to
ownership of the Company's Common Stock, determined in accordance with Rule
13(d)(3) under the Securities and Exchange Act of 1934, by persons known to the
Company who own more than 5% of the Company's Common Stock:
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Name and Address of Number of
Title of Class Beneficial Owner Shares(1) Percent of Class
Common
------
Common Stock Drury J. Gallagher 282,451(2) 11.92
c/o Global Gold Corporation
438 West 37th Street
New York, NY 10018
Common Stock Eyre Resource N.L. 600,000(3) 27.33
Crest House - Suite 5
7 Havelock Street
West Perth WA 6005
Australia
Common Stock Jeffrey Beaumont, Trustee
of the Parry-Beaumont Trust 400,000(3) 18.23
18, Pioneer Sector 1
Jurong, Singapore 2262
- ----------
(1) For purposes of this table, a person or group is deemed to have
"beneficial ownership of any shares which such person has the right to acquire
within 60 days after December 31, 1996. For purposes of calculating the
percentage of outstanding shares held by each person named herein, any shares
which such person has the right to acquire within 60 days after December 31,
1996 are deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other person.
(2) This amount includes 150,000 shares of Common Stock issuable on the
exercise of options granted to Mr. Gallagher on July 21, 1995 pursuant to the
Company's 1995 Stock Option Plan adopted on such date, and 24,000 shares of
Common Stock issuable upon the exercise of the Warrants issued to Mr. Gallagher
pursuant to the Offering. However, on January 3, 1997, Mr. Gallagher cancelled
all his options in partial consideration for the transfer of 1,000,000 shares of
Common Stock (after the Reverse Split) to him. See Item 12(A) hereof for a
further description of such transaction and the resulting beneficial ownership
of the Company's Common Stock by him.
Mr. Gallagher disclaims any beneficial interest in the 20,000 shares of
the Company's Common Stock and 40,000 shares of Common Stock issuable upon the
exercise of the Warrants acquired by Francis L. Gallagher, Jr., (Mr. Gallagher's
brother) as trustee of the Drury J. Gallagher Trust F/B/O Children dated March
1, 1985.
(3) The shares owned by each of Eyre and the Parry-Beaumont reflects the
surrender of 6,000,000 and 4,000,000 shares of the Company's Common Stock,
respectively (prior to the Reverse Split), and the surrender of Acquisition
Warrants to purchase 3,600,000 (prior to the Reverse Split) and 2,400,000 (prior
to the Reverse Split) shares of Common Stock, respectively, as well as the
surrender by Autosport of its options to purchase 2,000,000 shares of the
Company's Common Stock (prior to the Reverse Split), all pursuant to the Initial
Restructuring Agreement. Under the Second Restructuring Agreement, Eyre and the
Parry-Beaumont surrendered their Acquisition Warrants to acquire 2,400,000
(prior to the Reverse Split) and 1,600,000 shares (prior to the Reverse Split)
of the Company's Common Stock, respectively.
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(b) Set forth below is information as of December 31, 1996 pertaining to
ownership of the Company's Common Stock by all directors and executive officers
of the Company:
Name and Address of Number of
Title of Class Beneficial Owner Shares(1) Percent of Class
Common Drury J. Gallagher 282,451(2) 11.9(2)
c/o Global Gold Corporation
438 West 37th Street
New York, New York 10018
Common Robert A. Garrison 61,660(3) 27.3(3)
44 Lords Highway East
Weston, Connecticut 06883 ------- ------
Total 344,111 14.63
(c) As of December 31, 1996, except as described in Item 12 hereof, there
were no arrangements in effect which may result in a change of control of the
Company, after taking into account the effects of the Restructuring Agreements
discussed above.
- ----------
(1) For purposes of this table, a person or group is deemed to have
"beneficial ownership of any shares which such person has the right to acquire
within 60 days after December 31, 1996. For purposes of calculating the
percentage of outstanding shares held by each person named herein, any shares
which such person has the right to acquire within 60 days after December 31,
1996 are deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other person.
(2) This amount includes 150,000 shares of Common Stock issuable on the
exercise of options granted to Mr. Gallagher on July 21, 1995 pursuant to the
Company's 1995 Stock Option Plan adopted on such date, and 24,000 shares of
Common Stock issuable upon the exercise of the Warrants issued to Mr. Gallagher
pursuant to the Offering. However, on January 3, 1997, Mr. Gallagher cancelled
all his options in partial consideration for the transfer of 1,000,000 shares of
Common Stock (after the Reverse Split) to him. See Item 12(A) hereof for a
further description of such transaction and the resulting beneficial ownership
of the Company's Common Stock by him.
Mr. Gallagher disclaims any beneficial interest in the 20,000 shares of
the Company's Common Stock and 40,000 shares of Common Stock issuable upon the
exercise of the Warrants acquired by Francis L. Gallagher, Jr., (Mr. Gallagher's
brother) as trustee of the Drury J. Gallagher Trust F/B/O Children dated March
1, 1985.
(3) This amount includes 61,660 shares of Common Stock issuable on the
exercise of options granted to Mr. Garrison on July 21, 1995 pursuant to the
Company's 1995 Stock Option Plan and reflects all such options which are
exercisable within 60 days after December 31, 1996. However, on January 3, 1997,
Mr. Garrison cancelled all his options in partial consideration for the transfer
of 1,000,000 shares of the Common Stock (after the Reverse Split) to him. See
Item 12(A) hereof for a further description of such transaction and the
resulting beneficial ownership of the Company's Common Stock by him.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Officers
As described in Item 1(D)4(c) hereof, the Company made a loan of $25,000
to Envirotherm Heating and Cooling Systems, Inc. on October 17, 1994. Mr.
Gallagher owns 4% of the common stock of Envirotherm, which he received for
consulting services rendered by him subsequent to and independent of the loan
transaction described above. The Company treated such loan as worthless as of
December 31, 1996.
As described in Item 6 hereof, Mr. Gallagher agreed to advance funds to
the Company to cover its administrative expenses and legal and accounting
expenses through June 30, 1997, if he was paid in full by such date or earlier
out of the proceeds of any financing received by the Company in excess of
$500,000 and provided that the Company also secured his loan with the Jet-Line
Note, which the Company agreed to do.
As of December 31, 1996, Mr. Gallagher loaned $191,000 to the Company,
which loan is evidenced by a new consolidated note which the Company issued to
him as of such date and cancelled the earlier consolidated note dated November
12, 1996.
On January 3, 1997, the Board of Directors of the Company approved the
transfer of 1,000,000 shares of its Common Stock (computed after the Reverse
Split) to each of Messrs. Gallagher and Garrison in exchange for, (a) in Mr.
Gallagher's case, the cancellation of $100,000 of accrued salary, and the
cancellations of his options to acquire 175,000 shares of the Common Stock of
the Company (computed after the Reverse Split) and the cancellation of his stock
appreciation rights (the "SARs") which, under certain circumstances, could have
resulted in the issuance to him of up to 37,500 shares of the Company's Common
Stock (computed after the Reverse Split)1 and (b)
- ----------
1 The Board of Directors granted each of Messrs. Gallagher and Garrison a
SAR for 500,000 units of the Company's Common Stock, with the base price thereof
of $0.20 per share (the "Base Price") on the date of grant, July 21, 1995 (based
on the Board's determination of the fair market value of the Company's Common
Stock on that date). If the value of the units increases over the Base Price
during the period of six years after the grant, and if the market capitalization
of the Company (determined by multiplying the number of shares of Common Stock
outstanding over the mean of the publicly-traded fair market value of the Common
Stock in the over-the-counter market, Nasdaq or elsewhere) exceeds the formula
price as set forth below for a consecutive period of three months, the holder of
the SAR shall be entitled to be paid such excess by the Company in cash, or
shares of Common Stock, or a combination thereof, in one or more annual
installments over a period not in excess of three years, as the Board of
Directors determines in its sole discretion, but such payment shall cause the
holder of the SAR to forfeit options to purchase 12,500 shares of the Company's
Common Stock under the option described in (1)(iii) and (2)(ii) above.
The formula price is set forth below:
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<PAGE>
in Mr. Garrison's case, the cancellation of $100,000 of accrued salary, the
cancellation of his options to buy 75,000 shares of the Company's Common Stock
and the cancellation of his SARs. The Company made such transfer to reward each
of them for their efforts to secure financing for the Company and/or the
Armenian mining project, for maintaining the Company's existence in the face of
the Company's potential insolvency, and to increase their proprietary stake as
the day-to-day management of the Company at the request of prospective
investment banking firms and potential investors with whom the Company was then
seeking to obtain funding.
Since July, 1995, Messrs. Gallagher and Garrison had deferred the payment
of their salaries due them under their employment agreements and continued such
deferral from July 1, 1996 through December 31, 1996. Since July, 1996, they
undertook to keep the Company alive financially, by Mr. Gallagher's further
advances to the Company of $191,000, by Mr. Garrison's payment of his own travel
and travel-related expenses totally over $50,000, by their undertaking joint and
several guarantees of $500,000 to LIM and their constant fund-raising activities
including frequent trips to London, Toronto, Vancouver and various places in the
United States for such purpose. Without such efforts, the Company's activities
would have ceased in substantially all respects. No financial assistance of this
type, or any guaranty, was provided by Eyre or its officers, directors or
shareholders or by the Parry-Beaumont Trust (except for $100), despite the
Company's written requests to them for such assistance. Furthermore, when the
holders of the Warrants acquired in the Offering were asked to exercise them at
the reduced exercise price of $0.25 per share during the 30-day period ended
December 15, 1996, none of the holders exercised them (except for one holder,
Mr. Ian Darragh, an Eyre director, who purchased 400 shares for a total of $100,
computed prior to the Reverse Split).
As a result of such transfers of Common Stock to Messrs. Gallagher and
Garrison, Mr. Gallagher increased his beneficial ownership of Common Stock to
26.4% and Mr. Garrison became the beneficial owner of 23.8% of the Common Stock,
and, taken together as a group, they now own 50.2% of the issued and outstanding
shares of the Company's Common Stock (excluding their Warrants and options to
buy the Company's Common Stock). Consequently, if Messrs. Gallagher and Garrison
act in concert, they will be able to effectively determine the vote on any
matter voted by the Company's stockholders, including the election of directors
and any merger, sale of assets or other significant corporate action.
- ----------
Percentage of Excess of Value of Award
Market Capitalization over Base Price to which Recipient is Entitled
- --------------------- ----------------------------------------------
$100,000,000 50%
$200,000,000 66 2/3%
$300,000,000 75%
Thus, each holder became potentially entitled to receive a maximum of 375,000
shares of the Company's Common Stock payable under the SARs awarded to him.
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<PAGE>
(B) Relationship with Eyre Resources and the Parry-Beaumont Trust
(1) Asset Purchase Agreement with Eyre Resources1
In January, 1995 the Company entered into a letter of intent with
Eyre Resources N.L., an Australian corporation ("Eyre"), with respect to certain
foreign mining projects. Thereafter, the Company entered into a definitive Asset
Purchase Agreement with Eyre, dated as of June 30, 1995 (the "Agreement"), with
respect to the Armenian, Georgian and Australian Mining projects described
herein, and closed the transactions contemplated thereunder on December 1, 1995.
The Agreement between the Company and Eyre provided as follows:
1. (a) The Company caused to be delivered to Eyre (i) 12,000,000 shares of
its Common Stock, (ii) warrants (the "Acquisition Warrants") to purchase
6,000,000 shares of Common Stock, at an exercise price of $0.50 per share
(subject to adjustment as provided therein), which expire three years after the
closing of the Eyre transaction (the "Closing") and (iii) $300,000, of which
$100,000 was deemed paid at the Closing (by offsetting the $100,000 amount
loaned by the Company to Eyre prior thereto) and an additional $100,000 was
evidenced by an interest-bearing note of the Company payable in six equal
monthly installments) and an additional note of the Company for $100,000 payable
to Eyre if and when the Company consummated a future financing of at least
$2,000,000. The notes bore interest at the lowest rate to avoid the imputation
of interest at a higher rate under the Internal Revenue Code of 1986, as amended
(the "Code"). In addition, the Company agreed to assume and discharge all
liabilities of Eyre (other than Armenian, Georgian or Australian income or local
taxes or other than specified amounts currently due under certain Australian
licenses described below) existing at the Closing with respect to the assets
transferred, and to assume and perform all obligations with respect to its share
of the assets after the Closing.
(b) In exchange therefor, Eyre sold (i) an undivided 20% interest in
Eyre's interest in two Australian exploration licenses in an Australian
lead/zinc mining prospect known as Ediacara described herein to Global Gold
Australia Limited, the Company's wholly-owned Cayman Islands subsidiary; (ii)
all of Eyre's potential interest in the Armenian gold mining project described
herein to Global Gold Armenia Limited, the Company's wholly-owned Cayman Islands
subsidiary; and (iii) all of Eyre's potential interest in the Georgian gold and
copper mining project described herein to Global Gold Georgia Limited, the
Company's wholly-owned Cayman Islands subsidiary (individually, a "Project" and
collectively, the "Projects").
(c) The Company caused to be delivered to the Parry-Beaumont Trust
8,000,000 shares of its Common Stock and Acquisition Warrants to acquire
4,000,000 shares of Common Stock for consulting services rendered by the
Parry-Beaumont Trust in connection with the Projects and for arranging for the
sale of the above-mentioned assets in question to the Company's subsidiaries.
- ----------
1 All of the share numbers reflected in Item 12(B) do not reflect the
Reverse Split.
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(d) The Company issued to Autosport (Asia) Pte. Ltd. options under
the Company's 1995 Stock Option Plan to acquire 2,000,000 shares of Common
Stock, at an exercise price of $0.20 per share.
(e) The loan made by the Company to Eyre of $100,000 (described in
"Loan Transaction" below) was applied at the Closing against the $200,000 amount
due to Eyre at the Closing under the Agreement.
2. Pursuant to the Agreement, the Company designated, prior to the
Closing, that each of its newly-formed subsidiaries would be a direct transferee
of the interests in the Projects so that each Project was owned initially and
directly by a separate subsidiary of the Company. However, by virtue thereof and
pursuant to the Agreement, the Company agreed to guarantee the full performance
of all of the obligations undertaken by any such subsidiary designated for such
purposes by the Company. Under such guaranty, Eyre is first required to give
notice to the subsidiary in question of any default and the opportunity to cure
such default within a 10 day period. In the event that such subsidiary does not
cure such default within such period, then Eyre may proceed directly against the
Company for any violation thereof.
3. Autosport (Asia) Pte. Ltd., a Singapore corporation controlled by Eyre
("Autosport"), entered into a mining supervision contract with the Company at
the Closing under which it was to provide mining supervisory services for all of
the Projects (the "Mining Supervision Contract") and consult regularly with the
Company thereunder. Under the Mining Supervision Contract, Autosport was
entitled to be paid, solely out of Project revenues or financings relating
thereto, (a) all of its direct and indirect costs in providing services in
connection with the Projects plus 10% thereof, and (b) all of the costs of
acquiring equipment in connection with the Projects plus 10% thereof. The
Company agreed to indemnify Autosport against certain claims arising out of its
performances of services, but the Company's liability thereunder was limited
solely to Project revenues and financings related to the Projects. Autosport had
the right to assign its rights under the Agreement, with the Company's prior
written consent, which was not to be unreasonably withheld or delayed. The
Company had the right to approve the construction and operating budgets for each
Project.
4. Pursuant to the Agreement, Eyre, the Parry-Beaumont Trust and the
current five principal stockholders of the Company (Messrs. Gallagher, John J.
Hayman, Francis A. Hayman, Jr., George L. Ryan and the Seitz Family Limited
Partnership) entered into a stockholders agreement (the "Stockholders
Agreement") at the Closing providing for, among other things, the following:
(a) Eyre had the right to designate three of the five directors of
the Company, including Stephen Parry (one of Mr. Kevin Parry's sons), Jaap Poll
and one other person, and the parties agreed to elect Messrs. Gallagher and
Garrison as directors. If the size of the Board was changed thereafter, Eyre had
the right to designate such additional persons as comprise 60% of the members of
the Board of Directors, and Messrs. Gallagher and Garrison (or their successors)
had the right to designate such additional persons as comprise 40% thereof. As a
result of this provision, Eyre controlled the Board of Directors of the Company
after the Closing.
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(b) The parties agreed to use their best efforts to vote to cause
the election of Mr. Gallagher as President, Mr. Garrison as Vice President, and
Stephen Parry as Vice President.
(c) (i) Each party cannot sell, transfer or pledge his shares of
Common Stock, except to family members, or a trust or estate for their benefit,
or a charitable organization qualified under Section 501(c)(3) of the Code, or a
corporation, partnership or limited liability company, controlled by the
stockholder or members of his family and except as provided in (ii) below.
Furthermore, if a stockholder receives a bona fide offer to buy his or its
shares of Common Stock (other than pursuant to a public offering), the Company,
and thereafter the non-selling stockholders (on a pro-rata basis), have the
right to purchase the stock in question at the offered price. If such right of
first refusal is exercised, the purchaser is required to pay (A) the lesser of
(i) the full purchase price or (ii) the greater of 20% of the purchase price or
$100,000 and (B) the balance in 24 equal consecutive monthly installments after
the closing thereof (including interest at the lowest rate to avoid the
imputation of interest at a higher rate under the Code). If such right of first
refusal is not exercised, then the seller may sell his or its shares of Common
Stock to the offeror on the terms described in the offer, but such offeror must
then become a party to the Stockholders Agreement.
(ii) All of the seven stockholders, including Eyre and the
Parry-Beaumont Trust, agreed not to sell any of the shares of the Company's
Common Stock owned by them for a period of 24 months from the date of the final
closing of the Offering (as defined herein) (i.e., two years from December 31,
1995), except that (A) each of Eyre and the Parry-Beaumont Trust has the right
to transfer 2,000,000 shares of Common Stock to one or more any persons or
persons who is not a United States person within the meaning of the Securities
Act, or to any other person in the United States and (B) the other five
shareholders (other than Eyre and the Parry-Beaumont Trust) each has the right
to pledge up to 60% of the shares of the Company's Common Stock owned by them to
one pledgee only each, subject to applicable restrictions under the Act.
(d) In the event that the Company's undertakes an offering of its
securities (exclusive of any registrations on Form S-8 for shares issuable under
the 1995 Stock Option Plan), the stockholders who are parties to the
Stockholders Agreement will have piggyback registration rights which would
enable them to sell a portion of their shares of Common Stock, together with
those offered by the Company, subject to the approval thereof by the underwriter
undertaking the offering in question. Commencing on or after the date which is
18 months after the final closing date of the Offering (which closing date was
December 31, 1995), Eyre, the Parry-Beaumont Trust or any other three of the
other stockholders acting jointly, who desire to sell their shares of Common
Stock, but at least 1,000,000 shares of Common Stock collectively, can cause the
Company, two times only, to file a registration statement which shall be
effective on and after the expiration of the 24-month lock-up period specified
above.
5. At the Closing, there were a number of items that required future
action. The assignment made by Eyre to Global Gold Australia Limited of its
undivided 20% interest in the Ediacara project required the written consent of
the Ministry of Mines of South Australia. Although such documents were submitted
for approval shortly after the closing, no such consent was ever obtained, since
the
42
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Company, prior thereto, caused Global Gold Australia Limited to surrender its
interest in the Australian Project under the Initial Restructuring Agreement.
Moreover, Global did not receive certain legal opinions from Eyre's Australian
and New York counsel which were required to be delivered at the closing under
the Agreement, although such opinions were ultimately delivered.
(2) Restructuring Agreements
(a) Initial Restructuring Agreement
After the closing of the transaction under the Agreement, the
Company, Eyre and the Parry-Beaumont Trust decided to restructure the
transaction pursuant to the Restructuring Agreement by and among such parties
dated as of December 1, 1995 (the "Initial Restructuring Agreement"). Such a
step was undertaken in order to facilitate the Company's proposed financing of
the contemplated gold mining projects in Armenia and Georgia by enabling the
Company to qualify for political risk insurance from the Overseas Private
Investment Corporation ("OPIC") as a credit enhancement by and possible
financing from OPIC. Under the rules applicable to such insurance, OPIC provides
insurance for U.S. entities which are at least 50% beneficially owned by United
States persons, determined on a fully diluted basis. By virtue of the stock
ownership of the Company arising under the Agreement, the Company would not
qualify for such insurance. Moreover, such restructuring was undertaken at the
recommendation of a major United States accounting firm (which has not been
retained by the Company).
The Initial Restructuring Agreement provided as follows:
1. (a) Eyre and the Parry-Beaumont Trust agreed to surrender to the
Company 6,000,000 and 4,000,000 shares of Common Stock, respectively, and to
surrender Acquisition Warrants to purchase 3,600,000 and 2,400,000 shares of
Common Stock, respectively. Thus, after the Restructuring Agreement, Eyre and
the Parry-Beaumont Trust continued to own 6,000,000 and 4,000,000 shares of
Common Stock, respectively, and Acquisition Warrants to purchase 2,400,000
shares of Common Stock and 1,600,000 shares of Common Stock, respectively.
(b) Autosport agreed to surrender the option to purchase 2,000,000
shares of the Common Stock of the Company.
2. In consideration for the above surrender of securities, the
Company
(a) caused Global Gold Australia Limited to surrender its undivided
20% interest in the Australian Project,
(b) released to Eyre any rights with respect to the agreement
between the Company and the Armenian Ministry of Environment and Natural
Resources dated December 1, 1995 ( which was not executed), provided that such
agreement does not provide for any rights in Eyre inconsistent with, or in
contravention of, the Company's rights in the Armenian Project, and
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(c) granted Eyre a 2% overriding production royalty (subject to
adjustment) from the Company's or its subsidiary's interest in the joint venture
or ventures to be created pursuant to the Armenian Project (excluding the
Tailings Project as defined herein) and the Georgian Project and a 1% overriding
production royalty (subject to adjustment) in the Company's or its subsidiary's
interest in each joint venture for other projects undertaken in Armenia and
Georgia by the Company or its subsidiaries.
3. In addition, the parties agreed to cancel the Operating Agreement
between Eyre and the Company dated as of December 1, 1995 and the Mining
Supervision Agreement, between the Company and Autosport dated as of December 1,
1995.
4. (a) The Acquisition Warrants were amended to provide that they
could not be exercised unless, concurrently with the exercise thereof, the
Company issued a number of shares of Common Stock to persons or entities other
than Eyre, the Parry-Beaumont Trust or their affiliates equal to the number of
shares of Common Stock issued upon the exercise of the Acquisition Warrants.
(b) Furthermore, in the event that the Company sells or otherwise
transfers additional shares of its Common Stock or securities convertible into
shares of its Common Stock to entities or persons not deemed United States
persons under the applicable rules of OPIC, the Company is required to give Eyre
and the Parry-Beaumont Trust at least 15 days notice prior to the closing of
such sale or transfer. During such period, Eyre and the Parry-Beaumont Trust
shall have the right to sell the Acquisition Warrants in a transaction exempt
under the applicable securities laws of the United States or other applicable
jurisdictions. However, if Eyre and the Parry-Beaumont Trust do not sell such
number of Acquisition Warrants as aforesaid, then Eyre and the Parry-Beaumont
Trust are required to surrender to the Company a number of Acquisition Warrants
equal to the number of shares of Common Stock to be sold or transferred or
issuable upon such conversion by the Company, at the time of the closing of such
sale or transfer by the Company.
(c) In the event that Eyre and the Parry-Beaumont Trust are required
to surrender a portion of their Acquisition Warrants as described immediately
above, then the 2% and 1% overriding production royalties specified above shall
be adjusted upward, but not in excess of 1 percentage point, by multiplying 1%
times a fraction the numerator of which is the number of Acquisition Warrants
surrendered and the denominator of which is 4,000,000.
5. (a) The Stockholders Agreement was changed to eliminate the
control thereof by Eyre and the Parry-Beaumont Trust. As a result, the Company
five-person Board of Directors will consist of (a) Drury J. Gallagher, (b)
Robert A. Garrison, (c) Jaap Poll, (d) Stephen Parry and (e) a fifth member
selected by Mr. Gallagher. The amendment to the Stockholders Agreement further
provided that (i) in the event of the death of Robert A. Garrison, Drury J.
Gallagher would designate his designee or (ii) in the case of an enlargement of
the Board, Mr. Gallagher would have the right to designate additional persons to
constitute 60% of the members of the Board, provided that such designee has
demonstrable experience and expertise in the extractive or financial industry or
in a region in which the Company or a subsidiary intends to operate or is
operating.
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(b) Furthermore, the Stockholders Agreement was changed to reduce
the amount of shares of Common Stock that Eyre and the Parry-Beaumont Trust
could transfer to non-United States persons in transactions not subject to the
Act from 2,000,000 each to 1,500,000 each.
6. In addition, Eyre, the Parry-Beaumont Trust, Autosport and Kevin
Parry agreed to restrictions, for the purpose of obtaining independent
accountants as auditors for the Company, which prevent Eyre, the Parry-Beaumont
Trust and their affiliates from holding or controlling 50% or more of total
stockholder votes or 50% or more of the votes of the members of the Board of
Directors of the Company and precluding Kevin Parry's direct role with the
Company. The Company agreed to review the above mentioned restrictions on or
after January 1, 2001 and to consider, without obligation, eliminating them.
7. In connection with the Agreement and the Initial Restructuring
Agreement, Global Gold Armenia Limited and Global Gold Georgia Limited issued
promissory notes dated as of December 1, 1995 to the Company in the amounts of
$802,740 and $47,260, respectively, which bear interest at the rate of 6.36% per
annum and mature on November 30, 1998, for the purchase of the Company's Common
Stock issued to Eyre and the Parry-Beaumont Trust pursuant to such Agreements.
(b) Second Restructuring Agreement
Various prospective investment banking firms and potential investors who
expressed an interest in providing funding for the Company's projects in the
Fall of 1996 requested that the Company undertake a reverse split of its Common
Stock to decrease the number of shares outstanding and to reduce the equity
stake of certain shareholders who received shares pursuant to the Agreement
essentially in their capacity as finders in order to facilitate possible future
financings. In response thereto, by letter dated December 4, 1996, Eyre and the
Parry-Beaumont Trust (i) surrendered their Acquisition Warrants to purchase
2,400,000 and 1,600,000 shares of the Company's Common Stock (a total of
4,000,000 shares) (prior to the Reverse Split) (ii) surrendered their right to
designate two members of the Board of Directors of the Company and, in addition,
Eyre agreed (iii) to waive its overriding royalties in the Armenian mining
projects and (iv) to waive the approximately $146,000 due it under the
promissory notes received at the Closing (the "Second Restructuring Agreement").
While Eyre had 2% overriding royalty on the Armenian mining projects (other than
the Tailings Project), the Second Restructuring Agreement referred to the waiver
of a overriding royalty of 1.5% on the Armenian mining projects in reliance on
Eyre's earlier agreement to reduce such royalty to 1.5% by virtue of its failure
to secure financing from a designated mining company in November, 1996.
Accordingly, the Company believes that all overriding royalties on the Armenian
mining projects have been validly waived.
(c) Effect of the Agreement and the Restructuring Agreements
As a result of the Agreement, Eyre, together with the Parry-Beaumont
Trust, became the controlling stockholders of the Company and, as such, they
were able to determine effectively the vote on any matter being voted on by the
Company's stockholders, including the election of directors, and
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any merger, sale of assets or other change or control of the Company.
Furthermore, pursuant to the Stockholders Agreement, Eyre had the right to
designate 60% of the members of the Board of Directors, thereby gaining control
thereof.
However, by virtue of the Initial Restructuring Agreement, Eyre and the
Parry-Beaumont Trust reduced their ownership to only 47.66% of the Company's
issued and outstanding shares of Common Stock as of December 31 1995, and agreed
not to control the votes of 50% or more of the stock of the Company or 50% or
more of the members of the Board of Directors of the Company.
Moreover, under the Initial Restructuring Agreement, the Company retained
its rights with respect to both the Armenian Project and the Georgian Project,
but relinquished all of its interest in the Australian Project.
Also, by virtue of the Second Restructuring Agreement, Eyre and the
Parry-Beaumont Trust surrendered Acquisition Warrants to acquire 4,000,000
shares of the Company's Common Stock (computed prior to the Reverse Split),
thereby eliminating any Acquisition Warrants held by them, and their right to
designate two members of the Board of Directors of the Company. Such action,
together with the transfer of 2,000,000 shares of the Common Stock (after the
Reverse Split) to Messrs. Gallagher and Garrison, described in detail above,
diminished substantially the combined equity position formerly held by Eyre and
the Parry-Beaumont Trust.
(3) Eyre
Eyre, which was organized in 1993, is an Australian public company
registered with the Australian Securities Commission in Canberra, Australia.
Eyre has not applied for listing on the Australian Stock Exchange.
Eyre is engaged in the development of mining projects in Australia
with a view toward the commercial exploitation thereof. Eyre currently owns a
100% interest in the lead/zinc mining prospect licenses in Ediacara, real estate
and several additional assets.
Eyre had 21 holders of all of its common stock as of May 1, 1995.
Jeffrey Beaumont owns approximately 17.5% thereof, separate trusts for two other
officers own about 11.75% thereof each; a trust for the benefit of Kevin Parry
and the members of his family owns about 35% thereof, and the balance is owned
by 17 other stockholders.
Eyre's operating office is its own office building, Crest House,
located at 7 Havelock Street, West Perth 6005, Western Australia. Its telephone
number is 011619322-3988.
The Australian Securities Commission brought a court action against
Mr. Kevin Parry for the alleged criminal violation of Australian securities law
arising out of his alleged breach of fiduciary duties while serving as a
director of two corporations. Mr. Parry was found guilty of such violation in
late 1994, paid a fine of $15,000 and was barred from serving as a director of a
corporation for five years. In addition, the Company learned for the first time
in February, 1996 that a criminal
46
<PAGE>
action had been initiated against Mr. Parry in late 1994 for the alleged
misappropriation of property from an entity, but such action was subsequently
dismissed by the court in question.
(4) Parry-Beaumont Trust
The Parry-Beaumont Trust is a trust primarily for the benefit of
Kevin Parry and the members of his respective family, and Cameron Parry, one of
Mr. Parry's sons, and Jeffrey Beaumont are the co-trustees thereof. The Trust's
office is c/o Jeffrey Beaumont, Polymer Composites (Asia) Pte. Ltd., 18, Pioneer
Sector 1, Jurong, Singapore 2262. Mr. Beaumont's telephone number is 01165862-
4824, and Mr. Parry's telephone number is the same as that of Eyre.
(5) Loan Transaction between the Company and Eyre
Prior to the signing of the definitive agreement between the Company
and Eyre, but before the closing thereof, the Company loaned Eyre the sum of
$100,000 on an unsecured basis, which amount was offset against the $200,000
purchase price owed to Eyre under the Agreement. Pursuant to the Second
Restructuring Agreement, the balance of approximately $146,000 owed by the
Company to Eyre under its promissory notes delivered at the Closing was
cancelled.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
1. The following documents are filed as part of this report: Financial
Statements of the Company, including reports of independent certified public
accountants, Balance Sheets, Statements of Income, Statements of Stockholders
Equity, Statements of Cash Flow and Notes to Financial Statements: as at and for
the periods ended December 31, 1996 and December 31, 1995.
2. The Exhibits which are listed on the Exhibit Index attached hereto.
3. No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
47
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
1 Certificate of Incorporation, as amended.(1)
2 By-laws(1)
3 Certificate of Merger between the Registrant
and Everest Petroleum Inc.(1)
4 Agreement of Merger between the
Registrant and Everest Petroleum Inc.(1)
5 Asset Purchase Agreement between the
Registrant and Eyre Resources N.L. dated as
of June 30, 1995(1)
6 Form of 1995 Stock Option Plan+(1)
7 Letter Agreement between Registrant, Eyre
Resources N.L. and Robert A. Garrison+(1)
8 Employment Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995+(2)
9 Employment Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995+(2)
10 Employment Agreement between Autosport
(Asia) Pte. Ltd. and Robert A. Garrison
dated as of July 1, 1996+(2)
- ----------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
(1) Filed with 10-KSB for period ended December 31, 1994.
(2) Filed with 10-KSB for period ended December 31, 1995.
<PAGE>
11 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
1,000,000 shares of the Company's Common
Stock+(2)
12 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
487,500 shares of the Company's Common
Stock+(2)
13 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
12,500 shares of the Company's Common
Stock+(2)
14 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995 with respect to the grant of
487,500 shares of the Company's Common
Stock+(2)
15 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995 with respect to the grant of
12,500 shares of the Company's Common
Stock+(2)
16 Stock Appreciation Rights Agreement
between the Registrant and Drury J.
Gallagher dated July 21, 1995+(2)
17 Stock Appreciation Rights Agreement
between the Registrant and Robert A.
Garrison dated July 21, 1995+(2)
18 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Armenia Limited dated December 1,
1995(2)
<PAGE>
19 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Georgia Limited dated December 1,
1995(2)
20 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Australia Limited dated December 1,
1995(2)
21 Promissory Note of the Registrant dated
December 1, 1995 in the principal amount of
$100,000(2)
22 Promissory Note of the Registrant dated as
of December 1, 1995 in the principal amount
of $100,000(2)
23 Stockholders Agreement by and among the
Registrant, Eyre Resources N.L., the Parry-
Beaumont Trust, Drury J. Gallagher, Francis
A. Hayman, John Hayman. Howard G. Seitz
and George L. Ryan dated December 1,
1995(2)
24 Guarantee and Indemnification Agreement of
the Registrant dated December 1, 1995(2)
25 Warrant Agreement to purchase 20,000
shares of the Registrant's Common Stock
dated December 1, 1995 issued to David
Steadly(2)
26 Warrant Agreement to purchase 20,000
shares of the Registrant's Common Stock
dated December 1, 1995 issued to Karekin
Arzoomanian(2)
27 Form of Warrant Agreement issued to 20
purchasers of the Registrant's 10%
Convertible Notes pursuant to the
Confidential Private Placement Memorandum
dated May 17, 1995, as amended(2)
<PAGE>
28 Restructuring Agreement dated as of
December 1, 1995 by and among the
Registrant, Global Gold Armenia Ltd.,
Global Gold Georgia Ltd., Global Gold
Australia Ltd., Eyre Resources N.L., and the
Parry-Beaumont Trust (2)
29 Promissory Note of Global Gold Armenia
Limited dated as of December 1, 1995 in the
principal amount of $802,740(2)
30 Promissory Note of Global Gold Georgia
Limited dated as of December 1, 1995 in the
principal amount of $47,260(2)
31 Amended Employment Agreement between
the Registrant and Robert A. Garrison dated
as of April 11, 1996+(2)
32 Agreement No. 1 by and between the
Registrant, London & International
Mercantile Limited and HCL
Communications Ltd.*
33 Agreement No. 2 by and between the
Registrant, London & International
Mercantile Limited and HCL
Communications Ltd.*
34 Warrant Agreements to purchase 2,000,000
shares of the Registrant's Common Stock
issued to London & International Mercantile
Limited and HCL Communications Ltd.
under Agreement No. 1 with such party*
35 Warrant Agreements to purchase 2,000,000
shares of the Registrant's Common Stock
issued to London & International Mercantile
Limited and HCL Communications Ltd.
under Agreement No. 2 with such party*
36 Assignment and Assumption Agreement
between the Registrant and Global Gold
Armenia Limited dated as of July 30, 1996*
37 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as
of July 19, 1996, as amended on
November 4, 1996+*
<PAGE>
38 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 19, 1996, as amended on
November 4, 1996+*
39 Restructuring Agreement dated December
4, 1996 by and among the Registrant,
Eyre Resources N.L. and the
Parry-Beaumont Trust*
40 Certificate of Amendment to the Certificate
of Incorporation of the Registrant filed
with the Delaware Secretary of State on
December 31, 1996*
41 Unanimous Written Consent of the Board
of Directors of the Registrant dated as of
January 3, 1997, approving the transfer of
1,000,000 shares of the Registrant's
Common Stock to each of Drury J.
Gallagher and Robert A. Garrison.+*
42 Letter Agreement by and among the
Registrant, Global Gold Armenia Limited
and First Dynasty Mines Ltd.*
43 Debenture of Global Gold Armenia Limited
issued to First Dynasty Mines Ltd. dated
February 3, 1997, including Guarantee
thereof by the Registrant*
44 Global Gold Armenia Limited Charge Over
Shares issued to First Dynasty Mines Ltd.
dated February 3, 1997*
45 Form of Amendments No. 2, 3 and 4 to
Warrant Agreement issued to the
purchasers of the Registrant's 10%
Convertible Notes pursuant to the
Confidential Private Placement
Memorandum dated May 17, 1995,
as amended*
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
GLOBAL GOLD CORPORATION
(Registrant)
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, Chairman, Chief
Executive Officer and Treasurer
Dated: April 11, 1997
48
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Drury J. Gallagher Chairman, Chief Executive Officer, April 11, 1997
---------------------- Treasurer and Director (Principal
Drury J. Gallagher Executive and Financial Officer)
/s/ Robert A. Garrison President, Chief Operating
---------------------- Officer Secretary and Director April 11, 1997
Robert A. Garrison
49
AGREEMENT 1
This agreement made the 18th day of July 1996.
Between
Global Gold Corporation
and
London & International Mercantile Ltd.
and
HCL Communications Ltd.
Whereas:
Global Gold Corporation (GGC) is a Delaware Corporation with mining interests in
the Republic of Armenia comprising the Armenian Gold Recovery Company (AGR) as
set out in a Joint Venture Agreement between GGC and the Armenian Government
dated 1st May 1996 (JV) (as exhibited in the First Schedule hereto). In
accordance with the terms and conditions of the decree issued by the Armenian
Government in covenant with the JV, GGC requires the delivery of a Guarantee in
the amount of US$250,000.00 (a draft of which is set out in the Second Schedule
hereto), (the "Guarantee"), to be delivered to the Ministry of Industry of the
Government of Armenia (the "Armenian Government") and is willing to secure the
delivery of same by issuing 1,000,000 shares of its common stock (the "Shares")
together with warrants to purchase 2,000,000 Shares of GGC (the "Warrants") (as
set out in the Seventh Schedule hereto) to the provider of the Guarantee and
other security set out herebelow.
London & International Mercantile Ltd. (LIM) is a financial company which is
internationally recognised and is of good reputation. LIM is ready, willing and
able to issue the Guarantee to the Armenian Government subject to the terms
herein.
HCL Communications Ltd. (HCL) is the holder of an Option (the "Option") to
purchase the Shares and Warrants. HCL has introduced the other parties to each
other, has negotiated this Agreement and is prepared to allow the Shares and
Warrants held by HCL under the Option to be used as collateral to secure the
issue and delivery of the Guarantee.
Now Therefore:
As collateral security to cover any payment made to the Armenian Government
pursuant to the Guarantee after a default under the JV by GGC, GGC hereby issues
as a pledge to LIM or to
its order or to its assigns 1,000,000 shares of common stock of GGC (the
"Shares") which the parties agree are of value equivalent to US$1,500,000.00
valued at US$1.50 per share and the
1
<PAGE>
Warrants (as set out in the Seventh Schedule hereto) as security against
delivery of a Guarantee from LIM to the value of US$250,000.00 which shall be
made payable to the Armenian Government in substantially the form attached
hereto in the Second Schedule.
The Guarantee is payable in the event that GGC fails to acquire the Equipment
(the "Equipment") as set out in the Third Schedule hereto by February 1, 1997.
Further in any event the Guarantee shall be valid for up to twelve (12) months
only.
A. In Consideration of the delivery of the Guarantee GGC shall simultaneously
deliver the following documentation to LIM.
1. (a) A certificate for 1,000,000 Shares of GGC with the Warrants attached
free of any charge, encumbrance or lien, subject only to the Option
in favour of HCL as set out in the Fifth Schedule hereto, pledged as
collateral security to cover any payment made to the Armenian
Government pursuant to the Guarantee after a default under the JV by
GGC.
(b) A letter confirming a right to LIM to arrange a lease-purchase
rental, borrowing or other facility to enable GGC to acquire the
Equipment (to a value of not less than US$5 million) and an
undertaking that the terms offered by LIM with respect thereto will
not be refused if such terms are commercially competitive both on
the price of the Equipment and the lease terms. In the event that
such offer by LIM is not accepted by GGC then GGC shall without
protest or deduction pay LIM a penalty of US$250,000.
(c) The Personal Pledges of Drury Gallagher and Robert A. Garrison the
Directors of GGC as set out in the Eight Schedule.
2. A letter signed by Patterson Belknap, Webb & Tyler, Attorneys ("PBW&T") or
the Law Offices of Stephen R. Field, general counsel to GGC, confirming
that:
(a) GGC has the lawful authority to issue the Shares and Warrants to
LIM.
(b) GGC will promptly arrange the issued of the Shares and Warrants to
LIM pledged as security for the Guarantee.
(c) The Guarantee is required by the Armenian Government under the terms
of the decree issued by the Armenian Government in connection with
the execution and delivery of the JV and the draft set out in the
Second Schedule is in a form and manner acceptable to the Armenian
Government.
2
<PAGE>
(d) To the best of attorney's knowledge attorneys do not know of any
condition or restriction which would prevent the granting of a
NASDAQ Electronic Bulletin Board listing of the common stock of GGC
within a reasonable period of time after the issue and delivery of
the Guarantee although attorneys cannot predict the actual date
thereof because the processing, of the appropriate documentation to
be filed, by NASDAQ in connection therewith varies from case to
case. A letter signed by Stephen R. Filed General Counsel to GGC
dated July 1996, setting out the options open to GGC is attached
hereto in the Ninth Schedule.
(e) In the event of a default by GGC either before or after NASDAQ
quotation there are no restrictions on the sale by LIM or other
holder who is resident outside the USA of shares of common stock of
GGC for the full market value thereof without being subject to US
income tax, provided that LIM or such other holder is not engaged in
a trade or business in the United States and the income from such
sale is not effectively connected with the conduct of any such
business for US income tax purposes.
(f) GGC is lawfully able to make the warranties and undertakings given
by it in Clause 3. herein.
3. GGC hereby undertakes, warrants and agrees as follows:
(a) GGC will issue 1,000,000 shares of common stock (the Shares)
together with the Warrants in GGC to LIM as security for the issue
by LIM of the Guarantee subject to the terms and conditions of this
Agreement which Shares and Warrants will be delivered upon the
execution and delivery hereof to M. Slattery who will hold same as
agent of GGC until receipt by LIM of confirmation of the acceptance
of the Guarantee by the Armenian Government and thereafter he will
deliver same to LIM.
(b) GGC will purchase, lease or lease purchase the Equipment to a value
of at least US$5 million as set out in the Third Schedule hereto
from LIM subject only to the terms of Clause A. 1. (b) and deliver
same to Armenia, subject to the terms and conditions of this
Agreement. A letter undertaking to accept such offer of finance for
the Equipment by GGC is set out in the Tenth Schedule.
(c) GGC will cause the Equipment to be delivered into Armenia by the
31st December 1996 and will be in operation on site in Armenia
within six (6) months of crossing the Armenian Border, subject to
the absence of any force majeure conditions (such as war, civil
unrest, strikes, riots, border closings, natural disasters or any
similar factor beyond the control of GGC in which circumstance the
Armenian Government will not seek payment under the Guarantee.
3
<PAGE>
(d) The Equipment will be subject to a fixed charge in favour of LIM and
will not be sold either in whole or in part to any third party and
will remain in the sole and exclusive possession and ownership of
GGC, or its wholly-owned subsidiary thereof or the AGR until after
LIM has been discharged from its obligations under the Guarantee and
LIM has been paid all its fees specified in the twelfth Schedule
hereto.
(e) GGC will at all times maintain full insurance coverage over the
Equipment to a value to cover the full cost of its replacement in
the event of its damage or loss for reasons of theft, seizure,
explosion, riot or other civil commotion, war, insurrection or
assault or from fire, earthquake, flood or other natural hazard and
LIM as holder of a charge over the Equipment as set out in Clause A.
3. (d) shall be named as an additional insured party in said
coverage.
(f) GGC will use its best efforts to acquire further insurance to cover
any loss incurred as a result of late delivery or late putting into
operation of the Equipment, to the extent available on terms
reasonably acceptable to GGC and LIM, and LIM shall be named as an
additional insured party in said coverage.
(g) GGC expects to have a NASDAQ Bulletin Board quotation within sixty
(60) days of the date of issue of the Guarantee and in any event
will seek a Full NASDAQ Small Cap Listing within ninety (90) days
provided GGC meets the NASDAQ equity test.
(h) That in the event that LIM, after sale of the Shares and
other recovery as set out herein, is not fully refunded its outlay
and fees from HCL as set out in the Fifth Schedule herein, LIM shall
be paid any shortfall by the two above mentioned directors of GGC.
(i) GGC represents that it expects to receive an offer to purchase its
shares from Mr. Franco Boule or his assigns within thirty days which
if accepted by GGC would raise a sum in excess of US$5,000,000 for
the use of GGC.
(j) All legal fees, charges, and validity fees charged by
LIM as are set out in the Twelfth Schedule hereto will be paid for
by GGC as and when set out in said Twelfth Schedule.
(k) GGC has no knowledge of any condition of restriction which would
prevent the granting of a NASDAQ Electronic Bulletin Board listing
for its common stock within a period of sixty (60) days of the date
of issue and delivery of the Guarantee.
4. GGC exhibits herewith:
(a) A copy of the JV in the First Schedule hereto.
4
<PAGE>
(b) A copy of the GGC 10-KSB for the year ended December 31, 1995 in the
Fourth Schedule hereto.
5. GGC will honour the Option in favour of HCL after release by LIM of the
Shares and Warrants from the pledge in consideration for HCL hereby
agreeing to allow the Optioned Shares to be so pledged.
B. In consideration of which LIM shall:
(a) Issue the Guarantee within one (1) business day and deliver the
Guarantee to the Armenian Government within three (3) business days
after execution and delivery of this Agreement.
(b) Offer financial terms for the acquisition of the Equipment as
described in clause A.1. (b) hereof.
(c) Enter into a Subsidiary Agreement with HCL as set out in the Fifth
Schedule hereto.
(d) Return the certificate for 1,000,000 shares of common stock (the
Shares) and the Warrants of GGC to GGC within ten (10) business days
after the expiration of the Guarantee if no payment has been made to
the Armenian Government and if HCL has not exercised the Option or
return such remaining unsold Shares if HCL has exercised its Option
in part. Upon expiration of the Guarantee without any payment made
thereunder by LIM, all of LIM's rights with respect to the Shares
and the Warrants as collateral security shall terminate without any
further action on the part of LIM and simultaneously therewith LIM's
charge over the Equipment under Clause A. 3. (d) hereof shall
terminate in full without any further action on LIM's part.
C. Miscellaneous
(a) It is agreed that the terms and conditions, warrants and
undertakings given herein are separate, distinct and independent
from terms and conditions, warrants and undertakings given in the
Agreement 2 dated 18th July 1996 (Kilborn Agreement).
(b) No Party shall, without the prior consent in writing of the other
Parties, assign, transfer or otherwise part with control of its
benefits or burdens hereunder.
(c) This Agreement shall be binding on the successors and assigns of the
Parties hereto.
(d) The Parties and arbitrators are charged to apply this Agreement in
good faith as it is written taking into account the fair and
reasonable expectations of the Parties as expressed herein.
5
<PAGE>
(e) The Parties agree to refer all unsettled disputes arising out of
this Agreement to the International Chamber of Commerce, under the
Rules of Conciliation and Arbitration, for arbitration by a panel of
three arbitrators. LIM may appoint one Arbitrator and GGC shall
appoint another, HCL shall appoint a third arbitrator; provided that
if all three arbitrators have not been appointed within thirty days
after the party submitting the matter in dispute has notified the
other Parties of such submission, any Party may apply to the
International Chamber of Commerce, London England to appoint the
remaining arbitrators. This Agreement shall be interpreted in
accordance with and be governed by English Law. The place of
arbitration of any matter to be settled shall be London, England.
(f) No Party shall be in breach of the Agreement if there is any total
or partial failure of performance by it of its duties and
obligations under this Agreement occasioned by any act of God, fire,
act of Government, or State, war, civil commotion, insurrection,
embargo, prevention from, or hindrance in, obtaining raw materials,
energy or other supplies, labour disputes of whatever nature and any
other reason beyond the control of either Party. If a Party is
unable to perform its duties and obligations under the Agreement as
a direct result of the effect of one of those reasons that Party
shall give written notice to the others of the inability stating the
reason in question. The operation of this Agreement shall be
suspended during the period in which the reason continues. Forthwith
upon the reason ceasing to exist the Party relying upon it shall
give written advice to the others of this fact. If the reason
continues for more than one year and substantially affects the
commercial basis of this Agreement the Party not claiming relief
under this clause shall have the right to terminate this Agreement
upon giving twenty days written notice of such termination to the
non-performing Party.
(g) If any provision or term of this Agreement or any part thereof shall
become or be declared illegal, invalid or unenforceable for any
reason in one or more jurisdictions it shall be deemed to be deleted
from this Agreement in the jurisdiction or jurisdictions in question
provided always that if any such deletion substantially affects or
alters the commercial basis of this Agreement the Parties shall
negotiate in good faith to amend and modify the provisions and terms
of this Agreement as may be necessary to give effect to the true
desire of the Parties herein or otherwise may be desirable in the
circumstances.
(h) Each Party shall be responsible for its own taxes, duties and other
government charges.
(i) This Agreement together with the Schedules embodies the entire
agreement and understanding of the Parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements understandings or arrangements with respect to the
subject matter hereof.
6
<PAGE>
(j) This Agreement may be amended, modified, varied or supplanted by the
Parties mutually agreeing to do so in writing.
(k) No failure or delay by any Party to exercise any right of remedy
under this Agreement shall be construed as a waiver thereof nor
shall any single or partial exercise of any right or remedy be
construed as a waiver as the case may be. The rights and remedies
provided in this Agreement are cumulative and are not exclusive of
any rights or remedies provided by law.
(l) Each of the Parties hereto shall be responsible for its own legal
and other advisory costs incurred in the preparation of this
Agreement. This Clause is without prejudice to and does not affect
LIM's right to collect all fees set out in the Twelfth Schedule.
(m) Any notice or other document to be given under this Agreement shall
be in writing and shall be deemed to have been duly given if
delivered or sent to the principal place of business of the
recipient by hand (and receipt acknowledged), or by an
internationally recognised overnight delivery service (such as
Federal Express).
(n) The Parties may expressly agree to accept notice or other document
by telex, facsimile, computer transmission or other electronic media
at the principal place of business or other stated address of the
receiving Party.
(o) In the event that HCL executes the purchase of 2,000,000 shares of
GGC common stock together with the warrants (to purchase 4,000,000
shares of GGC common stock attached) pursuant to the Stock Purchase
Agreement hereto attached and set out in the Seventh Schedule the
Shares and Warrants (issued hereunder) as collateral security, but
which are returned to GGC hereunder, shall be part of the total
package of shares and warrants that are made available to HCL by GGC
(by Stock Purchase Agreement dated 1996 in accordance with said
Stock Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF the undersigned duly authorised representatives of the
Parties hereto have hereunto executed and sealed this Agreement on the day and
year first above written.
Global Gold Corporation
By /s/ Drury J. Gallagher
-----------------------
Name: Drury J. Gallagher
Title: President
Witness: /s/ Robert Garrison
------------------------
London & International Mercantile Ltd.
By /s/ Roy A. Woodward
------------------------
Name: Roy A. Woodward
Title: Director
Witness: /s/ Niall Taylor
------------------------
HCL Communications Ltd.
By /s/ Alec Trustram Eve
------------------------
Name: Alec Trustram Eve
Title: Executive
Witness: /s/ Niall Taylor
------------------------
<PAGE>
FIFTH SCHEDULE
Subsidiary Agreement dated 18th July 1996
London & International Mercantile Ltd. (LIM)
HCL Communications Ltd. (HCL)
and
Global Gold Corporation (GGC)
Whereas in Agreement 1. (the "Agreement") between LIM, GGC and HCL, LIM has
agreed to deliver a Guarantee to the Armenian Government and GGC has agreed to
issue as a pledge 1,000,000 shares of common stock (the "Shares") and 2,000,000
warrants (the "Warrants"), in GGC held by HCL under an option agreement (the
"Option") to LIM.
HCL under the Option may at any time up to sixty one (61) days after the date of
execution and delivery hereof offer to by all or part of the Shares and Warrants
pursuant to the Stock Purchase Agreement set out in the Seventh Schedule and LIM
agrees to allow HCL to exercise the Option by making payment for the Shares for
the sum of US$1.50 per Share and the Warrants at the price set forth in the
Stock Purchase Agreement, to LIM during the continuance of the Guarantee and
thereafter, if there is no payment made by LIM under the Guarantee, to GGC.
LIM and GGC agree to honour the Option and GGC agrees that HCL may purchase all
or part of the Shares and Warrants for the said sum of US$1.50 per Share and the
Warrants at the price set out in the Stock Purchase Agreement in the Seventh
Schedule.
Now therefore
In consideration of the Option granted by GGC to HCL to buy all or part of the
Shares and Warrants to HCL by GGC and which grant is accepted and approved by
LIM, HCL agrees to do as follows:
(a) If HCL offers to buy all or part of the Shares HCL shall promptly pay
US$1.50 per share for the Shares and the Warrants. Any payment thus made
during the continuance of the Guarantee will be received by LIM as
replacement security for the issue of the Guarantee and LIM's fees as set
out in the Twelfth Schedule hereto and held in escrow by LIM until release
of the Guarantee, in the same manner as the Shares and Warrants were held
until purchase by HCL.
(b) If HCL fails to offer to purchase all or part of the Shares within a
period of sixty one (61) days from the date of execution and delivery
hereof then HCL shall forfeit its Option.
(c) The Miscellaneous provisions in Clause C. of the Agreement apply to this
Subsidiary Agreement where appropriate.
<PAGE>
IN WITNESS WHEREOF the undersigned duly authorised representatives of the
Parties hereto have hereunto executed and sealed this Subsidiary Agreement on
the day and year first above written.
London & International Mercantile Ltd.
By /s/ Roy A. Woodward
------------------------
Name: Roy A. Woodward
Title: Director
Witness: /s/ Niall Taylor
------------------------
HCL Communications Ltd.
By /s/ Alec Trustram Eve
------------------------
Name: Alec Trustram Eve
Title: Executive
Witness: /s/ Niall Taylor
------------------------
Global Gold Corporation
By /s/ Drury J. Gallagher
------------------------
Name: Drury J. Gallagher
Title: President
Witness: /s/ Robert Garrison
------------------------
<PAGE>
SIXTH SCHEDULE
Personal undertaking of Alec Trustram Eve
I Alec Trustram Eve hereby undertake as follows
That in consideration of the signing by all parties of the Agreement and the
Subsidiary Agreement in the Fifth Schedule I will
(a) Establish and register HCL Communications Ltd. as a Private Limited
Company registered in England.
(b) Transfer to and bind HCL to honour the Subsidiary Agreement as set out in
the Fifth Schedule to the Agreement.
Signed: /s/ Alec Trustram Eve
------------------------
Witnessed: /s/ Niall Taylor
------------------------
Dated: 18 July 1996
------------------------
<PAGE>
EIGHT SCHEDULE
Personal Pledge by Directors of GGC
We being two of the directors of GGC as part of the security given to LIM under
the Principal Agreement herewith, hereby personally, jointly and severally
pledge, commit, promise and undertake that:
In the event that the Guarantee issued by LIM in accordance with the terms
of the Agreement is called upon by the Armenian Government and LIM makes
payment of the sum of US$250,000 to the Armenian Government;
should LIM after sale of the Shares and Warrants (held as pledge) not have
realised, from the proceeds of said sale, sufficient funds to recover the
principal sum of US$250,000 paid under the Guarantee together with the
costs, charges and fees as set out in the Twelfth Schedule hereto and all
other reasonable fees and costs incurred by LIM in issuing the Guarantee
and perfecting the Shares and Warrants as security and the recovery,
safekeeping, offer and sale of the Shares and Warrants
we will jointly and severally without protest or deduction pay to LIM an amount
to cover the difference between all moneys due to LIM and the actual moneys
recovered by LIM from the sale as herein set out.
Signed: /s/ Drury J. Gallagher
------------------------
Drury J. Gallagher
Signed: /s/ Robert Garrison
------------------------
Robert A. Garrison
Dated: July 18, 1996
<PAGE>
TENTH SCHEDULE
GGC Letterhead
As an inducement for London & Mercantile Ltd. and HCL Communications Ltd. to
enter into Agreement 1. with Global Gold Corporation (GGC) to which this
Schedule is attached:
GGC will purchase, lease or lease purchase, or by other mutually agreed
means, acquire the Equipment as set out in the Third Schedule to the
Principal Agreement, to a value of at least US$5 million from LIM.
The terms offered by LIM with respect thereto will not be refused if such
terms are commercially competitive both as to price of the Equipment and
the lease terms. This offer shall be made by LIM on or before the 1st
November 1996, conditional upon receipt by 1st October 1996 from GGC of a
full list of Equipment required.
In the event either (a) GGC does not provide a full list of Equipment
required by 1st October 1996 and consequently LIM is not able to make an
offer or (b) after receipt of said list of Equipment and the making of an
offer by LIM that such offer by commercially competitive as to price of
Equipment and the lease terms the GGC shall pay LIM on February 1st 1997,
a penalty of US$250,000.
Global Gold Corporation
Signed: /s/ Drury J. Gallagher
------------------------
Dated: July 18, 1996
<PAGE>
TWELFTH SCHEDULE
Payable by GGC as and when set out herein
(a) 1.75% per US$250,000 ($4,375) payable upon confirmation by LIM that it is
about to deliver the Guarantee to the Armenian Government.
(b) Validity cost 0.5% per month (minimum period of six months) therefore cost
is $7,500 for the Guarantee payable upon the signing hereof.
(c) Reasonable legal fees (not to exceed US$3,000) in reviewing this Agreement
invoiced by LIM payable as and when invoiced.
AGREEMENT 2
This Agreement made the 18 day of July 1996.
Between
Global Gold Corporation
and
London & International Mercantile Ltd.
and
HCL Communications Ltd.
Whereas:
Global Gold Corporation (GGC) is a Delaware Corporation with mining interests in
the Republic of Armenia comprising the Armenian Gold Recovery Company (AGR) as
set out in a Joint Venture Agreement between GGC and the Armenian Government
dated 1st May 1996 (JV) (as exhibited in the First Schedule hereto). To
facilitate the development of the AGR, GGC requires the delivery of a Guarantee
in the amount of US$250,000.00 (a draft of which is set out in the Second
Schedule hereto) (the "Guarantee") to be delivered to Kilborn Inc. of 2200 Lake
Shore Blvd. W. Toronto, Ontario M8V 1A4 and is willing to secure the delivery of
same by issuing 1,000,000 shares of its common stock (the "Shares") together
with warrants to purchase 2,000,000 Shares of GGC (the "Warrants") (as set out
in the Seventh Schedule hereto) to the provider of the Guarantee and other
security set out herebelow.
London & International Mercantile Ltd. (LIM) is a financial company which is
internationally recognised and is of good reputation. LIM is ready, willing and
able to issue the Guarantee to Kilborn Inc. subject to the terms and conditions
herein.
HCL Communications Ltd. (HCL) is the holder of an Option (the "Option") to
purchase the Shares and Warrants. HCL has introduced the other parties to each
other, has negotiated this Agreement and is prepared to allow the Shares and
Warrants held by HCL under the Option to be used as collateral to secure the
issue and delivery of the Guarantee.
Now Therefore:
As collateral security to cover any payment made to Kilborn pursuant to the
Guarantee after a default in payment by GGC, GGC hereby issues as a pledge to
LIM or to its order or to its
assigns 1,000,000 shares of common stock of GGC (the "Shares") which the parties
agree is of value equivalent to US$1,500,000.00 valued at US$1.50 per share and
the Warrants (as set out in the Sixth Schedule hereto) ( the "Warrants") against
delivery of a Guarantee from LIM to
1
<PAGE>
the value of US$250,000.00 which shall be made payable to Kilborn Inc. in
substantially the form attached hereto in the Second Schedule.
The Guarantee is payable in the event that GGC fails to pay the sum of
US$250,000.00 within 120 days of the delivery to Kilborn Inc. of the Guarantee.
Further in any event the Guarantee shall be valid for up to six (6) months only.
A. In Consideration of the delivery of the Guarantee GGC shall simultaneously
deliver the following documentation to LIM.
1. (a) A certificate for 1,000,000 Shares of GGC with the Warrants attached
free of any charge, encumbrance or lien subject only to the option
in favour of HCL as set out in the Fourth Schedule hereto, pledged
as collateral security to cover any payment made to Kilborn pursuant
to the Guarantee after a default in payment to Kilborn by GGC.
(c) The Personal Pledges of Drury J. Gallagher and Robert A. Garrison
the Directors of GGC as set out in the Seventh Schedule.
2. A letter signed by Patterson Belknap, Webb & Tyler Attorneys ("PBW&T") or
the Law Offices of Stephen R. Field, general counsel to GGC, confirming
that:
(a) GGC has the lawful authority to issue the Shares and Warrants to
LIM.
(b) GGC will promptly arrange the issue of the Shares and Warrants to
LIM pledged as security for the Guarantee.
(c) The Guarantee is required by Kilborn Inc. and the draft set out in
the Second Schedule is in a form and manner acceptable to Kilborn
Inc.
(d) To the best of attorney's knowledge attorneys do not know of any
condition or restriction which would prevent the granting of a
NASDAQ Electronic Bulletin Board listing of the common stock of GGC
within a reasonable period of time after the issue and delivery of
the Guarantee although attorneys cannot predict the actual date
thereof because the processing, of the appropriate documentation to
be filed, by NASDAQ in connection therewith varies from case to
case. A letter signed by Stephen R. Field General Counsel to GGC
dated July 1996, setting out the options open to GGC is attached
hereto in the Eight Schedule.
(e) In the event of a default by GGC either before or after NASDAQ
quotation there are no restrictions on the sale by LIM or other
holder who is resident outside the USA of shares of common stock of
GGC for the full market value thereof without being subject to US
income tax, provided that LIM or such other holder is not engaged in
a trade or business in the USA and the income
2
<PAGE>
from such sale is not effectively connected with the conduct of any
such business for US income tax purposes.
(f) GGC is lawfully able to made the warranties and undertakings given
by it in Clause 3. herein.
3. GGC hereby undertakes, warrants and agrees as follows:
(a) GGC will issue 1,000,000 shares of common stock (the Shares)
together with the Warrants in GGC to LIM as security for the issue
by LIM of the Guarantee subject to the terms and conditions of this
Agreement which Shares and Warrants will be delivered upon the
execution and delivery hereof.
(b) GGC expects to have a NASDAQ Bulletin Board quotation within sixty
(60) days of the date of issue of the Guarantee and in any event
will seek a Full NASDAQ Small Cap Listing within ninety (90) days
provided GGC meets the NASDAQ equity test.
(c) That in the event that LIM, after sale of the shares and other
recovery as set out herein, is not fully refunded its outlay and
fees from HCL as set out in Subsidiary Agreement in the Fourth
Schedule herein, LIM shall be paid any shortfall by the two above
named directors of GGC.
(d) GGC represents that it expects to receive an offer to purchase its
shares from Mr. Franco Boule or his assigns within thirty days which
if accepted by GGC would raise a sum in excess of US$5,000,000 for
the use of GGC.
(e) All legal fees, charges, and validity fees charged by LIM as are set
out in the Tenth Schedule hereto will be paid for by GGC as and when
set out in said Tenth Schedule.
(f) GGC has no knowledge of any condition or restriction which would
prevent the granting of a NASDAQ Electronic Bulletin Board listing
for its common stock within a period of sixty (60) days of the date
of issue and delivery of the Guarantee.
4. GGC exhibits herewith:
(a) A copy of the JV in the First Schedule hereto.
(b) A copy of the GGC 10-KSB for the year ended December 31, 1995 in the
Third Schedule hereto.
5. GGC will honour the Option in favour of HCL after release by LIM of the
Shares and Warrants from the pledge in consideration for HCL hereby
agreeing to allow the Optioned Shares to be so pledged.
3
<PAGE>
B. In consideration of which LIM shall:
(a) Issue the Guarantee within one (1) business day and deliver the
Guarantee to Kilborn Inc. within three (3) business days after the
execution and delivery of this Agreement.
(b) enter into a Subsidiary Agreement with HCL as set out in the Fourth
Schedule hereto.
(c) Return the certificate for 1,000,000 shares of common stock (the
Shares) and the Warrants of GGC to GGC within ten (10) business days
after the expiration of the Guarantee if no payment has been made to
or claimed by the Armenian Government and if HCL has not exercised
the Option, or return such remaining unsold Shares if HCL has
exercised its Option in part. Upon expiration of the Guarantee
without any payment made thereunder by LIM, all of LIM's rights with
respect to the Shares and the Warrants as collateral security shall
terminate without any further action on the part of LIM.
C. Miscellaneous
(a) It is agreed that the terms and conditions, warrants and
undertakings given herein are separate, distinct and independent
from terms and conditions, warrants and undertakings given in the
Agreement 1 dated 18th July 1996 (Armenian Government Agreement).
(b) No Party shall, without the prior consent in writing of the other
Parties, assign, transfer or otherwise part with control of its
benefits or burdens hereunder.
(c) This Agreement shall be binding on the successors and assigns of the
Parties hereto.
(d) The Parties and arbitrators are charged to apply this Agreement in
good faith as it is written taking into account the fair and
reasonable expectations of the Parties as expressed herein.
(e) The Parties agree to refer all unsettled disputes arising out of
this Agreement to the International Chamber of Commerce, under the
Rules of Conciliation and Arbitration, for arbitration by a panel of
three arbitrators. LIM may appoint one Arbitrator and GGC shall
appoint another, HCL shall appoint a third arbitrator; provided that
if all three arbitrators have not been appointed within thirty days
after the party submitting the matter in dispute has notified the
other Parties of such submission, any Party may apply to the
International Chamber of Commerce, London England to appoint the
remaining arbitrators. This Agreement shall be interpreted in
accordance with and governed by English
4
<PAGE>
Law. The place of arbitration of any matter to be settled shall be
London, England.
(f) No Party shall be in breach of this Agreement if there is any total
or partial failure of performance by it of its duties and
obligations under this Agreement occasioned by any act of God, fire,
act of Government, or State, war, civil commotion, insurrection,
embargo, prevention from, or hindrance in, obtaining raw materials,
energy or other supplies, labour disputes or whatever nature and any
other reason beyond the control of either Party. If a Party is
unable to perform its duties and obligations under this Agreement as
a direct result of the effect of one of those reasons that Party
shall give written notice to the others of the inability stating the
reason in question. The operation of this Agreement shall be
suspended during the period in which the reason continues. Forthwith
upon the reason ceasing to exist the Party relying upon it shall
give written advice to the others of this fact. If the reason
continues for more than one year and substantially affects the
commercial basis of this Agreement the Party not claiming relief
under this clause shall have the right to terminate this Agreement
upon giving twenty days written notice of such termination to the
non-performing Party.
(g) If any provision or term of this Agreement or any part thereof shall
become or be declared illegal, invalid or unenforceable for any
reason in one or more jurisdictions it shall be deemed to be deleted
from this Agreement in the jurisdiction or jurisdictions in question
provided always that if any such deletion substantially affects or
alters the commercial basis of this Agreement the Parties shall
negotiate in good faith to amend and modify the provisions and terms
of this Agreement as may be necessary to give effect to the true
desire of the Parties herein or otherwise may be desirable in the
circumstances.
(h) Each Party shall be responsible for its own taxes, duties and other
government charges.
(i) This Agreement together with the Schedules embodies the entire
agreement and understanding of the Parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements understandings or arrangements with respect to the
subject matter hereof.
(j) This Agreement may be amended, modified, varied or supplanted by the
Parties mutually agreeing to do so in writing.
(k) No failure or delay by any Party to exercise any right of remedy
under this Agreement shall be constured as a waiver thereof nor
shall any single or partial exercise of any right or remedy be
construed as a waiver as the case may be. The rights and remedies
provided in this Agreement are cumulative and are not exclusive of
any rights or remedies provided by law.
5
<PAGE>
(l) Each of the Parties hereto shall be responsible for its own legal
and other advisory costs incurred in the preparation of this
Agreement. This Clause is without prejudice to and does not affect
LIM's right to collect all fees set out in the Tenth Schedule.
(m) Any notice or other document to be given under this Agreement shall
be in writing and shall be deemed to have been duly given if
delivered or sent to the principal place of business of the
recipient by hand (and receipt acknowledged), by facsimile (where
receipt is acknowledged) or by an internationally recognized
overnight delivery service (such as Federal Express).
(n) The Parties may expressly agree to accept notice or other document
by telex, facsimile, computer transmission or other electronic media
at the principal place of business or other stated address of the
receiving Party.
(o) In the event that HCL executes the purchase of 2,000,000 shares of
GGC common stock together with the warrants (to purchase 4,000,000
shares of GGC common stock attached) pursuant to the Stock Purchase
Agreement hereto attached and set out in the Seventh Schedule the
Shares and Warrants (issued hereunder) as collateral security, but
which are returned to GGC hereunder, shall be part of the total
package of shares and warrants that are made available to HCL by GGC
(by Stock Purchase Agreement dated 1996) in accordance with said
Stock Purchase Agreement.
6
<PAGE>
IN WITNESS WHEREOF the undersigned duly authorized representatives of the
Parties hereto have hereunto executed and sealed the Agreement on the day and
year first above written.
Global Gold Corporation
By /s/ Drury J. Gallagher
---------------------
Name: Drury J. Gallagher
Title: President
Witness: /s/ Robert Garrison
---------------------
London & International Mercantile Ltd.
By /s/ Roy A. Woodward
---------------------
Name: Roy A. Woodward
Title: Director
Witness: /s/ Niall Taylor
---------------------
HCL Communications Ltd.
By /s/ Alec Trustram Eve
---------------------
Name: Alec Trustram Eve
Title: Executive
Witness: /s/ Niall Taylor
---------------------
7
<PAGE>
FOURTH SCHEDULE
Subsidiary Agreement dated 18 July 1996
London & International Mercantile Ltd. (LIM)
HCL Communciations Ltd. (HCL)
and
Global Gold Corporation (GGC)
Whereas in Agreement 2 (the "Agreement") between LIM, GGC and HCL, LIM has
agreed to deliver a Guarantee to the Armenian Government and GGC has agreed to
issue as a pledge 1,000,000 shares of common stock (the "Shares") and 2,000,000
warrants (the "Warrants"), in GGC held by HCL under an option agreement (the
"Option") to LIM.
HCL under the Option may at any time up to sixty one (61) days after the date of
execution and delivery hereof offer to buy all or part of the Shares and
Warrants pursuant to the Stock Purchase Agreement set out in the Sixth Schedule
and LIM agrees to allow HCL to exercise the Option by making payment for the
Shares for the sum of US$1.50 per Share and the Warrants at the price set forth
in the Stock Purchase Agreement, to LIM during the continuance of the Guarantee
and thereafter, if there is no payment made by LIM under the Guarantee, to GGC.
LIM and GGC agree to honour the Option and GGC agrees that HCL may purchase all
or part of the Shares and Warrants for the said sum of US$1.50 per Share and the
Warrants at the price set out in the Stock Purchase Agreement in the Sixth
Schedule.
Now therefore
In consideration of the Option granted by LIM and GGC to HCL to buy all or part
of the Shares and Warrants to HCL by GGC, HCL agrees to do as follows:
(a) If HCL offers to buy all or part of the Shares HCL shall promptly pay
US$1.50 per share for the Shares and the Warrants. Any payment thus made
during the continuance of the Guarantee will be received by LIM as
replacement security for the issue of the Guarantee and LIM's fees as set
out in the Tenth Schedule hereto and held in escrow by LIM until release
of the Guarantee, in the same manner as the Shares and Warrants were held
until purchase by HCL.
(b) If HCL fails to offer to purchase all or part of the Shares within a
period of sixty one (61) days from the date of execution and delivery
hereof then HCL shall forfied its Option.
(c) The Miscellaneous provisions in Clause C. of the Principal Agreement apply
to this Subsidiary Agreement where appropriate.
8
<PAGE>
IN WITNESS WHEREOF the undersigned duly authorised representatives of the
Parties hereto have hereunto executed and sealed this Subsidiary Agreement on
the day and year first above written.
London & International Mercantile Ltd.
By /s/ Roy A. Woodward
---------------------
Name: Roy A. Woodward
Title: Director
Witness: /s/ Niall Taylor
---------------------
HCL Communcations Ltd.
By /s/ Alec Trustram Eve
-----------------------
Name: Alec Trustram Eve
Title: Executive
Witness: /s/ Niall Taylor
-----------------------
Global Gold Corporation
By /s/ Drury J. Gallagher
-----------------------
Name: Drury J. Gallagher
Title: President
Witness: /s/ Robert Garrison
-----------------------
9
<PAGE>
FIFTH SCHEDULE
Personal undertaking of Alec Trustram Eve
I Alec Trustram Eve hereby undertake as follows
That in consideration of the signing by all parties of the Principal Agreement
and the Subsidiary Agreement in the Fifth Schedule I will
(a) Establish and register HCL Communications Ltd. as a Private Limited
Company registered in England.
(b) Transfer to and bind HCL to honour the Agreement as set out in the Fourth
Schedule to the Principal Agreement.
Signed: /s/ Alec Trustram Eve
-----------------------
Witnessed: /s/ Niall Taylor
-----------------------
Dated: 18 July 1996
-----------------------
10
<PAGE>
SEVENTH SCHEDULE
Personal Pledge by Directors of GGC
We being two of the directors of GGC as part of the security given to LIM under
the Principal Agreement herewith, hereby personally, jointly and severally
pledge, commit, promise and undertake that:
In the event that the Guarantee issued by LIM in accordance with the terms
of the Agreement is called upon by Kilborn Inc. and LIM makes payment of
the sum of US$250,000 to Kilborn Inc;
should LIM after sale of the Shares and Warrants (held as pledge) not have
realised, from the proceeds of said sale, sufficient funds to recover the
principal sum of US$250,000 paid under the Guarantee together with the
costs, charges and fees set out in the Tenth Schedule hereto and all other
reasonable fees and costs incurred by LIM in issuing the Guarantee and
perfecting the Shares and Warrants as security and the recovery,
safekeeping, offer and sale of the Shares and Warrants.
we will jointly and severally without protest or deduction pay to LIM an amount
to cover the difference between all moneys due to LIM and the actual moneys
recovery by LIM from the sale as herein set out.
Signed: /s/ Drury J. Gallagher
-----------------------
Drury J. Gallagher
Signed: /s/ Robert Garrison
-----------------------
Robert A. Garriosn
Dated: July 18, 1996
11
<PAGE>
TENTH SCHEDULE
Payable by GGC as and when set out herein
(a) 1.75% per US$250,000 ($4,375) payable upon confirmation by LIM that it is
about to deliver the Guarante to Kilborn Inc.
(b) Validity cost 0.5% per month (minimum period of six months) therefore cost
is $7,500 for the Guarantee payalbe upon the signing hereof.
(c) Reasonable legal fees (not to exceed US$3,000) in reviewing this Agreement
invoiced by LIM payable as and when invoiced.
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B1 Right to Purchase 666,667 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on June 15, 1997 (subject to earlier expiration as provided
in Section 17 hereof) 666,667 fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company, at a purchase price per share of $3.00
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
1
<PAGE>
(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
2
<PAGE>
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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<PAGE>
Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5. 1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
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the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
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<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
8
<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
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(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the holder
of this Warrant shall be in writing and shall be considered as duly given on (a)
the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) June 15, 1997 or (b) the 60th day after
the receipt by the Company of a feasibility report from Kilborn Inc. or another
qualified engineering firm reflecting that the Zod mine in Armenia has proven
reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction under
applicable Federal and state securities laws, the holder agrees not to sell the
Company's Common Stock received upon the exercise of this Warrant until after
the later of (a) December 31, 1997 or (b) one year after the date of the full
exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
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FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B2 Right to Purchase 666,667 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on December 15, 1997 (subject to earlier expiration as
provided in Section 17 hereof) 666,667 fully paid and nonassessable shares of
Common Stock, $.001 par value, of the Company, at a purchase price per share of
$3.00 (such purchase price per share as adjusted from time to time as herein
provided is referred to herein as the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
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(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
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to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5. 1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
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the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
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<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
8
<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
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(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the holder
of this Warrant shall be in writing and shall be considered as duly given on (a)
the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) December 15, 1997 or (b) the 60th day
after the receipt by the Company of a feasibility report from Kilborn Inc. or
another qualified engineering firm reflecting that the Zod mine in Armenia has
proven reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction under
applicable Federal and state securities laws, the holder agrees not to sell the
Company's Common Stock received upon the exercise of this Warrant until after
the later of (a) December 31, 1997 or (b) one year after the date of the full
exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
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<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B3 Right to Purchase 666,666 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on June 15, 1998 (subject to earlier expiration as provided
in Section 17 hereof) 666,666 fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company, at a purchase price per share of $3.00
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
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(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
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to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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<PAGE>
4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5.1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
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the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
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<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
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<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
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(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the holder
of this Warrant shall be in writing and shall be considered as duly given on (a)
the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) June 15, 1998 or (b) the 60th day after
the receipt by the Company of a feasibility report from Kilborn Inc. or another
qualified engineering firm reflecting that the Zod mine in Armenia has proven
reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction under
applicable Federal and state securities laws, the holder agrees not to sell the
Company's Common Stock received upon the exercise of this Warrant until after
the later of (a) December 31, 1997 or (b) one year after the date of the full
exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
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FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B4 Right to Purchase 666,667 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on June 15, 1997 (subject to earlier expiration as provided
in Section 17 hereof) 666,667 fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company, at a purchase price per share of $3.00
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
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(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
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to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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<PAGE>
4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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<PAGE>
Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5. 1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
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the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
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<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
8
<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
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(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the holder
of this Warrant shall be in writing and shall be considered as duly given on (a)
the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) June 15, 1997 or (b) the 60th day after
the receipt by the Company of a feasibility report from Kilborn Inc. or another
qualified engineering firm reflecting that the Zod mine in Armenia has proven
reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction under
applicable Federal and state securities laws, the holder agrees not to sell the
Company's Common Stock received upon the exercise of this Warrant until after
the later of (a) December 31, 1997 or (b) one year after the date of the full
exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, President
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
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<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B5 Right to Purchase 666,667 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on December 15, 1997 (subject to earlier expiration as
provided in Section 17 hereof) 666,667 fully paid and nonassessable shares of
Common Stock, $.001 par value, of the Company, at a purchase price per share of
$3.00 (such purchase price per share as adjusted from time to time as herein
provided is referred to herein as the "Purchase Price"). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
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(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
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<PAGE>
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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<PAGE>
4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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<PAGE>
Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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<PAGE>
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5. 1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
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the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
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<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
8
<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
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(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the holder
of this Warrant shall be in writing and shall be considered as duly given on (a)
the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) December 15, 1997 or (b) the 60th day
after the receipt by the Company of a feasibility report from Kilborn Inc. or
another qualified engineering firm reflecting that the Zod mine in Armenia has
proven reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction under
applicable Federal and state securities laws, the holder agrees not to sell the
Company's Common Stock received upon the exercise of this Warrant until after
the later of (a) December 31, 1997 or (b) one year after the date of the full
exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, President
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
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<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER THEREOF MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
No. W-B6 Right to Purchase 666,666 Shares of
Common Stock of Global Gold Corporation
GLOBAL GOLD CORPORATION
Common Stock Purchase Warrant
Global Gold Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, London & International Mercantile Limited,
or registered permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time before 5:30
P.M., New York time, on June 15, 1998 (subject to earlier expiration as provided
in Section 17 hereof) 666,666 fully paid and nonassessable shares of Common
Stock, $.001 par value, of the Company, at a purchase price per share of $3.00
(such purchase price per share as adjusted from time to time as herein provided
is referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to the Stock Purchase Agreement between the Company and
the holder hereof dated as of June __, 1996, a copy of which is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise requires.
have the following respective meanings:
(a) The term "Company" shall include Global Gold Corporation and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
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(b) The term "Common Stock" includes the Company's Common Stock, $.001
par value per share, as authorized on the date of the Agreement and
any other securities into which or for which any of such Common
Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or
otherwise.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by the holder
hereof by surrender of this Warrant, with the form of subscription at the end
hereof duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is then exercisable by the
Purchase Price then in effect.
1.2. Partial Exercise. This Warrant may be exercised in part by surrender
of this Warrant in the manner and at the place provided in Section 1. 1 except
that the amount payable by the holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Purchase Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Trustee for Warrantholders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrants pursuant to
Section 4.2, such bank or trust company shall have all the powers and duties of
a warrant agent appointed pursuant to Section 12 and shall accept, in its own
name for the account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such successor, as the
case may be, on exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
10 days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes and, if requested by the Company, demonstration by
such holder of compliance with applicable securities laws) may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock to which such holder shall be entitled on such exercise,
plus, in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then current market
value of one full share, together with any other stock or other securities and
property (including cash, where applicable)
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<PAGE>
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification,
etc. In case at any time or from time to time, the holders of Common Stock shall
have received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of earnings or
earned surplus of the Company), or
(c) other or additional stock or other securities or property (including
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 5.3),
then and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) which such holder would hold on the date
of such exercise if on the date hereof he had been the holder of record of the
number of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3) receivable by him as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger, etc.
4.1 Reorganization. In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
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<PAGE>
4.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 4 to a bank or trust company having
its principal office in New York, New York, as trustee for the holder or holders
of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 4, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock
at Less Than The Purchase Price in Effect.
5.1 General. If the Company shall, at any time or from time to time, issue
any additional shares of Common Stock (other than shares of Common Stock
excepted from the provisions of this Section 5 by Section 5.4) without
consideration or for a Net Consideration Per Share less than the Purchase Price
in effect immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon the exercise of any warrant to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number of
such additional shares of Common Stock so issued would purchase at the Purchase
Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares
of Common Stock outstanding (excluding treasury shares, but including for this
purpose shares of Common Stock issuable upon exercise of any warrants to
purchase Common Stock issued and outstanding prior to the date of the issuance
of the Warrants) immediately prior to the issuance of such additional shares of
Common Stock, plus (b) the number of such additional shares of
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<PAGE>
Common Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5. 1) be issuable
on such exercise by the fraction of which (i) the numerator is the Purchase
Price which would otherwise (but for the provisions of this Section 5. 1) be in
effect, and (ii) the denominator is the Purchase Price in effect on the date of
such exercise.
5.2 Definitions, etc. For purposes of this Section 5 and Section 7:
The issuance of any warrants, options or other subscription or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share which may be received by the Company
for such Common Stock (as hereinafter determined) shall be less than the
Purchase Price at the time of such issuance and, except as hereinafter provided,
an adjustment in the Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant shall be made upon each such issuance in
the manner provided in Section 5. 1. Any obligation, agreement or undertaking to
issue warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase Price
and the number of shares of Common Stock issuable upon exercise of this Warrant
shall be made under Section 5.1 upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or other rights
or upon the issuance of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any adjustment of
the Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this Section 5.2 which relates to
warrants, options or other subscription or purchase rights with respect to
shares of Common Stock shall be disregarded if, as, and to the extent that such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the Purchase
Price that otherwise would have been in effect at the time of the issuance of
the expired or canceled warrants, options or other subscriptions or purchase
rights, with such additional adjustments as would have been made to that
Purchase Price had the expired or cancelled warrants, options or other
subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share" which
may be received by the Company shall be determined as follows:
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<PAGE>
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would be
issued if all such warrants, options, subscriptions, or other purchase rights or
convertible or exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by the
Company shall be determined in each instance as of the date of issuance of
warrants, options, subscriptions or other purchase rights, or convertible or
exchangeable securities without giving effect to any possible future price
adjustments or rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or convertible
securities.
For purposes of this Section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the Common
Stock or the issuance of any of the securities described in this Section 5
consists of property other than cash, such consideration shall be deemed to have
the same value as shall be determined in good faith by the Board of Directors of
the Company.
This Section 5.2 shall not apply under any of the circumstances described
in Section 5.4.
5.3. Extraordinary Events. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock,
or (iii) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Purchase
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Purchase Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 5.3) be issuable on such exercise by a fraction
of which (i) the numerator is the Purchase Price which would otherwise (but for
the provisions of this Section 5.3) be in effect, and (ii) the denominator is
the Purchase Price in effect on the date of such exercise.
5.4. Excluded Shares. Section 5.1 shall not apply to the (i) issuance of
shares of Common Stock, or options therefor, to directors, officers, employees,
advisors and consultants of
6
<PAGE>
the Company pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's Board
of Directors, and (ii) issuance of shares of Common Stock upon the exercise of
any warrants to purchase Common Stock issued and outstanding prior to the date
of the issuance of the Warrants to purchase Common Stock issued and outstanding
prior to the date of the issuance of the Warrants.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, and (c) will not transfer all or substantially all of its
properties and assets to any other person (corporate or otherwise), or
consolidate with or merge into any other person or permit any such person to
consolidate with or merge into the Company (if the Company is not the surviving
person), unless such other person shall expressly assume in writing and will be
bound by all the terms of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment
or readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or Chief
Financial Officer or, if the holder of a Warrant so requests, independent
certified public accountants selected by the Company to compute such adjustment
or readjustment in accordance with the terms of the Warrants and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant, in effect immediately prior to
such issue or sale and as adjusted and readjusted as provided in this Warrant.
The Company will forthwith mail a copy of each such certificate to each holder
of a Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
7
<PAGE>
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to or consolidation or merger of
the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities (other than the issue of Common Stock on the exercise of any warrants
to purchase Common Stock issued and outstanding prior to the date of the
issuance of the warrants), then and in each such event the Company will mail or
cause to be mailed to each registered holder of a Warrant a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class of persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any such
action is to be taken.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrants, all shares of Common Stock from time to time
issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver to
or on the order of the holder thereof a new Warrant or warrants of like tenor,
in the name of such holder or as such holder
8
<PAGE>
(upon payment by such holder of any applicable transfer taxes and, if requested
by the Company, demonstration by such holder of compliance with applicable
securities laws) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss, theft or destruction of any Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints American Registrar and Transfer
Company, with offices in Salt Lake City, Utah, as its agent for the purpose of
issuing Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant to
Section 11, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
The Company may change such agent and designate a new agent in the United States
for the above-described purposes by written notice to each holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate, and that a holder of this Warrant may suffer
irreparable harm and that such terms may be specifically enforced by a decree by
a court of competent jurisdiction for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title to
this Warrant may be transferred by endorsement (by the holder hereof executing
the form of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
9
<PAGE>
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder hereof as the absolute owner hereof for
all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices and other communications from the Company to the
holder of this Warrant shall be in writing and shall be considered as duly given
on (a) the date of delivery if delivered in person or delivered by nationally
recognized overnight delivery service or (b) three days after mailing if mailed
within the continental United States, sent by certified or mailed by first class
registered or certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such holder or, until any such holder
furnishes to the Company an address, then to, and at the address of, the last
holder of this Warrant who has so furnished an address to the Company.
16. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of
the terms hereof. This Warrant is being executed as an instrument under seal. If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
17. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
New York time, upon the earlier of (a) June 15, 1998 or (b) the 60th day after
the receipt by the Company of a feasibility report from Kilborn Inc. or another
qualified engineering firm reflecting that the Zod mine in Armenia has proven
reserves in excess of US $1,000,000,000.
18. Restrictions on Transferability. In addition to any other restriction
under applicable Federal and state securities laws, the holder agrees not to
sell the Company's Common Stock received upon the exercise of this Warrant until
after the later of (a) December 31, 1997 or (b) one year after the date of the
full exercise of the Warrants.
Dated: July 18, 1996
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, President
10
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Global Gold Corporation
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder
shares of Common Stock of Global Gold Corporation and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to whose address is
_____________________________________________________
(Street Address)
_____________________________________________________
(City, State and Zip Code)
_____________________________________________________
Dated:_________________
_________________________________________
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
11
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Global Gold Corporation to
which the within Warrant relates, and appoints ____________________________as
its attorney to transfer such right on the books of Global Gold Corporation with
full power of substitution in the premises.
Dated:________________
_________________________________________
(Signature)
(Signature must conform to name of holder as
specified on the face of the Warrant)
_________________________________________
(Print Name)
_________________________________________
(Street Address)
_________________________________________
(City, State and Zip Code)
_________________________________________
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
________________________________
12
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT made as of the 30st day of July,
1996 by and between Global Gold Corporation, a Delaware corporation, having an
office at 538 West 37th Street, Suite 5G, New York, New York 10017, ("Assignor")
and Global Gold Armenia Limited, a Caymans Island corporation, having an office
at W.S. Walker & Company, Caledonian House, P.O. Box 265, Georgetown, Grand
Cayman, Cayman Islands ("Assignee").
WHEREAS, Assignor is a party to the Armenian Joint Venture Agreement by
and among Assignor, the Ministry of Industry of Armenia and Armgold, which was
executed and delivered on May 1, 1996 (the "Armenian Agreement"); and
WHEREAS, Assignor has agreed to assign and transfer to Assignee all of
Assignor's right, title and interest in and under the Armenian Agreement, and
Assignee has agreed to assume all of Assignor's obligations under the Armenian
Agreement;
NOW, THEREFORE, in consideration of the sum of Ten ($10.00) dollars and
other good and valuable consideration paid by Assignee to Assignor, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignor hereby grants, bargains, sells, conveys, assigns, transfers
and sets over unto Assignee all of Assignor's right, title and interest in and
to the Armenian Agreement, TO HAVE AND TO HOLD the same unto the Assignee, its
successors and assigns, from the date hereof and for the balance of the term of
the Armenian Agreement.
2. Assignor represents and warrants that: (a) the Armenian Agreement is in
full force and effect; (b) Assignor is not in default under the Armenian
Agreement and no condition exists and no event has occurred which, or with the
giving of notice or passage of time, or both, would constitute a default under,
or termination of, the Armenian Agreement; (c) Assignor has received no notice
of any default under the Armenian Agreement; (d) Assignor has incurred no
liability of any kind thereunder except as contemplated under the Armenian
Agreement; and (e) the transfer made hereunder does not constitute a breach of
any provision of the Armenian Agreement and all requisite consents thereto have
been duly given.
3. Assignee hereby irrevocably assumes all of Assignor's obligations under
the Armenian Agreement.
4. This Agreement is made under and by virtue of duly adopted resolutions
of the respective Boards of Directors of Assignor and Assignee.
<PAGE>
5. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
6. This Agreement and the rights of the parties hereunder shall be
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties have signed and delivered this Agreement
on the date first written.
GLOBAL GOLD CORPORATION, ASSIGNOR
By: /s/ Drury J. Gallagher
---------------------------------
Drury J. Gallagher, President
GLOBAL GOLD ARMENIA LTD., ASSIGNEE
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, President
2
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 31st day of July, 1996 before me personally came Drury J.
Gallagher, known to me to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the President of Global Gold
Corporation, a Delaware corporation, and acknowledged to me that he executed
said instrument for the purposes and consideration therein expressed, and as the
act of said corporation.
/s/ Stephen R. Field
--------------------------------
Notary Public
STEPHEN R. FIELD
Notary Public State of New York
No. 31-6286310
Qualified in New York Country
Commission Expires June 30, 1998
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 31st day of July, 1996 before me personally came Drury J.
Gallagher, known to me to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the President of Global Gold Armenia
Ltd., a Cayman Islands corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, and as the act
of said corporation.
/s/ Stephen R. Field
--------------------------------
Notary Public
STEPHEN R. FIELD
Notary Public State of New York
No. 31-6286310
Qualified in New York Country
Commission Expires June 30, 1998
GLOBAL GOLD CORPORATION
STOCK OPTION AGREEMENT
(NON-QUALIFIED STOCK OPTION)
THIS AGREEMENT made as of this 19th day of July, 1996 between GLOBAL GOLD
CORPORATION, a Delaware corporation, with offices at 438 West 37th Street, Suite
5G, New York, New York 10018 (the "Company") and Drury J. Gallagher, residing at
107 Eakins Road, Manhasset, New York 11030 (the "Holder").
The Company has adopted the 1995 Stock Option Plan (the "Plan"). The Plan,
as it may hereafter be amended and continued, is incorporated herein by
reference and made part of this Agreement.
The Committee, which is charged with the administration of the Plan
pursuant to Section 3 thereof, has determined that it would be to the advantage
and interest of the Company to grant the option provided for herein to the
Holder as an inducement to remain in the service of the Company or one of its
subsidiaries, and as an incentive for increased efforts during such service.
NOW, THEREFORE, the parties agree as follows:
1. Pursuant to the Plan, the Company with the approval of the Committee,
hereby grants to the Holder as of the date hereof an option to purchase all or
any part of 250,000 shares of Common Stock of the Company (the "Option") at a
price per share of $1.00, and upon the terms and conditions set forth herein.
2. The Option shall continue in force through July 18, 1999 (the
"Expiration Date"), unless sooner terminated as provided herein and in the Plan.
Subject to the provisions of the Plan, and except as otherwise provided in
Section 2(c) hereof, the Option shall become fully exercisable on the date of
the grant of the Option.
(a) Except as provided hereinbelow, the Option may not be exercised
unless the Holder is then an employee (including any officer who is an
employee), consultant, employee of a consultant, advisor, agent or independent
representative of the Company or any subsidiary of the Company or any
combination thereof and unless the Holder has remained in the continuous employ
or service thereof from the date of this grant.
(b) The Option is designated as a non-qualified stock option
pursuant to the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder.
(c) Notwithstanding anything contained in this Agreement to the
contrary:
(i) after the exercise of the Option, no sale or transfer of
the shares purchased thereunder may be effected without an effective
registration statement
1
<PAGE>
or an opinion of counsel for the Company that such registration is
not required under the Securities Act of 1933, as amended, and any
applicable state securities law; and
(ii) (A) if, during the term of his Agreement, there shall
occur a Change of Control of the Company (as defined in Section
2(c)(iv)(B), the Holder may, at such time, in the exercise of the
Holder's sole discretion, surrender the Option for cash equal to the
excess of the fair market value of the Common Stock of the Company
that he would have received upon the exercise of the previously
unexercised shares of Common Stock of the Company subject to the
Option over the exercise price thereof; and
(B) for purposes hereof, the term "Change of Control"
shall mean an event or series of events that would be required to be
described as a change in control of the Corporation in a proxy or
information statement distributed by the Corporation pursuant to
Section 14 of the Securities Exchange Act of 1934 in response to
Item 6(e) of Schedule 14A promulgated thereunder, or any substitute
provision which may hereafter be promulgated thereunder or otherwise
adopted. The determination of whether and when a Change in Control
has occurred or is about to occur shall be made by the Board of
Directors of the Company in office immediately prior to the
occurrence of the event or series of events constituting such change
in control.
3. In the event that the employment or service of the Holder shall be
terminated prior to the Expiration Date (otherwise than by reason of death or
disability), the Option may, subject to the provisions of the Plan, be exercised
(to the extent that the Holder was entitled to do so at the termination of his
employment or service) at any time within three months after such termination,
but not after the Expiration Date, provided, however, that if such termination
shall have been for cause or voluntarily by the Holder and without the consent
of the Company or any subsidiary corporation thereof, the Option and all rights
of the Holder hereunder, to the extent not theretofore exercised, shall
forthwith terminate immediately upon such termination. Nothing in this Agreement
shall confer upon the Holder any right to continue in the employ or service of
the Company or any consultant of the Company or affect the right of the Company
or any subsidiary to terminate his employment or service at any time.
4. If the Holder shall (a) die while he is employed by or serving the
Company or a corporation which is a subsidiary thereof or within three months
after the termination of such employment (other than termination for cause, or
voluntarily on his part and without the consent of the Company or subsidiary
corporation thereof) or (b) become permanently and totally disabled within the
meaning of Section 22 (e)(3) of the Code while employed by or serving the
Company or such subsidiary, then, notwithstanding anything contained in this
Agreement to the contrary, such Option shall become fully exercisable upon the
occurrence of any such event, and the Option may be exercised as set forth
herein by the Holder or by the person or persons to
2
<PAGE>
whom the Holder's rights under the Option pass by will or applicable law, or if
no such person has such right, by his executors or administrators, at any time
within one year after the date of death of the original Holder, or one year
after the date of permanent or total disability, but in either case, not later
than the Expiration Date.
5. (a) The Holder may exercise the Option with respect to all or any part
of the shares then purchasable hereunder by giving the Company written notice of
such exercise in the form annexed as Exhibit A, as provided in Section 9 hereof.
Such notice shall specify the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full in cash of an amount equal
to the exercise price of such shares multiplied by the number of shares as to
which the Option is being exercised; provided that, if permitted by the Board of
Directors of the Company, the purchase price may be paid, in whole or in part,
by surrender or delivery to the Company of securities of the Company having a
fair market value on the date of the exercise equal to the portion of the
purchase price being so paid, and in such event, the fair market value shall be
determined pursuant to Section 5 of the Plan.
(b) Prior to or concurrently with delivery by the Company to the
Holder of a certificate representing such shares, the Holder shall, upon
notification of the amount due, pay promptly any amount necessary to satisfy
applicable Federal, state or local income tax requirements. In the event such
amount is not paid promptly, the Company shall have the right to apply from the
purchase price paid any taxes required by law to be withheld by the Company with
respect to such payment and the number of shares to be issued by the Company
will be reduced accordingly.
6. Notwithstanding any other provision of the Plan, in the event of a
change in the outstanding Common Stock of the Company by reason of a stock
dividend, split-up, split-down, reverse split, recapitalization, merger,
consolidation, combination or exchange of shares, spin-off, reorganization,
liquidation or the like, then the aggregate number of shares and price per share
subject to the Option shall be appropriately adjusted by the Board of Directors
of the Company, whose determination shall be conclusive.
7. No options granted hereunder shall be transferable other than by will
or by the laws of descent and distribution. Options may be exercised, during the
lifetime of the Holder, only by the Holder, or by his guardian or legal
representative. In the event of any attempt by the Holder to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option or of any right
hereunder, except as provided for herein, or in the event of the levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Option by notice to the Holder, and it
shall thereupon become null and void.
8. Neither the Holder nor, in the event of his death, any person entitled
to exercise his rights, shall have any of the rights of a stockholder with
respect to the shares subject to the Option until share certificates have been
issued and registered in the name of the Holder or his estate, as the case may
be.
3
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or by facsimile or (b) three days after
mailing if mailed from within the continental United States by registered or
certified mail, return receipt requested, to the party entitled to receive the
same, if to the Company, Global Gold Corporation, 438 West 37th Street, Suite
5G, New York, New York 10036, facsimile number (212) 967-3018, with a copy to
Law Offices of Stephen R. Field, 750 Lexington Avenue, New York, New York 10022,
facsimile number (212) 980-4525, and if to the Holder, c/o Global Gold
Corporation, 438 West 37th Street, Suite 5G, New York, New York 10036, facsimile
number (212) 967-3018. Any party may change its or his address by giving notice
to the other party stating its or his new address. Commencing on the 10th day
after the giving of such notice, such newly designated address shall be such
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The parties agree that any action to enforce
this Agreement shall be brought solely in any Federal or state court of
competent jurisdiction in the State of New York in the City of New York, and
each party hereby consents to personal jurisdiction in any action and waives any
right to contest to such jurisdiction on the grounds of forum non-conveniens,
but such consent shall not constitute a general appearance or be available to
any other person who is not a party to this Agreement. Each party agrees that
service of process upon it or him may be made in any manner permitted by the
laws of the State of New York and hereby agrees that service will be deemed
sufficient over it or him if service is made by registered or certified mail to
the address set forth herein for the Holder and the Company.
11. In the event that any question or controversy shall arise with respect
to the nature, scope or extent of any one or more rights conferred by this
Agreement, the determination by the Committee (as constituted at the time of
such determination) of the rights of the Holder shall be conclusive, final and
binding upon the Holder and upon any other person who shall assert any right
pursuant to this Agreement.
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
ACCEPTED AND AGREED:
/s/ Drury J. Gallagher
- -----------------------
Drury J. Gallagher
4
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
TO: GLOBAL GOLD CORPORATION
438 West 37th Street, Suite 5G
New York, New York 10036
The undersigned hereby exercises his option to purchase _______ shares of
Common Stock of Global Gold Corporation (the "Company"), as provided in the
Stock Option Agreement dated as of July 19, 1996 at $1.00 per share or a total
of $ __________, and makes payment therefor as follows:
(a) To the extent of $________ of the purchase price, the
undersigned hereby surrenders to the Company certificates for shares of its
Common Stock, which, valued at $_______ per share, the fair market value
thereof, equals such portion of the purchase price.
(b) To the extent of the balance of the purchase price, the
undersigned has enclosed a certified or bank check payable to the order of the
Company for $__________. A stock certificate or certificate for the shares shall
be delivered in person or mailed to the undersigned at the address shown below.
The undersigned hereby represents and warrants that it is his present
intention to acquire and hold the aforesaid shares of Common Stock of the
Company for his own account for investment, and not with a view to the
distribution of any thereof, and agrees that he will make no sale thereof except
in compliance with the applicable provisions of the Securities Act of 1933, as
amended.
_____________________________________
Signature
_____________________________________
Print Name
_____________________________________
Street Address
_____________________________________
City, State and Zip Code
Dated:
5
<PAGE>
AMENDMENT TO GLOBAL GOLD CORPORATION STOCK OPTION AGREEMENT
(NON-QUALIFIED OPTION)
THIS AMENDMENT dated as of November 4, 1996 between Global Gold
Corporation, a Delaware corporation (the "Company") and Drury J. Gallagher (the
"Holder").
W I T N E S S E T H:
WHEREAS, the Company granted to the Holder a non-qualified option to
purchase 250,000 shares of the Company's common stock at an exercise price of
$1.00 per share by an agreement dated as of July 19, 1996 (the "Option
Agreement");
WHEREAS, the Company desires to amend the Option Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Section 1 of the Option Agreement is hereby amended by
substituting the exercise price of "$0.50 per share" in lieu of the exercise
price of "$1.00 per share" now appearing therein.
2. Except as otherwise set forth herein, all of the other terms and
conditions of the Option Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
Global Gold Corporation
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
/s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
GLOBAL GOLD CORPORATION
STOCK OPTION AGREEMENT
(NON-QUALIFIED STOCK OPTION)
THIS AGREEMENT made as of this 19th day of July, 1996 between Global Gold
Corporation, a Delaware corporation, with offices at 438 West 37th Street, Suite
5G, New York, New York 10018 (the "Company") and Robert A. Garrison, 44 Lords
Highway East, Weston, Connecticut 06883 (the "Holder").
The Company has adopted the 1995 Stock Option Plan (the "Plan"). The Plan,
as it may hereafter be amended and continued, is incorporated herein by
reference and made part of this Agreement.
The Committee, which is charged with the administration of the Plan
pursuant to Section 3 thereof, has determined that it would be to the advantage
and interest of the Company to grant the option provided for herein to the
Holder as an inducement to remain in the service of the Company or one of its
subsidiaries, and as an incentive for increased efforts during such service.
NOW, THEREFORE, the parties agree as follows:
1. Pursuant to the Plan, the Company with the approval of the Committee,
hereby grants to the Holder as of the date hereof an option to purchase all or
any part of 250,000 shares of Common Stock of the Company (the "Option") at a
price per share of $1.00, and upon the terms and conditions set forth herein.
2. The Option shall continue in force through July 18, 1999 (the
"Expiration Date"), unless sooner terminated as provided herein and in the Plan.
Subject to the provisions of the Plan, and except as otherwise provided in
Section 2(c) hereof, the Option shall become fully exercisable on the date of
the grant of the Option.
(a) Except as provided hereinbelow, the Option may not be exercised
unless the Holder is then an employee (including any officer who is an
employee), consultant, employee of a consultant, advisor, agent or independent
representative of the Company or any subsidiary of the Company or any
combination thereof and unless the Holder has remained in the continuous employ
or service thereof from the date of this grant.
(b) The Option is designated as a non-qualified stock option
pursuant to the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder.
(c) Notwithstanding anything contained in this Agreement to the
contrary:
(i) after the exercise of the Option, no sale or transfer of
the shares purchased thereunder may be effected without an effective
registration statement
1
<PAGE>
or an opinion of counsel for the Company that such registration is
not required under the Securities Act of 1933, as amended, and any
applicable state securities law; and
(ii) (A) if, during the term of his Agreement, there shall
occur a Change of Control of the Company (as defined in Section
2(c)(iv)(B), the Holder may, at such time, in the exercise of the
Holder's sole discretion, surrender the Option for cash equal to the
excess of the fair market value of the Common Stock of the Company
that he would have received upon the exercise of the previously
unexercised shares of Common Stock of the Company subject to the
Option over the exercise price thereof; and
(B) for purposes hereof, the term "Change of Control"
shall mean an event or series of events that would be required to be
described as a change in control of the Corporation in a proxy or
information statement distributed by the Corporation pursuant to
Section 14 of the Securities Exchange Act of 1934 in response to
Item 6(e) of Schedule 14A promulgated thereunder, or any substitute
provision which may hereafter be promulgated thereunder or otherwise
adopted. The determination of whether and when a Change in Control
has occurred or is about to occur shall be made by the Board of
Directors of the Company in office immediately prior to the
occurrence of the event or series of events constituting such change
in control.
3. In the event that the employment or service of the Holder shall be
terminated prior to the Expiration Date (otherwise than by reason of death or
disability), the Option may, subject to the provisions of the Plan, be exercised
(to the extent that the Holder was entitled to do so at the termination of his
employment or service) at any time within three months after such termination,
but not after the Expiration Date, provided, however, that if such termination
shall have been for cause or voluntarily by the Holder and without the consent
of the Company or any subsidiary corporation thereof, the Option and all rights
of the Holder hereunder, to the extent not theretofore exercised, shall
forthwith terminate immediately upon such termination. Nothing in this Agreement
shall confer upon the Holder any right to continue in the employ or service of
the Company or any consultant of the Company or affect the right of the Company
or any subsidiary to terminate his employment or service at any time.
4. If the Holder shall (a) die while he is employed by or serving the
Company or a corporation which is a subsidiary thereof or within three months
after the termination of such employment (other than termination for cause, or
voluntarily on his part and without the consent of the Company or subsidiary
corporation thereof) or (b) become permanently and totally disabled within the
meaning of Section 22 (e)(3) of the Code while employed by or serving the
Company or such subsidiary, then, notwithstanding anything contained in this
Agreement to the contrary, such Option shall become fully exercisable upon the
occurrence of any such event, and the Option may be exercised as set forth
herein by the Holder or by the person or persons to
2
<PAGE>
whom the Holder's rights under the Option pass by will or applicable law, or if
no such person has such right, by his executors or administrators, at any time
within one year after the date of death of the original Holder, or one year
after the date of permanent or total disability, but in either case, not later
than the Expiration Date.
5. (a) The Holder may exercise the Option with respect to all or any
part of the shares then purchasable hereunder by giving the Company written
notice of such exercise in the form annexed as Exhibit A, as provided in Section
9 hereof. Such notice shall specify the number of shares as to which the Option
is being exercised and shall be accompanied by payment in full in cash of an
amount equal to the exercise price of such shares multiplied by the number of
shares as to which the Option is being exercised; provided that, if permitted by
the Board of Directors of the Company, the purchase price may be paid, in whole
or in part, by surrender or delivery to the Company of securities of the Company
having a fair market value on the date of the exercise equal to the portion of
the purchase price being so paid, and in such event, the fair market value shall
be determined pursuant to Section 5 of the Plan.
(b) Prior to or concurrently with delivery by the Company to the
Holder of a certificate representing such shares, the Holder shall, upon
notification of the amount due, pay promptly any amount necessary to satisfy
applicable Federal, state or local income tax requirements. In the event such
amount is not paid promptly, the Company shall have the right to apply from the
purchase price paid any taxes required by law to be withheld by the Company with
respect to such payment and the number of shares to be issued by the Company
will be reduced accordingly.
6. Notwithstanding any other provision of the Plan, in the event of a
change in the outstanding Common Stock of the Company by reason of a stock
dividend, split-up, split-down, reverse split, recapitalization, merger,
consolidation, combination or exchange of shares, spin-off, reorganization,
liquidation or the like, then the aggregate number of shares and price per share
subject to the Option shall be appropriately adjusted by the Board of Directors
of the Company, whose determination shall be conclusive.
7. No options granted hereunder shall be transferable other than by will
or by the laws of descent and distribution. Options may be exercised, during the
lifetime of the Holder, only by the Holder, or by his guardian or legal
representative. In the event of any attempt by the Holder to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option or of any right
hereunder, except as provided for herein, or in the event of the levy or any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Option by notice to the Holder, and it
shall thereupon become null and void.
8. Neither the Holder nor, in the event of his death, any person entitled
to exercise his rights, shall have any of the rights of a stockholder with
respect to the shares subject to the Option until share certificates have been
issued and registered in the name of the Holder or his estate, as the case may
be.
3
<PAGE>
9. All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or by facsimile or (b) three days after
mailing if mailed from within the continental United States by registered or
certified mail, return receipt requested, to the party entitled to receive the
same, if to the Company, Global Gold Corporation, 438 West 37th Street, Suite
5G, New York, New York 10036, facsimile number (212) 967-3018, with a copy to
Law Offices of Stephen R. Field, 750 Lexington Avenue, New York, New York 10022,
facsimile number (212) 980-4525, and if to the Holder, c/o Global Gold
Corporation, 438 West 37th Street, Suite 5G, New York, New York 10036, facsimile
number (212) 967-3018. Any party may change its or his address by giving notice
to the other party stating its or his new address. Commencing on the 10th day
after the giving of such notice, such newly designated address shall be such
party's address for the purpose of all notices or other communications required
or permitted to be given pursuant to this Agreement.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The parties agree that any action to enforce
this Agreement shall be brought solely in any Federal or state court of
competent jurisdiction in the State of New York in the City of New York, and
each party hereby consents to personal jurisdiction in any action and waives any
right to contest to such jurisdiction on the grounds of forum non-conveniens,
but such consent shall not constitute a general appearance or be available to
any other person who is not a party to this Agreement. Each party agrees that
service of process upon it or him may be made in any manner permitted by the
laws of the State of New York and hereby agrees that service will be deemed
sufficient over it or him if service is made by registered or certified mail to
the address set forth herein for the Holder and the Company.
11. In the event that any question or controversy shall arise with respect
to the nature, scope or extent of any one or more rights conferred by this
Agreement, the determination by the Committee (as constituted at the time of
such determination) of the rights of the Holder shall be conclusive, final and
binding upon the Holder and upon any other person who shall assert any right
pursuant to this Agreement.
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------------
Drury J. Gallagher, President
ACCEPTED AND AGREED:
/s/ Robert A. Garrison
- -------------------------------
Robert A. Garrison
4
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE
TO: GLOBAL GOLD CORPORATION
438 West 37th Street, Suite 5G
New York, New York 10036
The undersigned hereby exercises his option to purchase _______ shares of
Common Stock of Global Gold Corporation (the "Company"), as provided in the
Stock Option Agreement dated as of July 19, 1996 at $1.00 per share or a total
of $ __________, and makes payment therefor as follows:
(a) To the extent of $________ of the purchase price, the
undersigned hereby surrenders to the Company certificates for shares of its
Common Stock, which, valued at $_______ per share, the fair market value
thereof, equals such portion of the purchase price.
(b) To the extent of the balance of the purchase price, the
undersigned has enclosed a certified or bank check payable to the order of the
Company for $__________. A stock certificate or certificate for the shares shall
be delivered in person or mailed to the undersigned at the address shown below.
The undersigned hereby represents and warrants that it is his present
intention to acquire and hold the aforesaid shares of Common Stock of the
Company for his own account for investment, and not with a view to the
distribution of any thereof, and agrees that he will make no sale thereof except
in compliance with the applicable provisions of the Securities Act of 1933, as
amended.
________________________________
Signature
________________________________
Print Name
________________________________
Street Address
________________________________
City, State and Zip Code
Dated:
5
<PAGE>
AMENDMENT TO GLOBAL GOLD CORPORATION STOCK OPTION AGREEMENT
(NON-QUALIFIED OPTION)
THIS AMENDMENT dated as of November 4, 1996 between Global Gold
Corporation, a Delaware corporation (the "Company") and Robert A. Garrison (the
"Holder")
W I T N E S S E T H:
WHEREAS, the Company granted to the Holder a non-qualified option to
purchase 250,000 shares of the Company's common stock at an exercise price of
$1.00 per share by an agreement dated as of July 19, 1996 (the "Option
Agreement");
WHEREAS, the Company desires to amend the Option Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Section 1 of the Option Agreement is hereby amended by
substituting the exercise price of "$0.50 per share" in lieu of the exercise
price of "$1.00 per share" now appearing therein.
2. Except as otherwise set forth herein, all of the other terms and
conditions of the Option Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
Global Gold Corporation
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
/s/ Robert A. Garrison
-----------------------------
Robert A. Garrison
GLOBAL GOLD CORPORATION
438 West 37th Street, Suite 5G
New York, NY 10018
December 4, 1996
VIA TELECOPY
Eyre Resources N.L.
Crest House
7 Havelock Street
West Perth WA 6005 Australia
Attn: Messrs. Kevin Parry, Jaap Poll, Ian Darragh, P-B Trust
PB Trust: Attn: Cameron Parry, Jeffrey Beaumont and Kevin Parry
Gentlemen:
As a follow up to our recent discussions and an implementation of our
further understandings, it is absolutely crucial that I have you confirm your
agreement with respect to the points described below. The transaction we are
currently negotiating requires that these steps must be taken and, if they are
not, we believe no transaction will eventuate and we will all collectively be
left with a valueless investment.
The points are as follows:
1. The warrants to purchase 2,400,000 shares of Global common stock held
by Eyre and the warrants to purchase 1.4 million shares of Global common stock
held by the P-B Trust must be cancelled. In accordance with my recent
discussions with you, Kevin, and in accordance with your fax of last week, since
Homestake did not come in to do a deal last week, we regard this as reflecting
our agreement.
2. The overriding royalty of 1.5% on the Armenian projects must be
cancelled.
3. In light of Kevin's regulatory problems in Australia the full extent of
which was not previously disclosed, we must request that you agree not to play
any part in the control of the Board of Directors of the corporation, and hence,
Eyre must surrender the two board seats [although one representative of Eyre can
be invited to attend board meetings or be an advisor to the Board.] In our fund
raising efforts, this point has been repeatedly thrown in our faces and has been
a total hindrance to a successful consummation of a
<PAGE>
Page Two
Eyre/PB Trust
December 4, 1996
transaction. Also I enclose a copy of an article that shows that the Alberta
Securities Commission in a similar situation required that the ownership of the
shares of the party in question be returned to the company, which reflects the
severity of this problem and the way others view it.
4. The unpaid amount on the notes of approximately $146,000 must be
cancelled as well.
We again request your written agreement of this restructured arrangement
by 5:00 p.m. tomorrow by your signing below and returning your signed copy to us
with the original being sent by overnight mail.
For all of the reasons previously discussed, there can be no delay or
sitting back since everything else will be lost.
Very truly yours,
/s/ Drury J. Gallagher
Drury J. Gallagher
President
AGREED:
Eyre Resources N.L.
By: /s/ Jaap Poll
--------------------------------
Jaap Poll, Director
By: /s/ Ian Darragh
--------------------------------
Ian Darragh, Director
PB Trust
By: /s/ Cameron Parry
--------------------------------
Cameron Parry
By: /s/ Jeffrey Beaumont
--------------------------------
Jeffrey Beaumont
By: /s/ Kevin Parry
--------------------------------
Kevin Parry
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "GLOBAL GOLD CORPORATION", FILED IN THIS OFFICE ON THE THIRTY-FIRST DAY OF
DECEMBER, A.D., 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
0887407 6100 AUTHENTICATION: 8271477
971000766 DATE: 01-04-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GLOBAL GOLD CORPORATION
Global Gold Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The name of the corporation is Global Gold Corporation.
SECOND: Article Fourth of the Certificate of Incorporation of the
Corporation is hereby amended to read as follows:
"FOURTH: The total number of shares of stock which the
Corporation is authorized to issue is one hundred million
(100,000,000) shares of common stock, par value $.001 per
share. Each of the Corporation's issued and outstanding shares
of Common Stock, par value $.001 per share as of the date of
this Certificate of Amendment, shall be converted and
reclassified into one-tenth of one share of Common Stock, par
value $.001 per share; no change shall be made to the par
value of the Corporation's Common Stock; and fractional shares
shall be rounded up to the nearest whole share."
THIRD: The above amendment to the Certificate of Incorporation of
the Corporation was approved by the stockholders owning an absolute majority of
the issued and outstanding shares of common stock of the Corporation by written
consent on December 19, 1996 and by all members of the Board of Directors
pursuant to a Unanimous Written Consent adopted on December 19, 1996.
FOURTH: Such amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
FIFTH: The capital of the Corporation shall not be reduced under or
by reason of such amendment.
IN WITNESS WHEREOF, the undersigned caused the corporate seal to be
hereunto affixed and this certificate to be signed by its President and
Secretary as of the 19th day of December, 1996.
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
By: /s/ Robert A. Garrison
-----------------------------
Robert A. Garrison, Secretary
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of November, 1995, before me personally came DRURY
J. GALLAGHER, known to me to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the President of Global Gold
Corporation, a Delaware corporation, and acknowledged to me that he executed
said instrument for the purposes therein expressed, and as the act of said
corporation.
_____________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the _____ day of November, 1995, before me personally came Robert
A. Garrison known to me to be the person whose name is subscribed to the
foregoing instrument, and known to me to be the Secretary of Global Gold
Corporation, a Delaware corporation, and acknowledged to me that he executed
said instrument for the purposes and consideration therein expressed, and as the
act of said corporation.
_____________________________
Notary Public
UNANIMOUS WRITTEN CONSENT
OF
THE BOARD OF DIRECTORS
OF
GLOBAL GOLD CORPORATION
The undersigned, being all of the directors of GLOBAL GOLD CORPORATION, a
Delaware corporation, (the "Corporation"), hereby consent, pursuant to Section
141(f) of the Delaware General Corporation Law, to the adoption of the following
resolutions in lieu of meeting:
RESOLVED, that the issuance of a certificate to Drury J. Gallagher
for 1,000,000 shares of the Corporation's common stock in consideration of
the cancellation by Mr. Gallagher of the debt owed to him by the
Corporation of $100,000 representing the compensation due him for the
period from July 1, 1995 through June 30, 1996 and cancellation of all of
his outstanding stock options and stock appreciation rights granted to him
by the Corporation (other than the warrants acquired by him pursuant to
the offer made by the Corporation under the Confidential Private Placement
Memorandum dated May 17, 1995, as amended), be, and it is hereby,
approved, ratified and confirmed; and be it further
RESOLVED, that the issuance of a certificate to Robert A. Garrison
for 1,000,000 shares of the Corporation's common stock in consideration of
the cancellation by Mr. Garrison of the debt owed to him by the
Corporation of $100,000 representing the compensation due him for the
period from July 1, 1995 through June 30, 1996 and cancellation of all of
his outstanding stock option and stock appreciation rights granted to him
by the Corporation be, and it is hereby, approved, ratified and confirmed;
and be it further
RESOLVED, that the appropriate officers of the Corporation be, and
they hereby are, authorized and directed to take any and all action and to
execute and deliver any and all instruments required in connection with
the transactions contemplated by the foregoing resolutions.
IN WITNESS WHEREOF, the undersigned have executed this instrument,
effective as of the 3rd day of January, 1997.
/s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher
/s/ Robert A. Garrison
-----------------------------
Robert A. Garrison
FIRST DYNASTY MINES LTD.
No. 1 Temasek Avenue
37th Floor, Millenia Tower
Singapore 039192
January 27, 1997
Global Gold Corporation
Global Gold Armenia Limited
438 West 37th Street
New York, New York
10018
Dear Sirs:
This letter is intended to set out the material terms upon which First Dynasty
Mines Ltd. ("FDM") proposes to acquire an interest in Global Gold Armenia Ltd.
("Global Armenia").
We confirm our preliminary agreement as follows:
1. Initial Commitments
Subject to the terms and conditions set forth herein and in the Term Sheet
attached as a Schedule hereto, FDM will make the Initial Commitments set forth
in the Term Sheet in consideration for the issuance by Global Armenia to FDM of
a convertible grid promissory note, guaranteed by Global Gold Corporation
("Global Gold"), and secured by a pledge of the outstanding shares of Global
Armenia. Pending satisfactory completion of FDM's due diligence, unless
otherwise agreed by FDM, FDM shall not be obligated to make any investments or
commitments in excess of the Initial Commitments.
2. Due Diligence
As of and from the date hereof until March 30, 1997 or such other date as may be
mutually agreed (the "Due Diligence Period"), FDM will be entitled to conduct
thorough evaluations and investigations respecting Global Gold and Global
Armenia (collectively "Global") and their respective ownership, assets,
liabilities (actual and contingent) including, without limitation, Global
Armenia's interest in mining projects in Armenia and all related books and
records, financial statements, agreements, licenses, permits, concessions and
authorizations, of every nature and other documentation, if any, relating to
each or all of them. For this purpose, Global will grant access to its duly
authorized directors, officers, employees, agents and advisors in a timely
manner to all documents (and copies thereof), information and personnel relevant
to such investigations and will cooperate fully and in a timely manner with all
reasonable requests by FDM, its directors, officers, employees, agents and
advisors in
<PAGE>
-2-
respect of such evaluations and investigations. For greater certainty, at the
reasonable request of FDM, its duly authorized directors, officers, employees,
agents or advisors, Global will consent in writing in a timely manner to all
inquiries and searches made of relevant governmental authorities which FDM,
acting reasonably, deems desirable in the context of this transaction.
3. Representations and Warranties of Global Gold
Each of Global Gold Armenia, jointly and severally, represents and warrants to
FDM as follows (and recognize that FDM is relying upon these representations and
warranties in making the Initial Commitments):
(a) Global Gold is a corporation duly incorporated under the laws of
Delaware with full corporate power and capacity to own its assets
and conduct its business as presently conducted;
(b) Global Armenia is a corporation duly incorporated under the laws of
the Cayman Islands with full corporate power and capacity to own its
assets and conduct its business as presently conducted;
(c) Each of Global Gold and Global Armenia has the corporate power and
authority to enter into this Agreement and to perform its
obligations hereunder in accordance with the terms hereof;
(d) neither the execution and delivery of this Agreement nor the
fulfillment of the terms hereof conflicts with or will conflict with
or result in a breach of the constating documents of Global Gold or
Global Armenia;
(e) Global Gold owns, directly, all of the issued and outstanding shares
of the Global Armenia;
(f) no person has any right, present or future, contingent or absolute,
to acquire any shares or other securities of Global Armenia;
(g) there is no litigation or regulatory investigation, actual or
threatened, in respect of Global or its assets;
(h) all necessary permits and licences under the Joint Venture Agreement
have been received and AGRC owns all necessary title to the Tailings
project thereunder. The terms of the Joint Venture Agreement are
being complied with and Global has received no notice of
non-compliance thereunder;
<PAGE>
-3-
(i) All of Global Gold's assets in respect of the Joint Venture
Agreement in respect of the Armenian Gold Recovery and related
assets (the "Armenian Project") have been validly transferred to
Global Armenia;
(j) Global has made full disclosure to FDM of the assets and liabilities
of Global Armenia pursuant to the Global Armenia balance sheet
provided by accountants prior to the date hereof and there are no
contingent liabilities or material contracts relating to Global
Armenia that have not been disclosed in writing to FDM. Except for
accounts payable in the amount of approximately $1,350,000 incurred
by Global Gold, there are no outstanding amounts payable by Global
Gold or Global Armenia. Global Armenia has no actual or contingent
liabilities in favour of Eyre Resources N.L. nor any other party
having an original interest in Global Armenia or the Armenian
Project, except for the engagement letter dated May 5, 1995 from
Patterson, Belknap, Webb & Tyler LLP;
(k) each of Global Gold and Global Armenia is in material compliance
with applicable corporate, securities and other laws and regulations
and no proceedings have been taken or authorized by any person with
respect to bankruptcy, insolvency, liquidation, dissolution or
winding up of Global Gold or Global Armenia;
(l) no exemption, consent, filing or approval is required from any third
party by, or with respect to, the execution and delivery of this
agreement by Global Gold or Global Armenia; and
(m) only one share in the capital of Global Armenia has been issued.
FDM acknowledges that the foregoing representations and warranties in (c), (d),
(h), and (l) are subject to: (i) consent of applicable authorities to the
pledging of Global Armenia shares to FDM and conversion of promissory notes by
FDM; (ii) satisfaction of the bond requirements under the Decree dated June 29,
1996 and the $5 million investment requirement under the Joint Venture
Agreement; such matters being the subject of satisfaction of the escrow
conditions set forth in the Term Sheet.
4. Representations and Warranties of FDM
FDM hereby represents and warrants to Global Gold as follows:
(a) FDM is a corporation duly incorporated under the laws of the Yukon
Territory with full corporate power and capacity to own its assets
and conduct its business as presently conducted;
<PAGE>
-4-
(b) FDM has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder in accordance
with the terms hereof;
(c) neither the execution and delivery of this Agreement nor the
fulfilment of the terms hereof conflicts with or will conflict with
or result in a breach of the constating documents of FDM; and
(d) FDM is in material compliance with applicable corporate, securities
and other laws and regulations and no proceedings have been taken or
authorized by any person with respect to bankruptcy, insolvency,
liquidation, dissolution or winding up of FDM.
5. Covenants of Global
Global Gold and Global Gold Armenia jointly covenant and agree with FDM as
follows:
(a) unless, prior to entering into the Definitive Agreement, FDM
notifies Global in writing that it does not intend to proceed with
further investments in accordance with the terms hereof, Global will
not perform any act or enter into any transaction or negotiation
which would interfere or be inconsistent with the completion of the
Term Sheet transactions;
(b) Global will promptly notify FDM upon becoming aware that any of the
representations and warranties of Global contained herein are no
longer true and correct in any respect;
(c) Global will promptly obtain the consents of the appropriate Armenian
authorities and parties to the Joint Venture Agreement, as required,
to the secured interests of FDM hereunder, the proposed equity
ownership of FDM in Global Armenia, and all other matters in
connection with the Term Sheet transactions, under the terms of the
Joint Venture Agreement or otherwise;
(d) Global shall not enter into any material commitment in respect of
the Armenian project without the consent of FDM, which shall not be
unreasonably withheld or delayed; and
(e) During the Due Diligence period, Global Armenia shall not alter its
share capital nor issue any additional shares or options on shares
without the consent of FDM except as set forth in the Escrow
conditions in the Term Sheet.
<PAGE>
-5-
6. Conditions
In addition to completion of due diligence by the parties hereto, completion of
the Term Sheet transactions (other than the Initial Commitments upon
satisfaction of the Escrow Conditions) will be subject to the mutual conditions
that:
(a) there is not then in force any order or decree of a court of
competent jurisdiction or any governmental authority restraining,
interfering with or enjoining the consummation of the transactions
contemplated in this Agreement;
(b) Global and FDM will have obtained all requisite governmental,
regulatory and any other required third party consents and approvals
necessary to complete the Term Sheet transactions (including,
without limitation, all necessary approvals by The Toronto Stock
Exchange by FDM and all necessary approvals of the Armenian
authorities for the Term Sheet transactions); and
(c) Global and FDM will have entered into the Definitive Agreement, on
substantially the terms described in the Term Sheet.
7. Definitive Agreement
FDM will enter into the Definitive Agreement as soon as reasonably practicable
after the end of the Due Diligence Period (and not later than April 15, 1997
unless otherwise agreed by the parties) and the Definitive Agreement will
incorporate the terms and conditions of this Agreement, together with such
representations and warranties and additional covenants, terms and conditions
respecting the Term Sheet transactions and all related matters as are usual and
customary in transactions of a similar size and character. The Definitive
Agreement will, when executed and delivered, replace this Agreement and the Term
Sheet.
8. Convertible Notes
Pending conversion to equity of convertible notes issued to FDM in accordance
with the Term Sheet, investments made by FDM hereunder (and all further amounts
advanced by FDM in respect of the Term Sheet transactions) shall be evidenced by
grid promissory notes of Global Armenia, guaranteed by Global Gold, in
substantially the form attached hereto as Schedule "A" (the "Notes"). Advances
under the Notes will be used for the purposes set forth in the Term Sheet, and
shall be convertible into stock of Global Armenia and have the other terms and
conditions set forth in the Term Sheet.
<PAGE>
-6-
9. General Provisions
FDM and Global hereby agree that:
(a) time is and will be of the essence of this Agreement;
(b) each of the parties hereto will execute and deliver all such further
documents and instruments, give all such further assurances and do
all such acts and things as may reasonably be required to give full
effect to the terms of this Agreement;
(c) this Agreement will enure to the benefit of, and be binding upon,
the parties and their respective successors and permitted assigns;
(d) no party may assign any of its right, title, interest or obligation
under this Agreement without the prior written consent of the other
party hereto, such consent not to be unreasonably withheld;
(e) this Agreement may be executed in counterparts and all such
counterparts together will constitute a single fully executed
instrument and any facsimile signature on any such counterpart will,
in the absence of evidence to the contrary, constitute an original
signature.
(f) all amounts in this Agreement and the Term Sheet are in United
States dollars; and
(g) governing law for the definitive contract will be New York.
If the foregoing accurately reflects your understanding of our agreement, please
so indicate by signing below and returning a copy of this letter to FDM.
Yours truly,
FIRST DYNASTY MINES LTD.
Per:
/s/ [ILLEGIBLE]
--------------------------
Agreed this 27th day of January, 1997.
<PAGE>
-7-
GLOBAL GOLD CORPORATION
Per: /s/ Drury J. Gallahger
--------------------------
Authorized Signatory
Agreed this 27th day of January, 1997.
GLOBAL GOLD ARMENIA LIMITED
Per: /s/ Drury J. Gallahger
--------------------------
Authorized Signatory
<PAGE>
SCHEDULE
TERM SHEET
(all amounts U.S. $)
Parties: First Dynasty Mines Ltd. ("FDM"), Global Gold Corporation ("Global
Gold") and Global Gold Armenia Limited ("Global Armenia).
Initial Commitments:
FDM to loan $675,000 to Global Armenia to repay one half of the
outstanding accounts payable incurred by Global Gold and Global Armenia.
Accounts payable to be satisfied in the following priority: 1. direct
Armenia project costs (technical reports); 2. legal fees; and 3. other.
AGRC to sign $640,000 Tailings Dam Construction Contract with Armhydro: 1.
Upon signing FDM to fund $5,000 and 2. on or before February 10, 1997, FDM
to fund $96,000; and 3. thereafter FDM to fund the balance as due.
FDM to guarantee or co-sign for up to $3.5 million equipment purchase
contract and up to $1 million engineering procurement and construction
management contract between AGRC and Kilborn SNC Lavelin Inc. (the
"Kilborn Contract") and FDM to advance funding for expenditures thereunder
as jointly agreed by FDM and Global from time to time, subject to
cancellation provisions agreed to by FDM.
Initial Documents to be Delivered by Global:
Convertible grid promissory note evidencing Initial Commitments secured by
a pledge of all of the outstanding shares of Global Armenia.
Letters from Van Krikorian, counsel to Global, confirming status of
Armenian joint venture as reasonably requested by FDM or its counsel.
Legal opinions of Cayman and Armenian counsel as to legal status of Global
Armenia and the joint venture and its assets, and as to the registration
and enforceability of the security, as reasonably requested to FDM or its
counsel.
Escrow letter regarding payment of initial $675,000.
<PAGE>
-2-
Escrow Arrangements
Initial Commitments of $675,000 to be advanced by FDM to the law offices
of Patterson, Belknap, Webb & Tyler by January 27, 1997 to be held in
escrow pending satisfaction of escrow conditions.
Tailings Dam Construction Contract and Kilborn Contract to be executed and
held in escrow pending satisfactory of Escrow Conditions and initial funds
to be available from FDM ($5,000 upon signing and $96,000 on February 10,
1997)-to be wire transferred to AGRC account in Yerevan.
Convertible note and pledge of Global Armenia share to be executed and
held in escrow pending satisfaction of escrow conditions.
Escrow Conditions: Confirmation from Armenian joint venture partners
and/or applicable Armenian authorities in form satisfactory to FDM and
Global that (1) the Initial Commitments together funds already advanced by
Global satisfy the $5 million investment criteria under the Joint Venture
Agreement, Government Decree and L.I.M. guarantee and that AGRC has title
to the Tailings project; (2) Consent is given for FDM to invest in Global
Armenia as contemplated by this Agreement and the Term Sheet (initial
pledge, convertibility into equity, additional investments); (3) Global
Armenia to have issued 99,999 additional shares to Global Gold. Release of
escrow to be effected upon faxed written directions to release from FDM
and Global Gold.
Further Terms to be Incorporated into Definitive Agreement:
Upon advancing an aggregate of $6,480,000, in respect of Armenian project
expenses consisting of:
1. Initial $675,000 loan to fund accounts receivables repayment;
2. $640,000 advanced under the Tailings Dam Construction Contract;
3. $4,500,000 advanced under the Kilborn Contract; and
4. $675,000 loan to Global Armenia (balance of outstanding payables) on
March 31, 1997 (if sufficient outstanding FDM warrants are exercised at
first expiry date of March 31, 1997) or 90 days after signing hereof;
FDM to be entitled to convert its promissory note(s) in the amount of
$6,480,000 into shares of Global Armenia representing 25% of the
outstanding stock of Global Armenia. FDM to be entitled to convert such
notes at any time prior to completion of the foregoing investments, for a
pro-rated percentage of Global Armenia's equity.
<PAGE>
-3-
Convertible notes, guaranteed by Global Gold, evidencing all advances will
be secured, at the option of FDM, by one or more of: (1) a pledge of
Global Armenia stock; (2) a security interest in the Joint Venture
Agreement; (3) a security interest in tailings assets under the Joint
Venture Agreement. FDM may request security in Global Gold Shares (up to a
maximum 25% Global Gold stock fully diluted) if the foregoing security is
insufficient. Global to obtain any necessary consents or approvals
required under the Joint Venture Agreement to faciliate this security, and
to provide FDM with evidence of registration and opinions as to
enforceability as reasonably requested by FDM.
If FDM does not elect to proceed with additional investments or does not
elect to convert its notes to equity, FDM to be entitled to be repaid over
four years in equal quarterly principal installments of 1/12 principal,
commencing on March 31, 1998 with outstanding balance from time to time
bearing interest at 10%, calculated and paid quarterly from January 1,
1998.
FDM will be entitled to increase its interest in Global Armenia to 51% if
FDM makes payments totalling $10 million (inclusive of the $5,480,000) and
the tailings project has become operational in respect of the Tailings
project. Additional funds advanced to be evidenced on grid promissory
notes and secured by the security substantially similar to the aforesaid
promissory note and security.
FDM will be entitled to increase its interest in Global Armenia to 80% if
joint venture arrangement in respect of Zod mine under joint venture
agreement are not concluded by the time the tailings project has reached
production or on January 1, 1998, whichever is later, provided that FDM
has advanced $10 million in respect of the Tailings project which amount
has not been repaid.
FDM to be entitled to increase its interest in Global Armenia by 1% for
each $500,000 invested for expenditures advanced in respect of development
of Zod and Megrahdzor mines (excluding $10 million tailings expenditures)
up to a maximum 80% of Global Armenia.
Upon obtaining 80% of Global Armenia, FDM will be entitled to acquire the
remaining 20% of Global Armenia by issuance of $10 million value of FDM
common shares based on the market price of FDM shares at deemed price of
$2.50; $10 million value of FDM shares to be increased proportionate to
extent the mineable reserves at Zod and Megrahdzar mines (established
after a drilling at depth at a particular time as agreed) exceed 5 million
ounces (such that $10 million value is based on a mineable reserve of 5
million ounces; $12 million value is based on 6
<PAGE>
-4-
million ounces and so on). Formulation subject to the Toronto Stock
Exchange approval.
Definitive agreement to contain an expanded schedule of representations
and warranties of Global Gold and Global Armenia as to legal and financial
status of Global Armenia and the joint venture and other appropriate
representations reasonably requested by counsel to FDM.
Shareholders agreement (to be entered into to govern ongoing affairs of
Global Armenia at time of definitive document) to provide, among other
things, that (1) from the date of the release of escrow of the Initial
Commitments, FDM to be entitled to appoint 2 of 5 directors of Global
Armenia, increasing to 3 of 5 if FDM acquires 51% to 80% of Global Armenia
and thereafter increasing proportionate to ownership; (2) Global Armenia
shall appoint one FDM representative on the AGRC board initially,
increasing to two of three appointed by Global Armenia if FDM acquires
ownership of 51% of Global Armenia; and (3) providing for certain matters
requiring joint approval of the shareholders of Global Armenia subject to
Global Gold's entitlement to one representative on the AGRC board for so
long as it holds at least 20% of Global Armenia shares.
Appropriate employment arrangements between Global Armenia and Messrs.
Gallagher and Garrison to be agreed.
FDM to consider feasibility of holding its investment in a United States
subsidiary.
DATED February 3, 1997
DEBENTURE
made between
GLOBAL GOLD ARMENIA LIMITED
(the "Company")
and
FIRST DYNASTY MINES LTD.
(the "Lender")
W.S. Walker & Company
Caledonian House
P.O. Box 265
George Town
Grand Cayman
<PAGE>
THIS DEBENTURE is made the 3rd day of February 1997
BETWEEN:
(1) GLOBAL GOLD ARMENIA LIMITED, a company incorporated and existing under the
laws of the Cayman Islands (the "Company") which expression shall include
the permitted successors in title transferees and assigns of the Company
OF THE ONE PART
AND:
(2) FIRST DYNASTY MINES LTD., a corporation having its registered office at
Temasek Avenue, #37-02 Millenia Tower, Singapore 039 192 (the "Lender")
which expression shall include the successors in title transferees and
assigns of the Lender
OF THE OTHER PART
W H E R E A S:
The Lender has agreed to grant a loan to the Company of the amount of
US$5,480,000 upon the terms and conditions hereinafter appearing.
NOW THIS DEBENTURE WITNESSETH as follows:
1. (a) Words importing the masculine gender shall include the feminine and
neuter genders and vice versa and words importing the singular
number only shall include the plural number and vice versa and words
importing persons and all reference to persons shall include
corporations and firms; and
(b) "the Principal Sum" shall mean the sum of US$5,480,000 or, if less,
the unpaid balance of the amount paid by Lender pursuant to that
certain letter agreement, dated 27th January, 1997, among the
Company, Lender and Global Gold Corporation. Each advance and
payment under this Debenture shall be noted on the Advance Grid
attached hereto as Exhibit A and shall be binding upon the parties,
absent fraud or mistake.
2. In consideration of the Lender having agreed to grant the loan of the
Principal Sum as aforesaid, the Company hereby covenants to repay on March
31, 1998, June 30, 1998, September 30, 1998
-1-
<PAGE>
and December 31 thereafter in 12 equal installments (each a "Payment") to
the Lender the Principal Sum outstanding on 31st March, 1998 and interest
thereon (or on the outstanding balance thereof) at the rate of 10 per
centum simple interest per annum calculated on a 360 day year ("the
applicable interest rate") (as well after as before any judgement).
3. (a) At any time (i) upon and following an event described in Clause 4
below or (ii) following the Maturity Date but prior to repayment in
full of the Principal Sum the Lender shall be entitled by notice in
writing addressed to the Company to require the Company to allot and
issue to him in exchange for and in satisfaction of the Principal
Sum (or such part thereof as the notice may specify) fully paid
ordinary shares of the Company at the rate ("the Conversion Rate")
of one ordinary share of a nominal value of US$0.01 in exchange for
every US$164.40 of the Principal Sum (or such part thereof as is
being converted) and the Company shall forthwith issue to the Lender
so many shares as are properly specified in the said notice, and
shall pay to the Lender a proportionate part of the current interest
due upon the Principal Sum calculated up to the date of such issue.
The forgoint Conversion Rate assumes 100,000 ordinary shares of the
Company issued and outstanding. The sole outstanding ordinary share
of the Company is currently held by the Company's parent, Global
Gold Corporation, a Delaware corporation ("Global"). The Company
will promptly issue 99,999 ordinary shares to Global in order to
coincide with the aforesaid Conversion Rate and such issue shall not
give rise to any adjustment in the Conversion Rate.
(b) The shares issued on conversion shall carry the right to participate
in full in all dividends and (unless adjustment has been made
pursuant to sub-paragraph (c) hereof) other distributions declared
after the date of conversion; in all other respects such share
capital will rank pari passu and form one class with the ordinary
shares of the Company in issue on the date of conversion.
(c) Upon any sub-division or consolidation of ordinary shares, the
Conversion Rate shall be adjusted correspondingly and notice of such
adjustment shall be given to the Lender by the Company.
(d) If any offer or invitation to subscribe for or purchase ordinary
shares is made to the shareholders of the Company, the Company shall
at the same time make, or so far as it is able, procure to be made,
the same offer or invitation to the Lender as if immediately before
the record date of such offer or invitation the Principal Sum had
been converted into ordinary shares at the Conversion Rate then
applicable.
(e) The Company hereby covenants with the Lender that at all times until
the Principal Sum is repaid in full it will maintain sufficient
ordinary shares in its authorised but unissued share capital to
allow it to immediately give effect to the conversion rights hereby
conferred.
4. Notwithstanding any other provisions of this Debenture any sums owing
hereunder shall become payable immediately and all unpaid interest and any
other monies owing hereunder shall become immediately owing and payable as
follows:-
-2-
<PAGE>
(a) If the Company shall default in the payment of any monies due and
owing hereunder; or
(b) If any representation or warranty made in or in connection with this
Debenture or the execution and delivery thereof or in any document
or certificate furnished pursuant hereto shall prove at any time to
have been incorrect in any material respect; or
(c) If the Company shall default in the performance or observance of any
agreement covenant stipulation or obligation contained or implied in
this Debenture whether negative or otherwise (other than obligations
in respect of the payment of any monies hereunder); or
(d) If by or under the authority of any Government the management of the
Company or its authority to conduct its business is curtailed to the
point of making it effectively inoperative by any seizure or
intervention or proceedings of any nature; or
(e) If a distress or execution shall be levied or enforced upon or
against any of the Chattels or property of the Company and shall not
be satisfied within seven (7) days of the levy or enforcement of
such distress or execution; or
(f) If the Company makes or attempts to make any alteration to the
provisions of its Memorandum or Articles of Association which might
in the opinion of the Lender affect its interests hereunder or shall
fail or neglect to comply with any or all of the provisions of the
Companies Law Cap. 22 or any statutory modification or re-enactment
thereof or any other of the laws of the Cayman Islands in so far as
the same way relate to it; or
(g) If an order is made or an effective resolution is passed for the
winding up of the Company except for the purpose of a
reconstruction or amalgamation the terms of which have been
previously approved in writing by the Lender; or
(h) If an encumbrancer takes possession or a receiver is appointed of
any part of the assets of the Company; or
(i) If the Company ceases or threatens to cease to carry on its business
or substantially the whole of its business; or
(j) If the Company shall have sold or agreed to sell the whole of its
undertaking or any substantial part thereof otherwise than with the
previous written convent of the Lender; or
(k) If the Company is unable to pay its debts within the meaning of
Section 92 of the Companies Law Cap. 22 or any statutory
modification or re-enactment thereof; or
5. The Company hereby represents and warrants to the Lender that it is a
corporation duly organised, validly existing and in good standing under
the Laws of the Cayman Islands and that it is duly qualified to do
business wherever necessary to carry on its present operations and that
the making and performance of this Debenture is within its powers having
been duly authorised
-3-
<PAGE>
by all necessary governmental and corporate approvals and does not
contravene any law or any contractual restriction binding on the Company
and that this Debenture is a legal valid and binding obligation of the
Company enforceable against the Company in accordance with its terms and
that there are no pending or threatened actions or proceedings before any
court or administrative agency which may materially adversely affect the
Company or its financial conditions and operations.
6. the Company hereby further covenants with the Lender at all times during
the continuance of this Debenture as follows:
(a) At all times during the continuance of this Debenture to keep up and
maintain and preserve all the property of the Company in good and
merchantable order and condition;
(b) To pay to the Lender on demand all costs charges and expenses
incurred or to be incurred by the Lender in relation to these
presents or any default hereunder or the protection or enforcement
of any of the rights of the Lender hereunder together with the stamp
duty and recording fees hereon;
(c) To carry on its business in a proper and efficient manner; and
(d) To observe and perform all the covenants agreements and provisions
contained in or implied hereby.
7. It shall be lawful for but not obligatory on the Lender to advance and pay
all sums of money necessary for the purpose of remedying any breach or
breaches of covenants or obligations whether imposed on the Company under
the provisions of this Debenture or implied by law and all monies so paid
and shall bear interest at the applicable interest rate computed from the
time or respective times of paying or advancing the same.
8. No neglect omission or forbearance on the part of the Lender to take
advantage of or enforce any right or remedy arising out of any breach or
non-observance of any covenant or condition herein contained or implied
shall be deemed to be or operate as a general waiver of such covenant or
condition or the right to enforce or take advantage of the same in respect
of any breach or non-observance thereof either original or recurring.
9. Any notice required to be given to or served on the Company or the Lender
under these presents shall be in writing and shall be deemed to be
sufficiently given by personal service at the respective places of
business of the Company or the Lender or if posted shall be deemed to be
sufficiently given to and served respectively seventy-two hours after the
time of posting it posted by registered post and addressed to the Lender
or the Company at the address stated above.
10. This Debenture shall be governed and construed solely according to the
Laws of the Cayman Islands.
-4-
<PAGE>
IN WITNESS WHEREOF each of the Company and the Lender has executed this
Debenture as a Deed by its duly authorised persons the day and year first above
written.
Signed for and on behalf of )
GLOBAL GOLD ARMENIA )
LIMITED by: )
/s/ Robert A. Garrison, ) Per: /s/ Robert A. Garrison
Director ) --------------------------
) Director
in the presence of: )
/s/ John E. Schmeltzer, III. )
- -----------------------------
witness and thereby executed
by GLOBAL GOLD ARMENIA
LIMITED as its Deed
Signed for and on behalf of )
FIRST DYNASTY MINES )
LTD. by: )
) Per:___________________________
,Director ) Director
)
in the presence of: )
)
_____________________________
witness, and thereby executed
by FIRST DYNASTY MINES
LTD. as its Deed
GUARANTEE
Payment by, and performance of the obligations of Global Gold Armenia Limited a
wholly owned subsidiary of Global Gold Corporation under the forgoing Debenture
dated February 3, 1997 is hereby unconditionally and irrevocably guaranteed by
Global Gold Corporation.
-5-
<PAGE>
IN WITNESS WHEREOF Global Gold Corporation has executed this Guarantee as a Deed
on the 3rd day of February, 1997
Signed for and on behalf of )
GLOBAL GOLD )
CORPORATION by: )
/s/ Drury J. Gallagher, ) Per: /s/ Drury J. Gallagher
,Director ) --------------------------
) Director
in the presence of: )
/s/ John E. Schmeltzer, III. )
- ------------------------------
witness, and thereby executed
by GLOBAL GOLD CORPORATION
as its Deed
-6-
CHARGE OVER SHARES
THIS DEED is dated February 3, 1997
AND MADE BETWEEN:
(1) GLOBAL GOLD CORPORATION, a Delaware Corporation whose registered office is
438 West 37th Street, Suite 5H, New York, New York 10038, U.S.A. (the
"Chargor"); and
IN FAVOUR OF
(2) FIRST DYNASTY MINES LTD. whose registered office is at Temasek Avenue,
#37-02 Millenia Tower, Singapore 039 192 ("FDM").
WITNESSES as follows:
1 Definitions and Interpretation
1.1 In this Charge unless the context otherwise requires:
"Borrowed Money" means amounts advances by FDM to Global Gold Armenia
Limited ("Global Armenia") pursuant to a convertible debenture issued
dated 1997 by Global Armenia and guaranteed by the charger (the
"Debenture") together without interest thereon.
"Charged Property" means the property and rights of the Chargor which are
the subject of any security created or purported to be created by this
Charge
"Derivative Assets" means all stocks shares warrants or other securities
rights dividends interest or other property whether of a capital or income
nature accruing offered issued or deriving at any time by way of dividend
bonus redemption exchange purchase substitution conversion consolidation
subdivision preference option or otherwise attributable to any of the
Shares and Securities or any Derivative Assets previously described
"Encumbrance" means any mortgage charge pledge lien assignment
hypothecation security interest title retention preferential right or
trust arrangement or other security arrangement or agreement or any right
conferring a priority of payment
"Enforcement Event" means any event set out in the Debenture.
"Secured Liabilities" means all monies obligations and liabilities
whatsoever whether for principal interest or otherwise in whatever
currency which may now or at any time
- 1 -
<PAGE>
in the future be due owing or incurred by the Chargor to FDM under the
terms of the Debenture and/or this Charge whether actual or contingent and
whether alone severally or jointly as principal guarantor surety or
otherwise and in whatever name or style and whether on any current or
other account or in any other manner whatsoever.
"Shares and Securities" means all stocks shares and other securities:
(i) listed in the Schedule for which the stock or share
certificates or other documents of title have been deposited
by the Chargor with FDM; or
(ii) for which the stock or share certificates or other documents
of title have been deposited by the Chargor with FDM or its
agents or nominees or are held to the order of FDM.
in each case whether held in the Cayman Islands or elsewhere and
irrespective of whether in any such case the deposit was made or the
certificates or other documents were received by FDM or its agents or
nominees for the purposes of creating security, safe custody, collection
or otherwise.
1.2 Reference to Clauses and Schedules are to the clauses and schedules to
this Charge.
1.3 Clause headings are inserted for ease of reference only and are not to
affect the interpretation of this Charge.
1.4 Except to the extent the context otherwise requires any reference in this
document to "this Charge" and any other document referred to in it
includes any document expressed to be supplemental to or collateral with
or which is entered into pursuant to or in accordance herewith or
therewith and shall be deemed to include any instruments amending varying
supplementing novating or replacing the terms of any such documents from
time to time.
1.5 References to a person are to be construed to include corporations firms
companies partnerships individuals associations states and administrative
and governmental and other entities whether or not a separate legal
entity.
1,6 References to any person are to be construed to include references to that
person's successors transferees and assigns whether direct or indirect.
1.7 References to any statutory provision are to be construed as references to
that statutory provision as amended supplemented re-enacted or replaced
from time to time (whether before or after the date of this Charge) and
are to include any orders regulations instruments or other subordinated
legislation made under or deriving validity from that statutory provision.
- 2 -
<PAGE>
1.8 The words "other" and "otherwise" are not to be construed ejusdem generis
with any foregoing words where a wider construction is possible.
1.9 The words "including" and "in particular" are to be construed as being by
way of illustration or emphasis only and are not to be construed as, nor
shall they take effect as, limiting the generality of any foregoing words.
2 Covenant to Pay
2.1 The Chargor covenants with FDM that it will pay and discharge the Secured
Liabilities when due to FDM.
2.2 The Chargor shall pay interest to the date of payment or discharge
(notwithstanding any demand or any judgment obtained by FDM or the
liquidation or administration of or any arrangement or composition with
creditors by the Chargor) at the rate or rates applicable under the
agreements or arrangements giving rise to the relevant obligations or
liabilities. Such interest shall be compounded in the event of it not
being punctually paid in accordance with the usual practice of banks in
the Cayman Islands but without prejudice to the right of FDM to require
payment of such interest.
2.3 All sums payable by the Chargor under this Charge shall be paid without
any set-off counterclaim withholding or deduction whatsoever unless
required by law in which even the Chargor will simultaneously with making
the relevant payment under this Charge pay to FDM such additional amount
as will result in the receipt by FDM of the full amount which would
otherwise have been receivable and will supply FDM promptly with evidence
satisfactory to FDM that the Chargor has accounted to the relevant
authority for the sum withheld or deducted.
3 Charge
3.1 The Chargor as beneficial owner (with the intent that the security so
constituted shall extend to all beneficial interests of the Chargor in the
Charged Property and to any proceeds of sale or other realisation of the
Charged Property or any part of it) and as continuing security for the
payment and discharge of the Secured Liabilities charges the Shares and
Securities and the Derivative Assets to FDM.
4 Deposit of Title Documents and Further Assurance
4.1 The Chargor shall on the execution of this Charge deposit with FDM (at its
office in Vancouver or as otherwise directed by FDM) all stock or share
certificates or other documents of title to or representing the Charged
Property together with such duly executed transfers or assignments with
the name of the transferee date and consideration left blank as FDM may
require to enable FDM to vest the same in FDM or its nominees or, after
the occurrence of an Enforcement Event, any purchaser to the intent that
FDM
- 3 -
<PAGE>
may at any time after the occurrence of an Enforcement Event without
notice present them for registration.
4.2 The Chargor shall subject to clause 4.3 upon the accrual offer issue or
receipt of any Derivative Assets deliver or pay to FDM or procure the
delivery or payment to FDM of all such Derivative Assets or the stock or
share certificates or other documents of title to or representing them
together with such duly executed transfers or assignments with the name of
the transferee date and consideration left blank as FDM may require to
enable FDM to vest the same in FDM or its nominees or, after the
occurrence of an Enforcement Event, any purchaser to the intent that FDM
may at any time after the occurrence of an Enforcement Event without
notice present them for registration.
4.3 For so long as no Enforcement Event has occurred the Chargor will receive
all dividends interest and other income deriving from and received by it
in respect of the Charged Property for the account of the Chargor and will
promptly pay such dividends interest and other income to the Chargor on
receipt.
4.4 Without prejudice to anything else contained in this Charge the Chargor
shall at any time at the request of FDM but at the cost of the Chargor
promptly sign seal execute deliver and do all deeds instruments transfers
renunciations proxies notices documents acts and things in such form as
FDM may from time to time require for perfecting or protecting the
security over the Charged Property or any part of it or for facilitating
its realisation.
5 Representations Warranties and Covenants by the Chargor
5.1 The Chargor represents and warrants to FDM and undertakes that:
(a) it is and will be the sole absolute and beneficial owner and the
registered holder of all of the Charged Property free from
Encumbrances and will not create or attempt to create or permit to
arise or subsist any Encumbrance (other than this Charge) on or over
the Charged Property;
(b) it has not sold or otherwise disposed of or agreed to sell or
otherwise dispose of or granted or agreed to grant any option in
respect of all or any of its right title and interest in and to the
Charged Property or any part of it and will not do any of the
foregoing at any time during the subsistence of this Charge;
(c) except as disclosed in writing approved by FDM the Shares and
Securities are and will at all times be fully paid and there are and
will be no monies or liabilities outstanding in respect of any of
the Charged Property;
(d) the Charged Property has been and will at all times be duly
authorised and validly issued and is and will at all times be free
from any restriction on transfer or rights of pre-emption;
- 4 -
<PAGE>
(e) it has and will at all times have the necessary power to enter into
and perform its obligations under this Charge;
(f) this Charge constitutes its legal valid binding and enforceable
obligations and is a security over all and every part of the Charged
Property effective in accordance with its terms;
(g) this Charge does not and will not conflict with or result in any
breach or constitute a default under any agreement instrument or
obligation to which the Chargor is a party or by which it is bound;
(h) all necessary authorisations and consents to enable or entitle it to
enter into this Charge have been obtained and will remain in full
force and effect at all times during the subsistence of the security
constituted by this Charge; and
(i) it will procure due compliance with its obligations in this Charge
by all nominees in whose name or names any Charged Property is
registered or holding any certificates or other documents of title
relating to any Charged Property.
5.2 The Chargor undertakes to FDM to provide a copy of any report accounts
circular or notice received in respect of or in connection with any of the
Charged Property to FDM forthwith upon the receipt by the Chargor.
5.3 The Chargor shall promptly pay all calls or other payments due and will
discharge all other obligations in respect of any part of the Charged
Property and if the Chargor fails to fulfil any such obligations FDM may,
but shall not be obliged to, make such payments on behalf of the Chargor
in which event any sums so paid shall be reimbursed on demand by the
Chargor to FDM together with interest as provided for in the Debenture
from the date of payment by FDM until repayment whether before or after
judgment.
5.4 The Chargor shall indemnify FDM on a full indemnity basis against calls or
other payments relating to the Charged Property and any defect in the
Chargor's title to the Charged Property and against all actions
proceedings losses costs claims and demands suffered or incurred in
respect of anything done or omitted in any way relating the the Charged
Property or in the exercise or purported exercise of the powers contained
in this Charge by FDM.
5.5 The Chargor shall not do or cause or permit anything to be done which may
adversely affect the security created or purported to be created by this
Charge or which is a variation or abrogation of the rights attaching to or
conferred by all or any part of the Charged Property without the prior
written consent of FDM and shall take such action as FDM may in its
discretion direct in relation to any proposed compromise arrangement
reorganisation conversion repayment offer or scheme of arrangement
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<PAGE>
affecting all or any part of the Charged Property.
6 Rights of FDM
6.1 FDM may at its discretion (in the name of the Chargor or otherwise
subject to clause 4.3 after the occurrence of any Enforcement Event and
without any consent or authority on the part of the Chargor) exercise any
voting rights and any powers or rights which may be exercised by the
person or persons in whose name or names the Charged Property is
registered.
6.2 Following the occurrence of an Enforcement Event all dividends interest
and other income forming part of the Charged Property shall, unless
otherwise agreed between FDM and the Chargor, be paid without any set-off
or deduction whatsoever to an interest bearing suspense account and
retained by FDM until applied as hereinafter provided as part of the
Charged Property and any such monies which may be received by the Chargor
shall pending such payment be held in trust for FDM.
6.3 The powers conferred on FDM by this Charge are solely to protect its
interests in the Charged Property and shall not impose any duty on it to
exercise any such powers. FDM shall not have any duty as to any Charged
Property and shall incur no liability for:
(a) ascertaining or taking action in respect of any calls instalments
conversions exchanges maturities tenders or other matters in
relation to any Charged Property or the nature or sufficiency of any
payment whether or not FDM has or is deemed to have knowledge of
such matters; or
(b) taking any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Charged Property.
6.4 FDM shall not be liable to account as mortgagee in possession in respect
of all or any of the Charged Property and shall not be liable for any loss
upon realisation or for any failure to present any interest coupon or any
bond or stock drawn for repayment or for any failure to pay any call or
installments or to accept any offer or to notify the Chargor of any such
matter or for any failure to ensure that the correct amounts (if any) are
paid or received in respect of the Charged Property or for any negligence
or default by its nominees or agents or for any other loss of any nature
whatsoever in connection with the Charged Property.
7. Enforcement
7.1 If any Enforcement Event shall occur and be continuing then:
(a) FDM shall cease to be under any further financial commitment to the
Chargor and may at any time thereafter declare the Secured
Liabilities (or such of them as FDM may specify) immediately due and
payable forthwith on
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<PAGE>
demand; and
(b) the security constituted by this Charge shall become immediately
enforceable and the power of sale shall become immediately
exercisable.
8 Power of Sale
8.1 At any time after the security constituted by this Charge has become
enforceable FDM may without further notice to the Chargor exercise the
power to sell or otherwise dispose of the whole or any part of the Charged
Property, in such manner and on such terms and for such consideration
(whether payable immediately or by instalments) as FDM shall in its
absolute discretion think fit and without liability for loss whatsoever,
and may (without prejudice to any right which it may have under any other
provision of this Charge) treat such part of the Charged property as
consists of money as if it were the proceeds of such a sale or other
disposal. FDM shall after the payment of any claims having priority to the
security created by this Charge apply the proceeds without prejudice to
the right of FDM to recover any shortfall from the Chargor in paying the
costs of sale or other disposal and in or towards the discharge of the
Secured Liabilities in such order as FDM in its absolute discretion thinks
fit and the surplus (if any) of such proceeds shall be paid to the person
or persons entitled to it including without limitation the Chargor.
9 Protection of Third Parties
9.1 No purchaser mortgagee or other person dealing with FDM shall be concerned
to enquire whether the Secured Liabilities have become payable or whether
any power which it is purporting to exercise has become exercisable or
whether any money is due under this Charge or as to the application of any
money paid raised or borrowed or as to the propriety or regularity of
any sale by or other dealing with FDM.
10 Power of Attorney
10.1 The Chargor by way of security irrevocably appoints FDM to be the attorney
of the Chargor (with full powers of substitution and delegation) for the
Chargor and in its name or otherwise and on its behalf and as its act and
deed to sign seal execute deliver protect and do all deeds instruments
transfers renunciations proxies notices documents acts and things which
the Chargor may or ought to do under the covenants and provisions
contained in this Charge and generally in its name and on its behalf to
exercise all or any of the powers authorities and discretions conferred by
or pursuant to this Charge on FDM and to execute and deliver and otherwise
protect any deed assurance agreement instrument or act which it may deem
proper in the exercise of all or any of the powers authorities or
discretions conferred on FDM pursuant to this Charge.
10.2 The Chargor ratifies and confirms and agrees to ratify and confirm
anything such
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<PAGE>
attorney shall lawfully and properly do or purport to do by virtue of
clause 10.1 and all money expended by any such attorney shall be deemed to
be expenses incurred by FDM under this Charge.
10.3 The Chargor undertakes to procure that all registered holders from time to
time of any of the Charged Property shall forthwith grant FDM a power of
attorney on the terms set out in clause 10.1 in respect of such Charged
Property.
11 Discharge of Security
11.1 The security constituted by this Charge shall be continuing and shall not
be considered as satisfied or discharged by any intermediate payment or
settlement of the whole or any part of the Secured Liabilities or any
other matter or thing whatsoever including the insolvency liquidation or
administration of the Chargor and shall be binding until all the Secured
Liabilities have been unconditionally and irrevocably paid and discharged
in full.
11.2 Upon the irrevocable payment or discharge in full of the Secured
Liabilities FDM will or will procure that its nominees will (as the case
may be) at the request and cost of the Chargor retransfer to the Chargor
all FDM's right title and interest in or to the Charged Property freed
from this Charge.
11.3 Upon any release of the Charged Property FDM or its nominees (as the case
may be) shall not be bound to release or transfer to the Chargor the
identical stocks shares or securities which were deposited with or
transferred to it or them and the Chargor shall accept shares and
securities of the same class and denomination or such other securities as
then represent the Charged Property.
12 Avoidance of Payments
12.1 No assurance security or payment which may be avoided or adjusted under
any enactment relating to bankruptcy or insolvency and no release
settlement or discharge given or made by FDM on the faith of any such
assurance security or payment shall prejudice or affect the right of FDM
to recover from the Chargor (including the right to recover any monies
which it may have been compelled by due process of law to refund and any
costs payable by it pursuant to otherwise incurred in connection with such
process) or to enforce the security created by or pursuant to this Charge
to the full extent of the Secured Liabilities.
13 Communications
13.1 Every notice demand or other communication under this Charge shall be in
writing and may be delivered personally or by letter telex or facsimile
transmission despatched by FDM to the Chargor to its address specified at
the head of this Charge or to the
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<PAGE>
following numbers:
Chargor
c/o Global Gold Corporation
438 West 37th Street
Attn: Mr. Drury Gallagher, President
Fax no: (212) 967-3018
or to such other address and or telex number or facsimile number as may be
notified in accordance with this Clause by the relevant party to the other
party for such purpose.
13.2 Every notice demand or other communication shall be deemed to have been
received (if sent by post) 5 working days after being posted prepaid
airmail (if posted from or to an address outside the Cayman Islands) and
(if delivered personally or despatched by telex subject to receiving the
correct telex answerback or by facsimile transmission) at the time of
delivery or despatch if during normal business hours in the place of
intended receipt on a working day in the place of intended receipt and
otherwise at the opening of business in that place on the next succeeding
such working day.
14 Currency Indemnity
14.1 If under any applicable law or regulation or pursuant to a judgment or
order being made or registered against the Chargor or the liquidation of
the Chargor or without limitation for any other reason any payment under
or in connection with this Charge is made or falls to be satisfied in a
currency (the "payment currency") other than the currency in which such
payment is expressed to be due under or in connection with this Charge
(the "contractual currency") then to the extent that the amount of such
payment actually received by FDM when converted into the contractual
currency at the rate of exchange falls short of the amount due under or in
connection with this Charge the Chargor as a separate and independent
obligation shall indemnify and hold harmless FDM against the amount of
such shortfall. For the purposes of this Clause "rate of exchange" means
the rate at which FDM is able on or about the date of such payment to
purchase, in accordance with its normal practice, the contractual currency
with the payment currency and shall take into account (and the Chargor
shall be liable for) any premium and other costs of exchange including any
taxes or duties incurred by reason of any such exchange.
15 Miscellaneous
15.1 No delay or omission on the party of FDM in exercising any right or remedy
under this Charge shall impair that right or remedy or operate as or be
taken to be a waiver of it nor shall any single partial or defective
exercise of any such right or remedy preclude
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<PAGE>
any other or further exercise under this Charge or that or any other right
or remedy.
15.2 FDM's rights under this Charge are cumulative and not exclusive of any
rights provided by law and may be exercised from time to time and as often
as FDM deems expedient.
15.3 Any waiver by FDM of any terms of this Charge or any consent or approval
given by FDM under it shall only be effective if given in writing and then
only for the purpose and upon the terms and conditions if any on which it
is given.
15.4 The security constituted by this Charge shall be in addition to and shall
not be prejudiced determined or affected by nor operate so as in any way
to determine prejudice or affect any Encumbrance which FDM amy now or at
any time in the future hold for or in respect of the Secured Liabilities
or any part of them and shall not be prejudiced by time or indulgence
granted to any person or any abstention by FDM in perfecting or enforcing
any remedies securities guarantees or rights it may now or in the future
have from or against the Chargor or any other person or any waiver release
variation act omission forbearance unenforceability indulgence or
invalidity of any such remedy security guarantee or right.
15.5 If at any time any one or more of the provisions of this Charge is or
becomes illegal invalid or unenforceable in any respect under any law of
any jurisdiction neither the legality validity or enforceability of the
remaining provisions of this Charge nor the legality validity or
enforceability of such provision under the law of any other jurisdiction
shall be in any way affected or impaired as a result.
15.6 Any statement certificate or determination of FDM as to the Secured
Liabilities or without limitation any other matter provided for in this
Charge shall be in the absence of manifest error be conclusive and binding
on the Chargor.
15.7 The parties agree that if requested by FDM United States UCC fiduciary
statements will be filed in such jurisdictions as required by it, such
fiduciary statements to be signed solely by Chargor.
16 Law and Jurisdiction
16.1 This Charge is governed by and shall be construed in accordance with the
laws of the Cayman Islands.
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<PAGE>
IN WITNESS whereof the Chargor and FDM have executed and delivered this Charge
as a Deed the day and year first before written.
Executed as a Deed by GLOBAL )
GOLD CORPORATION )
by: )
)
)
/s/ Robert Gain )
Director )
- ------------------------------ )
Witnessed in the presence of:
/s/ [ILLEGIBLE]
Executed as a Deed by FIRST )
DYNASTY MINES LTD. )
by: )
)
)
______________________________ )
Witnessed in the presence of: )
Consented to by Global Gold Armenia Limited.
Dated: 1997
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<PAGE>
SCHEDULE
Number of shares Description of shares
100,000 Ordinary Shares in the
capital of Global Gold
Armenia Limited, a Cayman
Islands exempted, company
of a par value of US$0.01
each registered in the
name of Global Gold Corporation
-12-
AMENDMENT TO WARRANT NO. W-____
ISSUED BY
GLOBAL GOLD CORPORATION
In order to give the holder of Warrant No. ___ issued by Global Gold
Corporation (formerly known as Triad Energy Corp.) (the "Warrant") additional
time within which to exercise the same, from its current expiration date of
December 31, 1996 until September 30, 1997, the Warrant is hereby amended as
follows:
1. The first paragraph of the Warrant is amended to substitute the
date "September 30, 1997" in lieu of the date "December 31, 1996" appearing
therein.
2. Section 17 of the Warrant is revised to read as follows:
"17. Expiration. The right to exercise this Warrant shall expire at
5:30 P.M., New York time, on September 30, 1997."
3. Except as otherwise set forth herein, all of the other terms and
conditions of the Warrant shall remain in full force and effect.
Dated: April 16, 1996 GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
<PAGE>
AMENDMENT TO WARRANT NO. W-____
ISSUED BY
GLOBAL GOLD CORPORATION
Warrant No. ___ issued by Global Gold Corporation (formerly known as
Triad Energy Corp.) (the "Warrant") pursuant to the Confidential Private
Placement Memorandum dated May 17, 1995, as amended, is hereby amended as
follows:
1. The first paragraph of the Warrant is hereby amended to
substitute the following paragraph in lieu of the paragraph appearing therein:
"Global Gold Corporation (formerly known as Triad Energy Corp.) a
Delaware corporation (the "Company"), hereby certifies that, for value received,
_________________________________________________, or registered permitted
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time before 5:30 P.M., New York time, on
September 30, 1997, _______ fully paid and nonassessable shares of Common Stock,
$.001 par value, of the Company, at a purchase price per share of $0.50 (such
purchase price per share as adjusted from time to time as herein provided is
referred to herein as the "Purchase Price"), provided that the Purchase Price
during the period from November 15, 1996 through December 14, 1996 shall be
$0.25 per share for those shares acquired upon the exercise of this Warrant
during such period. The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein."
2. Section 2 of the Warrant is hereby amended by the addition of a
new last sentence thereof to read as follows:
"Notwithstanding anything contained in this Warrant to the contrary,
if this Warrant is exercised in whole or in part by the Holder during the period
from November 15, 1996 through December 14, 1996, the Holder will receive, upon
such exercise thereof, an additional warrant (the "Additional Warrant") to
purchase one-half share of the Common Stock for each share of Common Stock
purchased upon such exercise, which will identical to this Warrant in all
respects, except that the Additional Warrant will have an exercise price of
$0.50 per share and shall expire on December 31, 1996, or, if later, the date of
commencement of the trading of the Common Stock on NASDAQ or a national
securities exchange."
3. Except as otherwise set forth herein, all of the other terms and
conditions of the Warrant shall remain in full force and effect.
Dated: November 15, 1996 GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
<PAGE>
EXHIBIT A
AMENDMENT TO WARRANT NO. W-____
ISSUED BY
GLOBAL GOLD CORPORATION
Warrant No. ___ issued by Global Gold Corporation (formerly known as
Triad Energy Corp.) (the "Warrant") pursuant to the Confidential Private
Placement Memorandum dated May 17, 1995, as amended, is hereby amended as
follows:
1. The first paragraph of the Warrant is hereby amended to
substitute the following paragraph in lieu of the paragraph appearing therein:
"Global Gold Corporation (formerly known as Triad Energy Corp.) a
Delaware corporation (the "Company"), hereby certifies that, for value received,
__________________________________________________, or registered permitted
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time before 5:30 P.M., New York time, on
December 31, 1997, _______ fully paid and nonassessable shares of Common Stock,
$.001 par value, of the Company, at a purchase price per share of $1.00 (such
purchase price per share as adjusted from time to time as herein provided is
referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein."
2. Section 17 of the Warrant is hereby amended to read as follows:
"The right to exercise this Warrant shall expire at 5:30 p.m., New
York time, on December 31, 1997."
3. Except as otherwise set forth herein, all of the other terms and
conditions of the Warrant shall remain in full force and effect.
Dated: January 23, 1997 GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-----------------------------
Drury J. Gallagher, President
