U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
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Commission file number: 1-4799
NATIONAL ENTERPRISES, INC.
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(Name of small business issuer in its charter)
Indiana 35-0540454
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
90 Adelaide Street West, Suite 300
Toronto, Ontario, Canada M5H 3V9
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 416-363-8300
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: NONE
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 [ ] No
[X]
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 the best of the 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]
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State issuer's revenue for its most recent fiscal year: $1,661
As of July 1, 1997 (using the average of the bid and asked prices on such
day) the aggregate market value of the voting stock held by non-affiliates was
$1,574,412.
State whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ X ]
As of July 1, 1997, 72,587,698 shares of common stock, no par value, of the
Issuer were outstanding.
Documents Incorporated by Reference into this Report
None
Transitional Small Business Disclosure Format (check one) Yes [ ] No [ X ]
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Table of Contents
Page
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PART I
Item 1. Description of Business 4
Item 2. Description of Property 14
Item 3. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 21
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters 22
Item 6. Management's Discussion and Analysis or Plan
of Operation 23
Item 7. Financial Statements 25
Item 8. Changes In and Disagreements With Accountants
on Accounting and Financing Disclosure 36
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons: Compliance with Section 16(a) of the Exchange
Act 36
Item 10. Executive Compensation 38
Item 11. Security Ownership of Certain Beneficial Owners
and Management 38
Item 12. Certain Relationships and Related Transactions 39
Item 13. Exhibits and Reports on Form 8-K 41
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In this Annual Report on Form 10-KSB, all references to "dollars" and "$"are to
United States dollars, except as otherwise noted. Reference to "C$" is to
Canadian dollars and "ATS" is to Austrian Schillings. Conversion of Austrian
Schillings to United States dollars herein assumes a conversion rate of 1
ATS=$.081, the rate published in the Wall Street Journal on July 9, 1997.
PART I
Item 1. DESCRIPTION OF BUSINESS
Introduction.
National Enterprises, Inc. (together with its wholly owned subsidiary,
Argosy Mining G.m.b.H., hereafter referred to as the "Company"), is a
corporation formed under the laws of the State of Indiana in 1940.
The Company emerged from Chapter 11 bankruptcy proceedings under a Plan of
Reorganization, which was confirmed by the United States Bankruptcy Court for
the Eastern District of Virginia (Case No. 90-33935-S) on April 10, 1992. Since
emerging from bankruptcy proceedings, the Company has never been profitable and
has not generated sufficient working capital to sustain its operations.
Subsequent to emerging from bankruptcy and throughout 1996 the Company continued
its efforts to reorganize its business affairs through the sale of its remaining
inventory of development resort lots, adoption of a new strategic business
direction, and the search for a new controlling shareholder. The Company
achieved this objective late in 1996.
On December 17, 1996, as part of a series of transactions which resulted in
a change in control of the Company, the Company acquired all the issued and
outstanding stock in Argosy Mining G.m.b.H., an Austrian company ("Argosy"),
from Argosy Mining Corp, a Canadian company ("Argosy Mining"). As a result of
the purchase of the stock of Argosy, the Company acquired 100% of the ownership
interests in nine gold exploration properties located in Austria and the
business of the Company changed from the sale of resort home sites and panelized
public housing to gold mining and exploration, in particular the evaluation,
exploration and development of gold mining prospects located in Austria.
Until the change in control in the Company and the acquisition by the
Company of the stock of Argosy in December, 1996, the business activities of the
Company during 1996 were limited by lack of capital, no operational business
plan and the lack of paid employees. The Company had nominal revenue from
operations in 1996. During 1996, the Company had become an inactive corporation
and was actively marketed by its directors as a company available for
acquisition by another corporation seeking to merge its business into a
reporting entity.
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The Change In Control and Acquisition of Argosy.
Starting in September, 1996, a series of transactions were initiated by the
Company, Argosy Mining and Mercury Immobililen Und Verwatungs A.G., a company
incorporated under the laws of Switzerland ("Mercury"), which resulted in the
sale of the Company's remaining inventory of development resort lots, adoption
of a new strategic business direction, through the sale of its wholly owned
subsidiaries, purchase of all the shares of Argosy and the change in control of
the Company. These transactions are summarized below.
(a) By agreement, dated September 3, 1996, the Company sold 200,000 shares
of common stock at $.25 per share to Florian Riedl-Riedenstein and 200,000
shares of common stock at $.25 to a private investor. The subscriptions were
accepted and the shares issued by the Company in January, 1997. The $100,000
raised was used by the Company in partial payment of the costs and expenses
incurred in the preparation and closing by the Company of the divestiture of the
assets of the Company, purchase of all the shares of Argosy and the change in
control of the Company. Mr. Riedl-Riedenstein has since become the Chairman,
President and Chief Executive Officer of the Company.
(b) By agreement, dated November 27, 1996, which closed on December 17,
1996, Mercury purchased 54,367,551 shares of common stock of the Company from
Arendscor (Canada) Inc. representing 77.2% of the outstanding common shares of
the Company, and became the controlling shareholder of the Company. The
consideration for the purchase was $10,000. The completion of the stock purchase
was conditioned, among other things, on the simultaneous closing of the purchase
of Argosy by the Company.
(c) On November 28, 1996, the Company transferred to Danca Investments
Inc., an affiliate of Arendscor (Canada) Inc., the then controlling shareholder
of the Company, all of the interest of the Company in its three wholly owned
subsidiaries, NRC Inc., Arendswood Homes Inc. and National Building Systems Inc.
This transaction divested the Company of its three wholly-owned subsidiaries and
certain of its remaining development resort lots. The consideration for the
transfer was the assumption by Danca Investments Inc. of $142,874 in obligations
owed by the Company to Arendscor (Canada) Inc. No independent valuation of the
assets transferred by the Company to Danca Investments Inc. was received.
However, the transaction was approved by the shareholders of the Company at the
1995 Annual Meeting of the Shareholders.
(d) By agreement, dated November 30, 1996, which closed on December 17,
1996, the Company acquired all the issued and outstanding stock of Argosy from
Argosy Mining, an unaffiliated entity. Argosy holds interests in nine gold
mining prospects in Austria. The consideration for the purchase was C$250,000 in
cash paid by the Company and 1,000,000 shares of common stock of the Company
transferred to Argosy Mining by Mercury. The agreement provides that an
additional 1,000,000 shares of common stock would be transferred to Argosy
Mining by Mercury if the Company did not register the original 1,000,000 shares
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of common stock with the Securities and Exchange Commission for resale within
three months following the closing date. Mercury deposited 1,000,000 shares of
common stock of the Company in escrow for this purpose. Such condition was not
satisfied and, therefore, the shares were transferred to Argosy Mining Corp
pursuant to the terms of the escrow.
(e) By agreement, dated December 6, 1996, Erzbergbau Radhausberg G.m.b.H.,
("Erzbergbau"), the seller of the mining properties to Argosy Mining, agreed to
the sale and transfer of the properties from Argosy Mining to the Company and
the Company agreed to assume the obligations relating to the properties in the
agreement between Erzbergbau and Argosy Mining. By agreement, dated December 6,
1996, Erzbergbau agreed to the full settlement of the amount due from Argosy for
the properties of $1,000,000 by the transfer of 300,000 shares of common stock
of the Company to Erzbergbau from Mercury and Erzbergbau released the Company
from any further obligations set forth in the agreement between Erzbergbau and
Argosy Mining and in the agreement referred to above.
(f) On December 12, 1996, Mercury entered into Put/Escrow Agreements with a
number of shareholders of the Company. The agreements provide that certain
shareholders may require Mercury to purchase additional shares of common stock
from them at $.10 per share during a period from September 12, 1997 to September
27, 1997. The put option expires if the shares covered have been registered by
the Company with the Securities and Exchange Commission for resale in the United
States and have been freely tradeable at a price above $.10 for more than ten
consecutive days after registration and prior to receipt by the Company of a
notice of exercise. As part of the agreement, the Company deposited cash of
$100,000 in escrow equal to one-half the option price, and Mercury deposited
1,000,000 shares of the common stock of the Company held by Mercury to secure
the Put/Escrow Agreement. The Put/Escrow Agreements cover a total of 2,000,000
shares of the Company, including 1,223,200 shares held by Arendscor (Canada)
Inc., 88,000 shares held by Edward Jan Smith (a director of the Company),
100,000 shares held by Matthew Gaasenbeek, III (a director of the Company),
8,800 shares held by Lisa Hoekwater, 240,000 shares held by John B. Overzet (a
former director of the Company), 100,000 shares held by Arthur Walker (a former
director of the Company), and 240,000 shares held by Jack Wrobel (a former
director of the Company).
As a result of these transactions, the Company achieved its objective of
reorganizing its business affairs through the sale of its remaining inventory of
development resort lots, adoption of a new strategic business direction, and the
search for a new controlling shareholder. Consequently, the business plan of the
Company changed and the Company became engaged in gold mining and exploration,
in particular the location, evaluation, acquisition, exploration and development
of precious metal mining prospects and to that end to own, acquire, improve,
develop, sell, lease, and convey lands or mineral claims or any right, title or
interest therein, and to search, explore, prospect or drill for and exploit ores
and minerals therein or thereupon.
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New Business Plan.
The Company, by and through Argosy, holds 100% of the ownership interests
in nine gold prospecting properties in Austria, as listed below:
Property Location Square Kilometers
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Schellgaden North and South Salzburg 39.4 sq. kms.
Schellgaden South North Carinthia 37.4 sq. kms.
Goldeck West - Siflitz and South Carinthia 27.6 sq. kms.
Goldeck East - Siflitz South Carinthia 31.6 sq. kms.
Kreuzeck West
Rabant-Gurskerkammer -
Fundkofel and South West Carinthia 23.9 sq. kms.
Kreuzeck East - Lengholz South Carinthia 20.5 sq. kms.
Kliening and East Carinthia 27.4 sq. kms.
Kliening West - Buchbauer East Carinthia 27.4 sq. kms.
Strassegg-Gasen North Styria 12.3 sq. kms.
All these properties have been centers of gold mining activities dating
back at least 1,000 years with intermittently flourishing gold production
continuing into the late 19th century. Repeated attempts to explore and revive
the areas' gold potential during the first half of the 20th century were
curtailed by political instability and the two World Wars. Extensive underground
workings from the old mining periods are still accessible at the Schellgaden,
Goldeck Siflitz and Kreuzeck gold properties.
In 1995, Argosy conducted underground channel sampling programs in old
mines on the Schellgaden and Goldeck Siflitz properties to test for the gold
potential of the in situ ore. Subsequently, four diamond core drill holes were
made at the Schellgaden North property and three at the Goldeck Siflitz
property. With analysis of previous exploration data and the new information
generated by the channel sampling and core drilling, a new understanding of the
Schellgaden North gold property's geology and structural model reveals what
management of the Company believes to be excellent potential for this ancient
mining area.
In order to further examine the potential of these sites, the Company plans
a new diamond core drilling program to be conducted over an area of 500 by 1500
meters in the Schellgaden North property, which includes old workings. A total
of six to eight diamond core holes are expected to be drilled to a depth of
approximately 300 meters in the Schellgaden North property in the summer and
fall of 1997. The cost of this project is approximately $600,000, which the
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Company will seek to fund through equity or debt financing. There can be no
assurance that the Company will be successful in such funding efforts. After the
core is drilled, the samples will be analyzed for geologic attributes and the
presence of gold. Based on the result of the core samples, the Company will
decide whether to drill additional core samples to confirm or support its
findings, develop a program to develop and prove the reserve in the area, or
abandon the site.
It is expected that should a gold reserve be found, confirmed and proven,
that the Company will seek either to enter into a joint venture agreement with
an operator to extract the gold from the area or will sell the property outright
to realize its value. There can be no assurance that a gold reserve will ever be
found, confirmed and proven or that the Company will ever be able to realize the
value of the find through a joint venture arrangement or sale of the property.
Although the Schellgaden North property is the first priority for further
exploration, an evaluation of the future exploration potential of the other
eight properties is ongoing under the direction of Dr. Hans R. Klob, Vice
President, Exploration of the Company. The Company may engage in prospecting and
development of core drilling programs with respect to the other properties.
In addition to the present sites held by the Company, the Company is
evaluating other potential acquisitions as well, including sites in Switzerland,
Ghana and British Columbia, Canada. There can be no assurance that any other
sites will be acquired by Company.
The development of the Company's new business plan is intended to be
financed by future debt or equity financing. There can be no assurance that the
business plan of the Company will be successful and will result in significant
revenue and profit to the Company. The gold mining properties acquired by the
Company are non-producing prospects where Management of the Company believes
that precious metal, in particular gold, may be present in commercially viable
quantities. The development of the business plan of the Company is dependent, in
part, on the ability of the Company to raise additional financing to fund the
proposed development activities and to pay operating expenses. There can be no
assurance that the Company will be able to procure such additional financing on
terms acceptable to it or at all and any equity financing acquired by the
Company will likely result in dilution of the interests of present shareholders.
The search for precious metal deposits that can be profitably produced is
extremely high risk and development requires large capital outlays and
operational expertise.
Austrian Mining Laws and Regulations
The properties presently held by the Company are located in and subject to
the laws of the Republic of Austria. In Austria, public duties and
responsibilities are divided between the Republic of Austria and its nine
provinces (Vienna, Lower Austria, Burgenland, Styria, Upper Austria, Carinthia,
Salzburg, Tyrol, Vorarlberg). According to the 1975 Mining Law, mining in
Austria is controlled by special federal authorities ("Mining Authorities").
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Mining Authorities of first stage are the Regional Mining Authorities,
special and professional federal authorities, and the Federal Minister for
Economic Affairs (second and appealing stage). Mining Authorities report
directly to the Federal Minister. There are six regional mining authorities in
Austria, located in Vienna (Vienna, Lower Austria, Burgenland); Graz (East- and
West-Styria), Leoben (Upper-Styria); Klagenfurt (Carinthia); Innsbruck (Tyrol,
Vorarlberg): Salzburg (Salzburg, Upper Austria). The Federal Ministry for
Economic Affairs (Vienna) is divided into several departments. Mining is subject
to Department VII ("Supreme Mining Authority").
The Mining Authorities are charged with significant duties and
responsibilities, including issuance of mining licenses, prevention of dangers,
legislation, optimal use of deposits and education of miners and foremen.
The legal framework for the Austrian mining industry is the 1975 Mining
Law, as amended. This law applies to the prospecting, exploration, exploitation,
storage and processing of mineral raw materials "free for mining," "state owned
mineral raw materials" and "land owner's mineral raw materials." The law also
applies to mining carried out in the course of exploration and exploitation,
processing of other mineral commodities and exploration and investigation of
geological structures suitable for storing liquid and gaseous hydrocarbons, and
storing hydrocarbons etc. These provisions also apply to mining aspects of
exploration and supervision of activities in respect of geothermal energy and
the utilization of geothermal heat, where tunnels, shafts and wells of more than
100 meters are used, the exploration of the earth crust for its suitability for
storing any substances and the utilization of workings in closed down mine sites
and other purposes than the production of mineral commodities.
Exploration is considered to be divided into two phases: the initial
search, followed by investigation. The permits required vary slightly depending
upon the classification of minerals:
Mineral raw materials free for mining:
1. All mineral raw materials from which iron, manganese, chromium,
molybdenum, tungsten, vanadium, titanium, zirconium, cobalt, nickel, copper,
silver, gold, platinum and PG-elements, zinc, mercury, lead, tin, bismuth,
antimony, arsenic, sulfur, aluminum, beryllium lithium, rare earths or compounds
of these elements can be produced, in as far as they are not listed below or
represent state owned, land owner's or other mineral raw materials.
2. Gypsum, anhydrite, barite, fluorite, graphite, talc, china clay (kaolin)
and leucophyllite.
3. All types of coal and oil shale.
Prospecting for "free for mining" mineral raw materials requires a
prospection permit, entitling the holder to search for such minerals within the
jurisdiction of the Regional Mining Authority. It does not confer an exclusive
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right. Conversely, an exploration license confers an exclusive right for "free
for mining" mineral raw materials within a specified area located in the area of
jurisdiction of the respective Regional Mining Authority. Mining of those
mineral raw materials requires a mining-permit.
"State owned mineral raw materials" belong to the federal state and
comprise the following types of minerals:
1. Rock salt and all salt occurring together with rock salt.
2. Hydrocarbons.
3. Minerals containing uranium and thorium.
The rights for exploration of these minerals can be granted to persons
meeting certain criteria through a civil right contract by the Federal Minister
of Economic Affairs in consent with the Federal Minister of Finance on behalf of
the state. The right to explore for salt has been ceded by law to an Austrian
public company in the salt business.
"Land owner's mineral raw materials" are comprised of the following
minerals:
Magnesite, mica, illite clay and other expandable clays, quartz, quartz
rock, and quartzitic sand, in as far as suitable for the manufacturing of glass
or fireproof products or as starting material for the manufacture of cement;
clays, in as far as suitable for the manufacture of fireproof or acid-proof
products, cements, brick work and other ceramic products; dolomite, in as far as
suitable for the manufacture of fireproof products; limestone, in as far as
suitable for the manufacture of quick lime or as starting material for the
manufacture of cement or as aggregate for metallurgical processes; marl, in as
far as suitable for the manufacture of cements; basaltic rock, in as far as
suitable for the manufacture of fireproof products or of rock wool; bentonite,
kieselgur, asbestos, feldspar, trass, andalusite, sillimanite and disthene.
A prospecting permit to search followed by an exploration permit to
investigate is needed for the above mentioned minerals. Both permits are issued
by the Regional Mining Authority.
All minerals not listed above are subject to the category of "other mineral
raw materials."
Prospecting on surface for "other mineral raw materials" and their
production requires a license according to the 1994 Trade Law. In case of
underground activities, commencing of mining has to be reported to the Regional
Mining Authority.
The holder of mining rights enjoys certain rights. Under certain conditions
he may - in the course of exploration and production utilize other minerals not
listed in his mining right title as well. The Mining Law furthermore allows use
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of mine waters. Mine waters may be utilized when ever required for mining
operations as long it does not merge with permanent surface waters.
The holder of the mining rights may also engage himself in processing
minerals and their benefication (pelletizing, bricketing, drying, roasting,
carbonizing, coking, gasefying, liquefying and solution) of minerals or making a
suspension during processing in accordance with operational and local conditions
and further processing to a saleable product. He is also entitled to use mines
for purposes other than exploitation of minerals to bring in or to store goods
in geological structures in as far as these operations do not interfere with the
production and the storage of minerals.
The holder of the mining rights is faced with special obligations as well.
Opening and closing of mines have to be announced in right time in advance.
During mining operations the holder of the mining rights has to take care for
life and health of persons, objects in the property of others and not
transferred to him for use to protect the environment, deposit and surface to
provide reclamation of surface after ending mining activities. Concerning the
protection of the environment he is obliged to do everything to prevent any
permanent damage to soil, vegetation and livestock.
If a person not belonging to the mining company comes to death or suffers
from injury to his body or health or an object is damaged by a mining operation
this is referred as a mining damage.
Mining activities must be carried out in such a way to avoid emissions in
the best way according to the latest technology. It's the duty of the holder of
the mining rights to follow up mine maps under the supervision of a mine
surveyor. In the case of any accident occurring in other mining operations the
holder of the mining rights is obliged to send rescue men and equipment upon
request in as far as this does not disturb its own operation.
Mineral production and the storage of any hydrocarbons in geological
structures has to be done in accordance with a written plan, which needs to be
approved by the Regional Mining Authority in respect of the operations envisaged
and the measures planned. This is not applicable to small enterprises. Small
enterprises are mining enterprises or independent operational units of a mining
enterprise employing less than 40 persons on regular base. In case of land
owners minerals production may be commenced or recommenced after an interruption
of more than five years on the base of exploration and production plans approved
by the Regional Mining Authority.
Where a mining enterprise consists of several independent units, the holder
of mining rights has to appoint a manager, a deputy manager and technical
supervisors for each unit. In small enterprises, where operational hazards can
be expected to remain at a low level, multiple appointments of responsible
persons are allowed. The holder of the mining rights also has to appoint a
responsible mine-surveyor for each mine. Multiple appointments by several
holders of mining rights are allowed as well. Any appointment is subject for
approval by the Mining Authority.
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Holders of mining rights jointly owning a mining right title or jointly
entrusted with the use of a mining right title and also single holders of mining
rights residing abroad permanently or legal persons or commercial law companies
are obliged to appoint a person living in Austria, authorized to receive legally
valid orders and written communications by the Mining Authorities.
Mining areas must be clearly entered in the land use plan. Buildings and
other installations not serving the purpose of mining operations may be
constructed in mining areas upon obtaining a special permit by the mining
authority only.
General Considerations.
The value of the Company's properties and exploration results may be
affected by the prices of precious metals, especially gold, and by the cost of
extracting the precious metals. During 1996, gold prices fluctuated from a low
of $368 to a high of $415 per ounce. During the last ten years, gold prices have
averaged $403 per ounce and stayed over $300 per ounce while modern heap leach
technologies has allowed lower grades of ore bodies to be mined. For several
years, this trend created a resurgence in the United States and internationally
in the traditional gold producing areas, of exploration activity for gold in the
minerals industry.
The availability of mining prospects is dependent upon the Company's
ability to negotiate leases or concessions with property owners or to locate
claims pursuant to laws of the particular jurisdiction.
Other than its mining agreements, the Company has no patents, trademarks,
licenses or franchises material to its operations. The properties in which the
Company has an interest in Austria are accessible throughout the year. If
mineralized deposits are discovered under claims or leases in which the Company
owns an interest, the economic viability of the deposit may depend upon numerous
factors not within the Company's control, including the selling price of
minerals, the extent of other domestic production, proximity and capacity of
water and mills, and the effect of state, federal or foreign government
regulations.
Competition in the Company's industry occurs almost exclusively in the
acquisition of mining properties because the market price for gold is determined
by market factors and conditions that are beyond the Company's control. The
exploration for, development of and acquisition of gold and other precious metal
properties are subject to intense competition. The principal methods of
competition include: (i) bonus payments at the time of lease acquisition, (ii)
delay rentals and advance royalty payments, (iii) the use of differential
royalty rates, (iv) the amount of annual rental payments, (v) exploration and
production commitments by the lessee and (vi) staking claims. Companies with
greater financial resources, larger staffs and labor forces, and more equipment
for exploration and development may be in a more advantageous position than the
Company to compete for such mineral properties. Management believes that
competition for acquiring mineral prospects will continue to be intense.
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The mining industry, including the business of Company, must follow strict
local, state and federal regulations imposed in each country where it operates
to maintain environmental quality. As a result, the Company is subject to the
environmental regulations in Austria with regard to mining properties. To the
best knowledge of management, the Company's Austrian project complies with all
present environmental regulations and laws. Continued compliance is not
anticipated to result in any additional material capital and/or operating costs.
However, it can not be known at this time what additional future laws and
regulations might be adopted in Austria or elsewhere, nor their effect, if any,
on the Company.
As of June 2, 1997, the Company did not have any employees. Its directors
and officers are not engaged full time in the prosecution of the Company's
business. The Company has retained the services of a consulting geologist, Dr.
Hans Klob, to assist it in its operations, on a part time basis and has
appointed him Vice President, Exploration of the Company. Dr. Klob served in a
similar capacity for Argosy Mining. No employees are expected to be hired
throughout this fiscal year unless the activities of the Company expand and its
new business plan develops. However, the Company intends to hire consultants to
assist it in its operations.
When used in this Annual Report on Form 10-KSB, in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in any oral statements made by the Company, the words or phrases
"will likely result," "expects," "intends," "will continue," "is anticipated,"
"estimates," "projects," "plans," and similar expressions are intended to
identify "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. A forward looking statement is not
historical fact and whether the statement comes true is subject to risks and
uncertainties. The actual results or activities of the Company will likely
differ from the projected results or activities of the Company. Forward looking
statements include the proposed business plan of the Company, the planned
development of the Company's mining properties in Austria, the commencement
dates and the costs of diamond core drilling and exploration activities, the
future acquisition of mining properties, the procurement of future financing to
fund the Company's operations, and the compliance with environmental and other
mining laws in Austria. Factors that could cause actual results to differ
materially from projected results include, among others, risks and uncertainties
relating to general domestic and international economic and political
conditions, risks associated with mining operations in Austria, unanticipated
ground and water conditions, unanticipated grade and geological problems,
metallurgical and other processing problems, availability of materials and
equipment, the timing of receipt of necessary governmental permits, the
occurrence of unusual weather or operating conditions, force majeure events,
lower than expected ore grades and higher than expected stripping ratios, the
failure of equipment or processes to operate in accordance with specifications
and expectations, labor relations, accidents, delays in anticipated start-up
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dates, environmental costs and risks, the ability of the Company to raise
financing on a favorable basis to the Company or at all, and general financial
and stock market conditions. Readers are cautioned not to put undue reliance on
forward-looking statements. In light of the significant uncertainties inherent
in forward-looking statements, the inclusion of any such statement should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved or that the Company will
ever obtain significant revenue or profitability. The Company disclaims any
intent or obligation to update publicly the forward-looking statements contained
in this report, whether as a result of new information, future events or
otherwise, except as required by applicable laws.
Item 2. DESCRIPTION OF PROPERTY
Summary.
The Company, by and through its wholly owned subsidiary Argosy, owns 100%
of the ownership interests in nine mining properties located in Austria. All
nine properties have been centers of gold mining activities dating back at least
1,000 years with intermittently flourishing gold production continuing into the
late 19th century. Repeated attempts to explore and revive the areas' gold
potential during the first half of the 20th century were curtailed by political
upheaval and the two World Wars. Access to the nine properties of the Company in
Austria is favorable as the area has a well developed infrastructure and none of
the properties lie in remote mountain areas.
The following is a description of the Company's mineral properties.
Schellgaden North and Schellgaden South. The Schellgaden North property
extends from South Salzburg into North Carinthia Province, Austria. The property
consists of 39.4 square kilometers. The property consists of 82 leases, 36
leases in Salzburg and 46 leases in Carinthia. The current lease term is for a
two year period, January 1, 1996 to December 31, 1997. It is in this property
that the initial exploration and evaluation activities of the Company are
scheduled to take place. The Schellgaden North site is part of a historically
significant gold mining district. A series of ancient gold mines lies along the
outcrop of a gneiss-micaschist-amphibolite series, called the Storz and Kareck
Formations on the eastern rim of the Tauern Window. The gold ore is a fine
grained stratabound quartz-sulfide layer, that occurs in three different
mineralized horizons.
The Schellgaden South Property is located in Northern Carinthia, Austria.
The property consists of 37.4 square kilometers and is located to the south of
the Schellgaden North property. This area is less significant than Schellgaden
North from a historical viewpoint in terms of number of mines once operating and
the extent of ore recovered. The property consists of 75 leases in Carinthia.
The current lease term is for a two year period, January 1, 1996 to December 31,
1997.
Access to the Schellgaden North and South properties is by Tauemautobahn
A-10, the major freeway link between Munich-Salzburg-Klagenfurt-Italy. A federal
highway, B-99, runs parallel. Small access roads frequently lead into the
14
<PAGE>
concession area over the whole North-South extension of about 29 kilometers
between the town of St. Michael in Salzburg and Gmund in Northern Carinthia.
Management determined to commence operations on this property as reported
gold grades were sufficiently high and underground workings from the old mining
operations periods are still accessible at the site. It was on the Schellgaden
North site that the prior owner, Argosy Mining, conducted limited exploration
activities. During the first phase of this program conducted by Argosy Mining,
the old underground mines were channel sampled and assayed by Bondar-Clegg in
Vancouver, Canada after sample preparation by The University of Salzburg
Geoscience Lab. The samples showed evidence of gold with grades ranging at an
average of 5-15 g Au/t. During the second phase four diamond core drill holes
were dug to a maximum depth of 100 meters in the south of the Stublbau Mine to
learn about the tectonic structure and to test the southern continuation of the
ore horizon of the mine. Drilling started in September 1995 and ended in October
1995. Based on the results of the study of the geologist for Argosy Mining, Dr.
Hans R. Klob, who now has been appointed Vice President, Exploration of the
Company, demonstrated the possibility that an area once viewed as medieval gold
mining following along a single stratabound quartz-sulfide-gold layer may be a
horizon of at least four different ore bearing levels of 2 to 10 meters
thickness with one to several single quartz-ore beds of centimeter- to meter
thickness.
The core drilling samples showed two systems of en echelon type block
faulting, one striking North-South with varying down-thrust to the east, the
other striking West-East with down thrust to the North, usually with small
vertical throw amounts. The formation usually dips gently to the east.
During the summer and fall of 1997, the Company intends to conduct a new
core drilling program over an area of 500 by 1500 meters on the property
overlying the main old workings. A total of six to eight diamond core holes are
expected to be drilled to a depth of approximately 300 meters. The projected
cost of this project is approximately $600,000. After the core is drilled, the
samples will be analyzed for geologic attributes and the presence of gold by
Bondar-Clegg, Canada or another acceptable assay laboratory. Based on the result
of the core samples, the Company will decide whether to abandon the site, drill
additional core samples to confirm or support its findings or develop a program
to develop and prove the reserve in the area. The program of the Company is
intended to confirm the results of the prior study conducted by Argosy Mining
and to determine the potential gold reserve in the area.
Goldeck West - Siflitz and Goldeck East - Siflitz. The Goldeck West-Siflitz
Property is located in South Carinthia, Austria. The property area is of 27.6
square kilometers and consists of 57 leases. The current lease term is for a two
year period, January 1, 1996 to December 31, 1997. This property was acquired by
Argosy directly from the Austrian Government in 1995. The property is located
within the Kreuzeck-Goldeck Gold district in the southern part of the Austrian
Province of Carinthia. This district has been the site of numerous mines for
gold and antimony from the early middle ages on and the last of the mines closed
15
<PAGE>
down in the early 1950's. The Goldeck East-Siflitz Property is located in South
Carinthia, Austria. The property consists of 31.6 square kilometers and consists
of 64 different leases. The current lease term is for a two year period, January
1, 1997 to December 31, 1998. The property is also part of the Kreuzeck-Goldeck
Gold district and lies to the east of the Goldeck West-Siflitz property. Argosy
obtained the exploration rights to this area directly from the Austrian
Government in 1995 when studies and drilling at Goldeck Siflitz area indicated a
continuation of gold bearing structures further to the east.
Access to the Goldeck West - Siflitz and Goldeck East - Siflitz is by a
federal highway, B- 100, which runs East/West along the Drau River. A dense
network of secondary roads accesses the two properties, which have been historic
centers of gold mining.
The Kreuzeck-Goldeck Mountains cover an area of over 600 square kilometers
with predominantly retrograde mica schist, garnet-mica schist intercalated by
quartzites. Bands of marble, rare in the Kreuzeck Mountains in the west, reach
greater abundance and thickness in the Goldeck Range in the east. Metavolcanic
intercalations are frequent throughout the whole area, with basalts and
rhyolites as well as andesitic to rhyolitic meta-tuffs and tuffites. While
amphibolite (meta-basalt) bands in the west are maximally 30 meters thick, in
the eastern Kreuzeck up to 500 meters have been observed. Numerous small
granodiorite intrusions of Alpidic age (26-40 million years) have intruded the
metamorphic series. At the Goldeck Range, a direct continuation of the Kreuzeck
Mountains in the west across the Drau Valley, a sometimes incomplete threefold
repetition of mixed pelitic-psammitic-volcanic lithologies and carbonates is
typical.
A large number of ore occurrences of different types have been known and
mined in the Kreuzeck-Goldeck Range, many believed stratabound, a number bound
to massive tectonic shear zones, especially in the Goldeck-Siflitz area, with
gold-arsenopyrite-stibnite associations. During the height of mining, between
1460 and 1560, despite primitive mining methods and poor recovery rates, it is
reported that annual production over the whole area may have reached a maximum
of 4,000 kilograms of gold.
The Company's exploration activities are currently focused on the
Schellgaden North. Exploration programs will be developed for Goldeck West -
Siflitz and Goldeck East - Siflitz based on the availability of capital and
developments on the Schellgaden North property.
Kreuzeck West - Rabant. The Kreuzeck West - Rabant Property is located in
Western Carinthia Province and extends into East-Tyrol Province, Austria. The
property consists of 23.9 square kilometers and is made up of 44 leases in
Carinthia and 5 leases in East Tyrol. The current lease term is for a two year
period, January 1, 1996 to December 31, 1997. This property is the western most
property in the Kreuzeck-Goldeck Gold district and has been an area of active
mining from the Middle Ages to the 1950s when the Rabant and Gurskerkammer Mines
were closed down by the Bleiberger Bergwerks Union ("BBU"). BBU mined the area
16
<PAGE>
for lead, zinc and antimony. The BBU still owns the mining rights around the
Gurskerkammer Mine, but Argosy was granted exploration rights covering the whole
area, and the mining rights are being reviewed by the Carinthian Department of
Mines. The Company expects that the rights granted to the BBU will be annulled.
Until, and if, the rights are lifted, the Company cannot conduct exploration
operations in the area.
Access to the Kreuzeck West property is by a federal highway, B-100 which
runs East/West along the Drau River. A dense network of secondary roads accesses
the property, which has been a historic center of gold mining.
From the west of the lease block to the east, former mining activities seem
to reveal a certain trend or zoning from predominantly stibnite ore bodies
(Rabant) to stibnite and arsenopyrite-gold at the center (Gurskerkammer Mine) to
gold (silver) in the east (Fundkofel Mine). While the Rabant-area stibnite ore
bodies with a lenticular to layer-like shape, similar to the Gurskerkammer Mine
stibnite ore and arsenopyrite-gold mineralizations, are said to be stratiform,
the Fundkofel Mine gold was found in vein-type, discordant structures.
At the Knappenstube mine, north of Fundkofel, only a massive sulfide ore
body is distinctly stratabound. Gold values vary strongly, are generally very
low and of no commercial interest. Thickness of the massive sulfide ore varies
from 0.1 to 2.2 meters, with additional impregnations up to three meters in the
host rock. Ore minerals are pyrite, pyrrhotite, sphalerite, chalcopyrite, galena
and arsenopyrite. High gold grades seem to coincide with galena-quartz veining
penetrating massive sulfide ore.
The Gurskerkammer Mine is easily accessible and the drill target would be
arsenopyrite-gold impregnated light green meta-tuffite in the hanging wall of
stibnite ore, dipping 45o NNE with grades ranging over 10 g Au/t. Stibnite was
mined from lenticular stibnite-quartz ore bodies along a major shear zone with
graphitic and argillaceous material.
The Rabant Mine is no longer accessible, as most entrances have collapsed.
The lenticular stibnite ore bodies are reported to contain fine intergrowth of
pyrite and arsenopyrite with gold contents ranging from 1 to 35 g Au/t.
The Fundkofel Mine offers very limited access. Gold was mined in this
location in the late Middle Ages. In the 1920s, a major mine development effort
took place with tunneling along three different levels, entrances to which have
collapsed. The mine is characterized by a series of chlorite-amphibolite schist,
meta-tuffites and mica schists trending West-East and dipping 34-40o north. They
are intersected by steeper dipping to vertical gold-bearing veins. These veins
normally pinch out within the mica schist, but open up in the metavolcanics.
More exploration, core samples and review needs to be done in this area
prior to ascertaining the potential for gold extraction. However, the work
cannot be done until the rights of the BBU are resolved.
17
<PAGE>
The Company's exploration activities are currently focused on the
Schellgaden North. Exploration programs will be developed for Kreuzeck West-
Rabant based on the availability of capital and developments on the Schellgaden
North property.
Kreuzeck East - Lengholz. The Kreuzeck East - Lengholz property is located
in SouthWestern Carinthia, Austria. The property consists of 20.5 square
kilometers and is made up of 42 leases. The current lease term is for a two year
period, January 1, 1996 to December 31, 1997. The Kreuzeck East property covers
the southern slope of the Eastern Kreuzeck Mountains between Steinfeld in the
west and Lessnig in the east. The property includes two famous old mining
districts, the rich gold mines north of Lengholz and the stibnite deposits of
Lessnig-Radlberg. The mines in this area have been shut down and inaccessible
for many years. At both old mine centers, mica schists with minor greenschists
are host rock to the mineralization, with a general East-West strike and 35-60o
dip to the north. The Lengholz mine was opened in 1544 when gold was discovered
and closed down in the 17th century.
Access to the Kreuzeck East property is by a federal highway, B-100 which
runs East/West along the Drau River. A dense network of secondary roads accesses
the property, which has been a historic center of gold mining.
The Company's exploration activities are currently focused on the
Schellgaden North. Exploration programs will be developed for Kreuzeck East -
Lengholz based on the availability of capital and developments on the
Schellgaden North property.
Kliening and Kliening West - Buchbauer. The Kliening and Kliening West
properties are located in Eastern Carinthia, Austria. Each property consists of
27.4 square kilometers and are made up of 54 different leases. The current lease
term is for a two year period, January 1, 1996 to December 31, 1997 and January
1, 1996 to December 31, 1998 respectively. The Kliening Gold Mining District
lies west of Bad St. Leonhard in the Upper Lavant Valley, the NNW of the village
of Kliening in eastern Carinthia. At Kliening, at least nine different steeply
Northeast dipping veins have been reported. Mineralized structures have been
traced over 1000 meters along strike, average spacing between the veins at about
50 meters.
Access to the Kliening properties from Vienna or Klagenfurt is over the
Austrian Sudautobahn, the federal highway A-2. The properties are located
between the town of Bad St. Leonard/Lavanttal and the Klippitztorl mountain
pass, about 10 kilometers to the west, with a secondary road link via the old
gold mining town of Kliening.
The polymetallic sulfide association is dominated by arsenopyrite with
pyrite, galena, ag- tetrahedrite, and bismuth. Gold also occurs in
milimeter-grains as free gold within quartz and chlorite. Host rocks are
metamorphic schists. A program of core samples in the 1980's were inconclusive
due to high losses of core material.
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<PAGE>
At Kliening West, the property contains a geologic zone with banded
gneisses, marble and schists intruded by pegmatitic bodies. Main faulting is NW
trending, minor faulting NE. The gold mineralization is bound to NW striking
quartz-arsenopyrite veins along sheer zones.
In 1990, samples taken from Kliening West were analyzed and yielded 0.2 g
Au/t to 0.40 ounces Au/t.
The Company's exploration activities are currently focused on the
Schellgaden North. Exploration programs will be developed for Kliening and
Kliening West - Buchbauer based on the availability of capital and developments
on the Schellgaden North property.
Strassegg-Gasen. The Strassegg-Gasen Property is located in Northern
Styria, Austria. The property consists of 12.3 square kilometers and is made up
of 25 leases. The current lease term is for a two year period from January 1,
1997 to December 31, 1998. The Strassegg-Gasen Property is located about 15
kilometers east of the district center Bruck/Mur, province of Styria. Extensive,
but shallow, underground mining of gold and arsenopyrite dates back to the
Middle Ages. A great number of collapsed mine entrances, pits and mine dumps
have been mapped by an exploration project conducted in the 1980s.
The Strassegg-Gasen property lies in Northern Styria, south of the town of
Murzzuschlag in the Mur Valley and east of the industrial center of
Bruck/Mar-Kapfenberg. Access is by the main Vienna-Klagenfurt road link
A-2/S-6/S-35. The property is bounded by a provincial road, which connects to
main highways. A dense network of small roads and trails provides easy access to
the property, which has been a center of historic mining activities.
At the Strassegg-Gasen Property ancient mining activities followed along a
NNW-SSE striking trend within a band of greenschists for about 2.5 kilometers.
Traces of mining there have been found also over a vertical extent of 200
meters. The mining district was important for both gold as well as arsenopyrite
production. The polymetallic mineral association contains arsenopyrite, galena,
sphalerite, minor chalcopyrite and traces of rare complex Ag-sulfides.
Two types of mineralizations are described, a series of parallel
quartz-sulfide veins, more or less parallel along strike to the schistosity of
the greenschist host rock, but more steeply dipping, with a maximal thickness of
1.5 meters, with locally massive sulfides, and a horizon with massive sulfide
nodules in greenschists with thickness to 2.5 meters and mainly arsenopyrite.
An airborne geo-MAG survey of the area discovered a strong magnetic anomaly
down-dip from the outcropping greenschist series, seat of the historic gold mine
workings. The anomaly shows a certain NNW-SSE elongation with a maximum magnetic
susceptibility of 300 n Tesla. Computer calculations to model the anomaly are
presently undertaken at the Institute for Geophysics at the University of Vienna
in an attempt to define the parameters of the anomaly more closely. The
Company's geologist believes that the anomaly is caused by a massive sulfidic
ore body located at an estimated depth of about 300 meters. Such a massive
sulfide ore body is believed to be the source for the numerous gold-sulfide
veins mined during historic times close to the surface.
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<PAGE>
Subject to favorable results of the present computer modeling attempts on
the anomaly, an initially limited exploratory core drill program is planned in
the future.
The Company's exploration activities are currently focused on the
Schellgaden North. Exploration programs will be developed for Strassegg-Gasen
based on the availability of capital and developments on the Schellgaden North
property.
The mining rights to all nine Austrian properties are held by currently
valid and maintained leases which expire, in part on December 31, 1997 and in
part on December 31, 1998.
Under Austrian federal law, the annual fee requirement for all exploration
claims and concessions is ATS 120.00 (approximately $9.72) for each claim, or
ATS 60,240.00 (approximately $4,879.44) for all 502 claims on the nine mining
properties. The bill is received by the concession holder for the properties
annually from the Highest Mining Authority seated at the Federal Ministry of
Economic Affairs in Vienna, Austria. An additional annual fee may be charged by
the provincial Mine Department Offices, which administers and grants exploration
and mining permits and approves exploration work programs. The provincial Mine
Department Offices can charge an annual renewal administrative fee of ATS 20.00
(approximately $1.62) per claim to cover administrative costs of concession
maintenance, registry and renewal. This fee amounts to ATS 720.00 (approximately
$58.32) in Salzburg, ATS 100.00 (approximately $8.10) in Innsbruck (East Tyrol),
and ATS 6,350.00 (approximately $514.35) in Klagenfurt (Carinthia). The
Departments of Graz and Leoben have not charged any fees in the past two years.
There are no fee requirements to local administrations or to local land owners
on or under whose properties the explorations work is conducted. The only
payments to land owners that may take place are negotiated payments of
compensation for actual/possible losses from the exploration and mining
activities and the granting of access to and over the property. These fees tend
to be between ATS 3,000.00 (approximately $243.00) to ATS 10,000.00
(approximately $810.00).
To maintain exploration rights and concessions under applicable Austrian
law, the Company has to submit a work program with detailed descriptions of the
type, extent and purpose of the planned exploration activities and schedule of
work. Also, the Company must provide an estimate of the cost of the program
combined with evidence of the financial means to complete the program. In
addition, the Company must provide a description of equipment required,
transportation needed and the safety measures taken to protect workers. Once a
program is completed, or at the end of each year, the Company must submit a work
program report indicating the results of the program.
The Company is in the process of procuring permits for the planned
Schellgaden North diamond drilling program scheduled for the summer and fall of
1997. There can be no assurance that the permits will be granted, or, if
granted, that they will be granted in a timely manner. The work program calls
20
<PAGE>
for up to eight 300 meter diamond core drill holes. After the work is completed,
or at year's end, the Company will submit a report to the Mine Department Office
which will validate the work and results for the purpose of continuation and/or
renewal of its respective claims. Management believes that this work program is
sufficient for all nine Austrian properties held by the Company to be renewed at
year end for an additional two year period, but there can be no assurance of
this result.
The exploration and mining rights held by the Company can be forfeited or
canceled by the Mining Authorities in the case of repeated breach of the
provisions and regulations of the mining law or repeated neglect of the
requirements stated by the Mining Authorities by the lease holder or their
authorized representative. The exploration and mining rights may also be
canceled by non-payment of the yearly claim fees. Under Austrian law, land
rights and mineral rights are equal and coexist for each others benefit. A land
owner may object to a work plan but cannot stop the plan as long as the program
is economically, legally and environmentally sound. The law encourages
negotiation and cooperation between land owners and holders of mineral rights.
Item 3. LEGAL PROCEEDINGS
The Company is party to one legal action related to the prior business of
the Company. On March 2, 1995, a lawsuit was filed in the 98th District Court in
Travis County, State of Texas, alleging liability for the deaths of two people
and the destruction of a mobile home allegedly manufactured by the Company in a
fire. The lawsuit seeks unspecified damages. The Company intends to vigorously
defend this action. The legal defense of the Company is being provided by the
insurance carrier for the Company and management does not consider a loss or
judgment above the limits of insurance probable.
While the outcome of this and any other legal action cannot be predicted
with certainty, it is the opinion of the Management of the Company that this
action, when finally resolved, will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1996 to a vote of
security holders.
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21
<PAGE>
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Prior to December 7, 1994, the Company's common stock had been listed on
the New York Stock Exchange, the Chicago Stock Exchange and the Pacific Stock
Exchange. On December 4, 1994, these stock exchanges suspended trading in the
Company's common stock. The suspension was a result of the failure of the
Company to continue to meet the listing requirements with the New York Stock
Exchange. The Company appealed suspension, but, on May 24, 1995, the Company was
delisted from the New York and Chicago Stock Exchanges and, on April 11, 1996,
the Company was delisted from the Pacific Stock Exchange. The Company's common
stock now trades over-the-counter on the National Association of Securities
Dealers Inc. OTC Bulletin Board under the symbol "NEIT."
The following is the range of high and low bid information for the shares
of the common stock of the Company for each quarter in 1995 and 1996. This
information was obtained from the Trading and Market Services division of The
Nasdaq Stock Market, Inc. The information provided is over-the-counter market
quotations. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
Quarter Ending High Bid Low Bid
-------------- -------- -------
March 31, 1995 None None
June 30, 1995 None None
September 30, 1995 0.125 0.03
December 31, 1995 0.125 0.03125
March 31, 1996 0.07 0.03125
June 30, 1996 0.0313 0.001
September 30, 1996 0.04 0.001
December 31, 1996 0.08 0.02
As of July 1, 1997, the Company had approximately 6,000 shareholders of
record.
The Company has not paid any cash dividends on its common stock since 1973
and does not intend to pay any cash dividends in the foreseeable future.
During 1996, the Company sold the following unregistered shares:
(1) On September 3, 1996, the Company sold 200,000 shares of common
stock at $.25 per share to Florian Riedl-Riedenstein and 200,000 shares of
common stock at $.25 per share to a private investor. The subscriptions
were accepted and the shares issued by the Company in January, 1997. The
$100,000 raised was used by the Company to pay the costs and expenses
incurred in the preparation and closing by the Company of the divestiture
22
<PAGE>
of the assets of the Company, purchase of all the shares of Argosy and the
change in control of the Company. Mr. Riedl-Riedenstein has since become
the Chairman, President and Chief Executive Officer of the Company. No
underwriter or sales agent was used in this transaction and no commissions
were paid for this transaction. The shares were issued pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act
of 1933, as amended (the "Securities Act"), in a private transaction to a
sophisticated purchaser and are restricted from transfer unless such
transfer is registered under the Securities Act or made pursuant to an
exemption therefrom.
(2) On December 17, 1996, the Company sold 1,800,000 shares of common
stock at $.25 per share to a private investor. The subscription was
accepted and the shares issued by the Company in January, 1997. The
$450,000 raised was used by the Company to pay the costs and expenses
incurred in the preparation and closing by the Company of the divestiture
of the assets of the Company, purchase of all the shares of Argosy and the
change in control of the Company. A finder's fee of $36,000 was paid in
connection with this transaction. The shares were issued pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act,
in a private transaction to a sophisticated purchaser and are restricted
from transfer unless such transfer is registered under the Securities Act
or made pursuant to an exemption therefrom.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
General
Prior to December 1996, the Company derived revenues from the operations of
its real estate development operations. The Company, however, as of December
1996, has discontinued such real estate development operations and has commenced
new operations in the mining industry.
Results of Operations
Since emerging from bankruptcy in 1992, the Company incurred losses from
its now discontinued real estate development operations. In 1995, the Company
realized net income from such operations of $371,484. However, such net income
is largely as a result of a forgiveness of accrued interest on the Company's
indebtedness to its then major shareholder in the amount of $596,410. Without
such extraordinary gain from debt forgiveness, the Company would have incurred a
net loss from operations of $224,926.
In 1996, the Company incurred a net loss from its now discontinued real
estate development operations of $32,660. Such net loss for 1996 was due to an
excess of general and administrative costs ($67,452, including a management fee
of $12,000) over the Company's net gains from land sales of $34,792.
23
<PAGE>
In addition to the $67,452 in general and administrative expenses from
discontinued operations, the Company had only an additional $10,285 in general
and administrative expenses in 1996, for a total of $77,737. This is in contrast
to the Company's general and administrative expenses for 1995 of $269,578. This
was due to the fact that during 1996 the Company had become an inactive
corporation with no paid employees.
Liquidity and Capital Resources
As a result of the series of transactions through which the Company
discontinued its real estate development operations, a change of control of the
Company was effected and nine gold exploration properties in Austria were
acquired, the Company does not have capital with which to pursue its new
business plan. Of the Company's $495,342 of total assets as of December 31,
1996, $200,192 constituted deferred exploration costs and $100,000 was being
held as a security deposit, thus leaving only $170,150 in cash and $25,000 in
accounts receivable.
To remedy a lack of capital in amounts sufficient to pursue its new
business plan, the Company is currently considering various capital raising
options, including, but not limited to, a significant equity financing. However,
there can be no assurance that the Company will be successful in its efforts to
raise capital sufficient to enable the Company to pursue its new business plan.
- THIS AREA INTENTIONALLY BLANK -
24
<PAGE>
Item 7. FINANCIAL STATEMENTS.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of National Enterprises, Inc.
We have audited the accompanying consolidated balance sheets and the related
consolidated statements of operations, cash flows, and changes in shareholders'
deficit of National Enterprises, Inc. as of and for the years ended December 31,
1996 and 1995. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements audited by us present
fairly, in all material respects, the financial position of National
Enterprises, Inc. and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for the two years ended
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, on April 10, 1992, the Company was
reorganized under Chapter 11 of the U. S. Bankruptcy Code. Under the Plan of
Reorganization most of the operating assets have been sold or transferred to a
liquidating trust for the benefit of creditors. During 1996, the Company sold
its subsidiaries which held all of its remaining operating assets. It then
acquired a new subsidiary which owned certain mineral concessions. These
concessions are unproven and the Company's ability to establish ongoing
operations is dependent upon these rights being commercially developed and the
Company's ability to raise adequate capital to develop them. The consolidated
financial statements do not include adjustments that might result from the
outcome of this uncertainty.
JAMES SMITH & COMPANY
A Professional Corporation
Dallas, Texas
June 30, 1997
25
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<TABLE>
<CAPTION>
NATIONAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
as of December 31, 1996 and 1995
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash ............................................ $ 170,150 $ 1,937
Accounts receivable ............................. 25,000 --
Security Deposit ................................ 100,000 --
------------ ------------
Total Current Assets ............................ 295,150 1,937
Mineral Properties and Deferred Exploration Costs ....... 200,192 --
------------ ------------
Total Assets .................................................. $ 495,342 $ 1,937
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Accounts payable ....................................... $ 37,703 $ 69,054
Other accrued expenses ................................. 67,370 57,370
Loans payable - related parties (Note 5) ............... -- 158,584
Net liabilities of discontinued operations ............. -- 13,592
------------ ------------
Total Current Liabilities ..................................... 105,073 298,600
------------ ------------
Commitments and Contingencies (Note 6)
Shareholders' Equity (Deficit)
Preferred stock, 10,000,000 shares authorized,
none issued ..................................... -- --
Common stock, no par value, 1,000,000,000
shares authorized, 70,387,698 and
69,416,698 shares issued and outstanding
in 1996 and 1995, respectively .................. 47,258,893 47,183,763
Common stock subscriptions ............................. 514,000 --
Common stock transferred by Affiliate (Note 1) ......... (46,000) --
Accumulated deficit .................................... (47,336,624) (47,480,426)
------------ ------------
Total Shareholders' Equity (Deficit) .......................... 390,269 (296,663)
------------ ------------
Total Liabilities and Shareholders' Equity (Deficit) .......... $ 495,342 $ 1,937
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE>
<TABLE>
<CAPTION>
NATIONAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods Ended December 31, 1996 and 1995
1996 1995
---- ----
<S> <C> <C>
Income
Interest income ................................................. $ 1,661 $ 2,445
Expenses
General and administrative ...................................... 10,285 145,032
------------ ------------
Loss from continuing operations ........................................ (8,624) (142,587)
Discontinued operations
Income (loss) from operations of subsidiaries (Note 7) .......... (32,660) 371,484
Gain on disposal of fully owned subsidiaries .................... 185,086 --
------------ ------------
Net Income ...................................................... $ 143,802 $ 228,897
============ ============
Net loss per share of common stock from
continuing operations .................................................. $ 0.00 $ 0.00
============ ============
Net income per share of common stock ................................... $ 0.00 $ 0.01
============ ============
Weighted average number of shares of common
stock outstanding ...................................................... 69,566,083 46,007,433
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE>
<TABLE>
<CAPTION>
NATIONAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods Ended December 31, 1996 and 1995
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income ..................................................... $ 143,802 $ 228,897
Adjustments to reconcile net income to net
cash provided (used) by operating activities
Increase in accounts receivable ............................ (25,000) --
Increase in security deposit ............................... (100,000) --
(Decrease) increase in accounts payable .................... (31,351) 23,613
(Decrease) increase in accrued expenses .................... 10,000 (485,292)
--------- ---------
Net cash used by operating activities ................................. (2,549) (232,782)
--------- ---------
Cash flows from investing activities
Mineral property acquisition costs ............................. (200,192) --
Increase (decrease) in assets of discontinued operations ....... (13,592) 60,763
--------- ---------
Net cash provided (used) by investing activities ...................... (213,784) 60,763
--------- ---------
Cash flows from financing activities
Short-term borrowings - related party .......................... -- 57,425
Payment on borrowings - related party .......................... (158,584) (15,000)
Proceeds from sale of common stock subscriptions ............... 514,000 --
Proceeds from sale of common stock ............................. 29,130 95,000
--------- ---------
Net cash provided by financing activities ............................. 384,546 137,425
--------- ---------
Net increase (decrease) in cash ....................................... 168,213 (34,594)
Cash at beginning of year ............................................. 1,937 36,531
--------- ---------
Cash at end of year ................................................... $ 170,150 $ 1,937
========= =========
Non-cash transactions
Conversion of debt to common stock (Note 4)
Transfer of common stock by Affiliate (Note 1)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE>
<TABLE>
<CAPTION>
NATIONAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
Common Stock Common Additional Common Stock
--------------------- Stock Paid-in Accumulated Transferred by
Shares Amount Subscriptions Capital Deficit Affiliate Total
------ ------ ------------- ---------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1995 ......... 19,036,698 $ 9,327,499 $ -- $ 35,432,264 $(47,709,323) $ -- $ (2,949,560)
Sale of common stock .... 3,800,000 1,900,000 -- (1,805,000) -- -- 95,000
Change to no par value
from $.50 per share ..... -- 33,627,264 -- (33,627,264) -- -- --
Convert note payable to
major shareholder into
shares of common stock .. 46,580,000 2,329,000 -- -- -- -- 2,329,000
1995 net income ......... -- -- -- -- 228,897 -- 228,897
------------ ----------- ---------- ------------ ------------ ------------ ------------
December 31, 1995 ....... 69,416,698 47,183,763 -- -- (47,480,426) -- (296,663)
Sale of common stock
subscriptions ........... -- -- 514,000 -- -- -- 514,000
Exercise of stock options 971,000 29,130 -- -- -- -- 29,130
Transfer of common stock
by Affiliate ........ -- 46,000 -- -- -- (46,000) --
1996 net income ......... -- -- -- -- 143,802 -- 143,802
------------ ------------ ---------- ------------ ------------ ------------ ------------
December 31, 1996 ....... 70,387,698 $ 47,258,893 $ 514,000 $ -- $(47,336,624) $ (46,000) $ 390,269
============ ============ ========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE>
National Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
National Enterprises, Inc. (National) was incorporated under the laws of the
state of Indiana in 1940. National emerged from bankruptcy proceedings under
Chapter 11 of Title 11 of the United States Code pursuant to a Plan of
Reorganization (the Plan) which was confirmed by the United States Bankruptcy
Court for the Eastern District of Virginia on April 10, 1992. Under the Plan,
substantially all of National's manufacturing and operating assets were
transferred to a liquidating trust for the benefit of the Company's creditors.
During 1996, National changed its operations to gold exploration and development
business by liquidating its remaining assets in real estate development business
and acquiring the mineral interests in nine gold exploration properties located
in Austria. National is in the exploration stage and has not, as yet, any
commercial production.
On December 17, 1996, a change in control of National was accomplished by
Mercury Immobililen Und Verwatungs A.G., a Switzerland corporation (Mercury),
purchasing 54,367,551 shares of common stock of the Company from Arendscor
(Canada) Inc., a Canadian corporation (Arendscor).
Discontinued Operations
On December 11, 1996, National transferred the ownership of its wholly owned
subsidiaries; NRC, Inc., Arendswood Homes, Inc. and National Building Systems,
Inc. (the Former Subsidiaries); to Danca Investments, Inc., an affiliate of
Arendscor as payment in full for all debts outstanding to Arendscor and its
affiliates. The transfer of the Former Subsidiaries constitutes a disposal of
substantially all of National's real estate development operations. The
operating results of the Former Subsidiaries have been segregated as
discontinued in the accompanying consolidated financial statements. The income
statements for 1995 have been restated and operating results of the discontinued
operations are also shown separately.
Acquisition of Argosy Mining G.m.b.H.
On December 17, 1996, National acquired all the issued and outstanding stock of
Argosy Mining G.m.b.H., an Austrian corporation (Argosy G.m.b.H.), from Argosy
Mining Corp., a Canadian corporation (Argosy Mining), and its related mineral
rights to explore for gold reserves in nine prospects located in Austria. The
consideration for the transaction included the payment by the Company of
$200,192 in cash and the transfer to Argosy Mining from Mercury of 2,300,000
shares of common stock in National, valued at $.02 per share, representing the
lowest bid price during the quarter ending December 31, 1996, for an aggregate
amount of $46,000. The transfer of shares by Mercury on behalf of National has
been accounted for in the accompanying consolidated balance sheets as an
increase in common stock in the amount of $46,000 with a corresponding deduction
30
<PAGE>
National Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
to shareholders' deficit in the amount of $46,000 and separately disclosed as
"common stock transferred by affiliate". The acquisition was accounted for under
the purchase method of accounting. Accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on their fair values at the
respective date of acquisition. The results of operations since December 17,
1996, are included in the accompanying consolidated financial statements.
The following summarized pro forma information assumes the acquisition had
occurred on January 1, 1995:
1996 1995
-------------- ------------
Income $ 5,661 $ 230,445
============== ============
Loss from continuing operations $ (65,624) $ (212,587)
============= ===========
Net income $ 81,802 $ 157,897
============== ============
Principles of Consolidation
The consolidated financial statements include the accounts of National and its
subsidiaries. All significant intercompany transactions and accounts are
eliminated from the consolidated financial statements.
Revenue Recognition
National recognized the sale of residential construction and resort property
when the sale closed. National did not provide any financing on these contracts.
Mineral Properties and Deferred Exploration Costs
Costs relating to the acquisition, exploration and development of non-producing
mining properties held by National are capitalized until such time as either
economically recoverable reserves are established, or the properties are sold or
abandoned. Proceeds from sale of properties and earn-in arrangements in which
National has retained an economic interest are credited against property costs
and no gain is recognized until all costs have been fully recovered.
Amounts recorded for mineral properties and deferred costs represent costs
incurred to-date and are not intended to reflect present or future values. The
recoverability of amounts shown for mineral properties and related deferred
costs is dependent upon the discovery of economically recoverable reserves,
confirmation of National's interest in the underlying mineral claims, the
ability of National to obtain necessary financing to complete the development,
and future profitable production or proceeds from the disposition thereof.
31
<PAGE>
National Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
Income Taxes
National has net operating loss carryforwards to offset the current taxable
income. The sale of the Former Subsidiaries eliminated substantially all of the
remaining net operating loss because it was related to those subsidiaries'
operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Cash Equivalents
For purposes of the statements of cash flows, National considers all highly
liquid investments with maturities of three months or less when purchased to be
cash equivalents.
Net Income (Loss) Per Share
Net income (loss) per share is based on the weighted average number of common
shares of stock outstanding. Options, when dilutive, have been included in the
calculation of weighted average number of shares outstanding.
NOTE 2 - INCOME TAXES
The transactions in 1996 eliminated virtually all of National's tax net
operating loss carryforward. The net income for the year will be offset by the
carryforward utilization, but the remaining losses were substantially
attributable to the subsidiaries. As a result, as of the end of 1996, National
has no remaining loss or credit carryforwards available for use in future years.
NOTE 3 - STOCK OPTION PLAN
On June 1, 1994, National adopted a non-qualified stock option plan subject to
shareholder approval, which approval was obtained on June 15, 1995. Under the
terms of the plan, the Company's Board of Directors is authorized to grant
options to purchase up to 1,500,000 of Common Stock to key employees of the
Company, including officers and directors. During 1994, options on 1,475,000
shares were granted at an exercise price of $.03 per share. The options are
fully vested after six months and must be exercised within ten years of the date
of grant. On November 29, 1996, certain officers, directors and former employees
of the Company exercised stock options for 971,000 shares of common stock. The
remaining stock options outstanding were canceled.
32
<PAGE>
National Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
NOTE 4 - COMMON STOCK
During 1996, National sold subscriptions for 2,200,000 shares of common stock at
$.25 per share net of expenses of $36,000 for aggregate proceeds of $514,000.
The shares of common stock were issued January 16, 1997.
On December 12, 1996, Mercury entered into Put/Escrow Agreements with a number
of shareholders of National. The agreements provide that certain shareholders
may require Mercury to purchase shares of common stock from the shareholders at
$.10 per share during a period from September 12, 1997 to September 27, 1997.
The put option expires if the shares covered have been registered by National
with the Securities and Exchange Commission for resale in the United States and
have been freely tradeable at a price above $.10 for more than ten consecutive
days after registration. As part of the agreement, National deposited cash of
$100,000 in escrow equal to one-half the option price, and Mercury deposited
1,000,000 shares of National's common stock held by Mercury to secure the
Put/Escrow Agreement. The Put/Escrow Agreements cover a total of 2,000,000
shares of National.
During 1995, the shareholders approved Arendscor's offer to exchange its
$2,329,000 note for 46,580,000 shares of common stock. An amendment to
National's Articles of Incorporation and Bylaws was made to increase the number
of shares authorized to be issued to 1,000,000,000 and to change the par value
of the stock from $.50 to no par value. This amendment is reflected throughout
the consolidated financial statements by combining the common stock and capital
in excess of par value accounts.
During 1995, National sold 3,800,000 shares of common stock at $.025 per share
for aggregate proceeds of $95,000.
NOTE 5 - RELATED PARTY TRANSACTIONS
In 1996, National transferred the ownership of its wholly owned subsidiaries;
NRC, Inc., Arendswood Homes, Inc., and National Building Systems, Inc. to Danca
Investments, Inc., an affiliate of Arendscor (Canada), Inc., as payment in full
of all debts outstanding to Arendscor (Canada), Inc., and its affiliates.
In 1995, National issued 46,580,000 shares of its common stock to its major
shareholder, Arendscor (Canada), in return for cancellation of a note payable to
Arendscor in the amount of $2,329,000 and forgiveness of accrued interest in the
amount of $596,410. As a result, Arendscor and its affiliates own a total of
56,496,551 shares of common stock. This represents eighty-two percent of the
common shares outstanding.
33
<PAGE>
National Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(continued)
In 1995, National sold 229 mobile home lots to an affiliate of Arendscor for a
total sales price in the amount of $71,563. This price is the approximate fair
market value of these lots. The lots sold were recorded on the books at a net
book value of $71,563. Accrued property taxes in the amount of $60,113 were
assumed by the purchaser.
In 1995, National paid North American Property Associates, Ltd., (NAPA), an
affiliate of Arendscor, $5,000 per month. This amount approximated the cost of
management and administrative salaries, rent and utilities incurred by NAPA for
the benefit of National. This arrangement ceased on December 31, 1995, when the
management of National's remaining business activities was moved to Toronto. In
1996, the Company paid a management fee of $1,000 per month to NAPA. Other costs
are incurred for National's benefit by another affiliate who is reimbursed for
these actual costs.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit filed in 1995 seeking unspecified
damages related to the deaths of two people and the destruction of a mobile home
in a fire. The plaintiff alleges that the mobile home was manufactured by a
division of the Company in 1978. The Company is represented by counsel retained
by its liability insurance carrier. This lawsuit is still in the discovery
phase. It is impossible at this time to estimate what liability, if any, the
Company may have in this matter.
The Company was named as a Third Party Defendant by a defendant in a lawsuit
filed by a former employee of the Company. This defendant manufactured the
equipment involved in the accident. The Company's liability to the former
employee was satisfied by workers compensation insurance. This lawsuit was
settled in 1996 at no cost to the Company.
In 1995, the Company transferred certain resort home sites and undeveloped
acreage in full settlement of a judgment in the amount of $157,000 rendered in
1992 in a lawsuit against one of the Former Subsidiaries. The property so
transferred had been fully reserved in 1992, following the verdict.
Therefore, no loss was incurred in 1995.
34
<PAGE>
NOTE 7 - DISCONTINUED OPERATIONS
The income (loss) from discontinued operations for the years ended December 31,
1996 and 1995, consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land sales ................................................... $ 492,320 $ 122,738
Other income ................................................. -- 10,030
Less cost of sales ........................................... (457,528) (119,878)
--------- ---------
34,792 12,890
General and administrative (including management
fees of $12,000 in 1996 and $60,000 in 1995) (Note 5) ........ 67,452 124,546
Interest expense - related parties (Note 5) .................. -- 104,118
Property taxes ............................................... -- 8,477
Depreciation ................................................. -- 675
--------- ---------
67,452 237,816
Net loss from discontinued operations before
extraordinary item ........................................... (32,660) (224,926)
Extraordinary gain from debt forgiveness -
related party (Note 5) ....................................... -- 596,410
--------- ---------
Net income (loss) from discontinued operations ............... $ (32,660) $ 371,484
========= =========
</TABLE>
35
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (a) OF THE EXCHANGE ACT.
Directors and Executive Officers of the Company.
Listed below are the names, ages (as of May 31, 1997) of each of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
Positions Held Directorship or Office
Name Age With the Company Held Since
- ---- --- ---------------- ----------------------
<S> <C> <C>
Florian Riedl-Riedenstein 55 Director, Chairman, 1996
President and Chief
Executive Officer
D. Campbell Deacon 49 Director 1994
Edward Jan Smith 48 Director 1996
C.W. Leigh Cassidy, C.A. 40 Vice President, Chief 1996
Financial Officer and
Secretary
Matthew Gaasenbeek, III 66 Director 1993
Dr. Hans R. Klob 50 Vice President, Exploration 1997
</TABLE>
No arrangement or understanding exists between any director or executive
officer and any other person under which any director or executive officer was
elected. All of the above officers and directors have been elected for a term of
one year or until a successor is elected. Directors are subject to election
annually by the shareholders. Directors are elected by a simple plurality of the
vote of the shareholders. There are no family relationships by blood, marriage
or adoption among any of the officers or significant employees of the Company.
Florian Riedl-Riedenstein. Mr. Riedl-Riedenstein has been a director and
Chairman of the Company since December, 1996 and has been President and Chief
Executive Officer of the Company since July, 1997. Mr. Riedl-Riedenstein is Vice
Chairman and a Director of Tri Star Gold Corp. (1996), a Director of Coral Gold
36
<PAGE>
Corp. (1994), a Director of Bralorne Pioneer Gold Corp. (1994) and a Director of
Levon Resources Ltd. (1996). He is formerly Chairman and Chief Executive Officer
of Strand Resources (1993-1996) and Managing Director of Investment Department
of Schoeller & Co., Bank AG (1969-1990).
D. Campbell Deacon. Mr. Campbell has been a director of the Company since
1994 and served as President and Chief Executive Officer of the Company from
1994 until July, 1997. He has been the President and Chief Executive Officer of
United Tri-Star Resources Corporation since 1994 and was the Chairman and Chief
Executive Officer of the investment banking firm of Deacon, Barclays, de Zoete
Wedd from 1986 to 1994. Mercury, the majority shareholder of the Company, is
also a significant shareholder in United Tri-Star Resources Corporation.
C.W. Leigh Cassidy, C.A. Mr. Cassidy has been the Vice President, Chief
Financial Officer and Secretary of the Company since December, 1996. Since 1996,
Mr. Cassidy has been Vice President, CFO of United Tri-Star Resources Ltd.,
International Reef Resources Ltd., Tri-Star Gold Corp. Previously, he was Vice
President, CFO of Emtech Ltd. (1993-1995), Vice President, CFO, Taramira Inc.
(1992-1993), Group Vice President, CFO, Household Financial Corporation (1987-
1992).
Edward Jan Smith. Mr. Smith has been a director of the Company since 1996.
From 1993 to 1996, he was the Secretary, Vice President, Finance and Chief
Financial Officer of the Company. Since leaving the Company, he has been Vice
President and Chief Financial Officer of MacLean Oddy & Associates, a wholesale
insurance brokerage firm. He was a principal in Smith, Sibley & Co., from 1991
to 1993 and was with Price Waterhouse from 1980 to 1991. In 1994, the Securities
and Exchange Commission announced the settlement of a Rule 2(e) administrative
proceeding brought against Mr. Smith and one other person in connection with
audits performed in 1987 and 1988 of another company when Mr. Smith was a
partner in Price Waterhouse. The settlement was reached to end an investigation
that had been in progress for five years. Under the terms of the settlement, Mr.
Smith did not admit or deny the charges and was barred from practicing before
the Commission as an auditor for a period of nine months. The terms of the
settlement does not limit or restrict, in any way, Mr. Smith's acting as a
director of the Company.
Matthew Gaasenbeek III. Mr. Gaasenbeek has been a director of the Company
since 1993. In 1997, he became an associate with Sharwood and Company, a
corporate finance intermediary. Since 1983 he has been the President of Northern
Crown Capital Corporation and since 1992 has been a director of Royal Oak Mines.
Previously, Mr. Gaasenbeek was President of Camico Inc. (1983-1991). Mr.
Gaasenbeek is also currently a director of several non-profit environmental
organizations.
Dr. Hans R. Klob. Dr. Klob has been Vice President, Exploration of the
Company since 1997. He is a professional geologist and economist with over 26
years experience in exploration, mining, project management and planning. Dr.
Klob has acted as a consulting geologist on many projects. From 1978 to 1984 he
held various management positions with Austrian OMV and SOHIO Petroleum. Since
1984, he has conducted consulting services for clients through HRK International
of San Francisco. During his career, he has served many small and large
organizations in the mining industry, such as Bechtel Engineering, Fluor Daniel,
Placer Dome US, St. Joe Gold-Dallhold Resources, Doyon Limited, Amoco
Production. He also has served as a consultant to foreign governments such as
Turkey, Rwanda and Nicaragua.
37
<PAGE>
Since 1995, Dr. Klob was General Manager of Argosy Mining's Austrian
subsidiary, which was purchased by the Company in December, 1996. In this
position, as exploration manager for Argosy Mining, he brought the Schellgaden
North gold property to the status of a geology inferred world class gold
resource. Dr. Klob, through HRK Consultants, is currently a consultant to the
Company. Based on his advice, the Schellgaden North property will be the main
target of the Company's 1997 diamond core drill program in Austria to drill
prove the indicated resource.
Item 10. EXECUTIVE COMPENSATION.
For the years 1994, 1995 and 1996, no compensation was awarded to, earned
by, or paid to the Chief Executive Officer of the Company and no executive
officer of the Company received a total annual salary and bonus in excess of
$100,000.
Directors receive no cash compensation for their services. The Company
reimburses Directors for out-of-pocket expenses incurred to attend Directors
meetings.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security ownership of all beneficial owners of more than 5% of the
outstanding common stock of the Company as of June 2, 1997 and management.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ------------------- -------------------- ----------
Mercury Immobilien und 52,067,551 71.73%
Verwaltungs AG Owned Directly
Eleonorenstrasse 2, Postfach 324
8028 Zurich, Switzerland
Florian Riedl-Riedenstein 250,000 .34%
A-3034 Maria-Anzbach Owned Directly
Tannhof - 1 AUSTRIA
D. Campbell Deacon Nil Nil
300, 90 Adelaide Street West
Toronto, Ontario M5H 3V9
Matthew Gaasenbeek, III 480,000 .66%
Sharwood and Company Owned by Spouse
300-8 King Street East
Toronto, Ontario M5C 1R5
Edward Jan Smith 110,000 .15%
Maclean, Oddy & Assoc. Inc.
1445 Ross Avenue, Suite 3900,
Dallas, Texas 75202-2791
Directors and
Executive Officers as a Group 840,000 1.15%
(six persons)
38
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1996, National transferred the ownership of its wholly owned
subsidiaries, NRC, Inc., Arendswood Homes, Inc., and National Building Systems,
Inc., to Danca Investments, Inc., an affiliate of Arendscor (Canada), Inc., as
payment in full of all debts outstanding to Arendscor (Canada), Inc., and its
affiliates.
On December 12, 1996, Mercury entered into Put/Escrow Agreements with a
number of shareholders of the Company. The agreements provide that certain
shareholders may require Mercury to purchase additional shares of common stock
from them at $.10 per share during a period from September 12, 1997 to September
27, 1997. The put option expires if the shares covered have been registered by
the Company with the Securities and Exchange commission for resale in the United
States and have been freely tradeable at a price above $.10 for more than ten
consecutive days after registration and prior to receipt by the Company of a
notice of exercise. As part of the agreement, the Company deposited cash of
$100,000 in escrow equal to one-half the option price, and Mercury deposited
1,000,000 shares of the common stock of the Company held by Mercury to secure
the Put/Escrow Agreement. The Put/Escrow Agreements cover a total of 2,000,000
shares of the Company, including 1,223,200 shares held by Arendscor (Canada)
Inc., 88,000 shares held by Edward Jan Smith (a director of the Company),
100,000 shares held by Matthew Gaasenbeek, III (a director of the Company),
8,800 shares held by Lisa Hoekwater, 240,000 shares held by John B. Overzet (a
former director of the Company), 100,000 shares held by Arthur Walker (a former
director of the Company), and 240,000 shares held by Jack Wrobel (a former
director of the Company).
By agreement, dated December 6, 1996, Erzbergbau Radhausberg G.m.b.H.,
("Erzbergbau"), the seller of the mining properties to Argosy Mining, agreed to
the sale and transfer of the properties from Argosy Mining to the Company and
the Company agreed to assume the obligations relating to the properties in the
agreement between Erzbergbau and Argosy Mining. By agreement, dated December 6,
1996, Erzbergbau agreed to the full settlement of the amount due from Argosy for
the properties of $1,000,000 by the transfer of 300,000 shares of common stock
of the Company to Erzbergbau from Mercury and Erzbergbau released the Company
from any further obligations set forth in the agreement between Erzbergbau and
Argosy Mining and in the agreement referred to above.
By agreement, dated November 30, 1996, which closed on December 17, 1996,
the Company acquired all the issued and outstanding stock of Argosy from Argosy
Mining, an unaffiliated entity. Argosy holds interests in nine gold mining
prospects in Austria. The consideration for the purchase was C$ 250,000 paid by
the Company and 1,000,000 shares of common stock of the Company held by Mercury.
The agreement provided that an additional 1,000,000 shares of common stock will
be transferred to Argosy Mining by Mercury if the Company does not register the
original 1,000,000 shares of common stock with the Securities and Exchange
39
<PAGE>
Commission for resale within three months following the closing date. Mercury
deposited 1,000,000 shares of common stock of the Company in escrow for this
purpose and the shares were transferred to Argosy Mining Corp pursuant to the
terms of the escrow.
On November 28, 1996, the Company transferred to Danca Investments Inc., an
affiliate of Arendscor (Canada) Inc., the then controlling shareholder of the
Company, all of the interest of the Company in its three wholly owned
subsidiaries, NRC Inc., Arendswood Homes Inc. and National Building Systems Inc.
This transaction divested the Company of its three wholly-owned subsidiaries and
certain of its remaining development resort lots. The consideration for the
transfer was the assumption by Danca Investments Inc. of $142,874 in obligations
owed by the Company to Arendscor (Canada) Inc. No independent valuation of the
assets transferred by the Company to Danca Investments Inc. was received.
However, the transaction was approved by the shareholders of the Company at the
1995 Annual Meeting of the Shareholders.
By agreement, dated November 27, 1996, which closed on December 17, 1996,
Mercury purchased 54,367,551 shares of common stock of the Company from
Arendscor (Canada) Inc. representing 77.2% of the outstanding common shares of
the Company, and became the controlling shareholder of the Company. The
consideration for the purchase was $10,000. The completion of the stock purchase
was conditioned, among other things, on the simultaneous closing of the purchase
of Argosy by the Company.
By agreement, dated September 3, 1996, the Company sold 200,000 shares of
common stock at $.25 per share to Florian Riedl-Riedenstein and 200,000 shares
of common stock at $.25 to a private investor. The subscriptions were accepted
and the shares issued by the Company in January, 1997. The $100,000 raised was
used by the Company in partial payment of the costs and expenses incurred in the
preparation and closing by the Company of the divestiture of the assets of the
Company, purchase of all the shares of Argosy and the change in control of the
Company. Mr. Riedl-Riedenstein has since become the Chairman, President and
Chief Executive Officer of the Company.
In 1995, National issued 46,580,000 shares of its common stock to its major
shareholder, Arendscor (Canada), in return for cancellation of a note payable to
Arendscor in the amount of $2,329,000 and forgiveness of accrued interest in the
amount of $596,410. As a result, Arendscor and its affiliates own a total of
56,496,551 shares of common stock. At the time this represented eighty-two
percent of the common shares outstanding.
In 1995, National sold 229 mobile home lots to an affiliate of Arendscor
for a total sales price in the amount of $71,563. This price is the approximate
fair market value of these lots. The lots sold were recorded on the books at a
net book value of $71,563. Accrued property taxes in the amount of $60,113 were
assumed by the purchaser.
40
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In 1995, National paid North American Property Associates, Ltd., (NAPA), an
affiliate of Arendscor, $5,000 per month. This amount approximated the cost of
management and administrative salaries, rent and utilities incurred by NAPA for
the benefit of National. This arrangement ceased on December 31, 1995, when the
management of National's remaining business activities was moved to Toronto. In
1996, the Company paid a management fee of $1,000 per month to NAPA. Other costs
are incurred for National's benefit by another affiliate who is reimbursed for
these actual costs.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit Item 601
No. Category Exhibit
1 3(ii) Amended By-Laws of National Enterprises, Inc.,
adopted February 11, 1972 as amended to March 15,
1993.*
2 10(i) Share Purchase Agreement, dated November 28, 1996,
among National Enterprises Inc. and Danca
Investments Inc., pertaining to the sale of all of
the issued and outstanding shares of NRC, Inc.
Filed as Exhibit 1.I to Form 8-K filed March 27,
1997 and incorporated herein by reference.
3 10(i) Share Purchase Agreement, dated November 28, 1996,
among National Enterprises Inc. and Danca
Investments Inc., pertaining to the sale of all of
the issued and outstanding shares of National
Building Systems, Inc. Filed as Exhibit 1.II to
Form 8-K filed March 27, 1997 and incorporated
herein by reference.
4 10(i) Share Purchase Agreement, dated November 28, 1996,
among National Enterprises Inc. and Danca
Investments Inc. pertaining, to the sale of all of
the issued and outstanding shares of Arendswood
Homes, Inc. Filed as Exhibit 1.III to Form 8-K
filed March 27, 1997 and incorporated herein by
reference.
5 10(i) Agreement, dated November 30, 1997, among National
Enterprises, Inc., Argosy Mining Corp. and Mercury
Immobilien und Verwaltungs AG, pertaining to the
acquisition of Argosy Mining G.m.B.H. Filed as
Exhibit 2.IV to Form 8- K filed March 27, 1997 and
incorporated herein by reference.
6 10(ii) National Enterprises, Inc. 1994 Stock Option
Plan.*
41
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7 21 List of subsidiaries of National Enterprises, Inc.*
8 27 Financial Data Schedule.*
*Filed herewith.
(b) Reports on Form 8-K
None filing the fiscal quarter ended December 31, 1996.
42
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL ENTERPRISES, INC.
By: /s/ Florian Riedl Riedenstein Date: July 18, 1997
-----------------------------------------------
Florian Riedl Riedenstein, Chairman, President,
Chief Executive Officer (Principal
Executive Officer), and Director
In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
By: /s/ C. W. Leigh Cassidy Date: July 18, 1997
-------------------------------------------------
C. W. Leigh Cassidy, Vice President,
Chief Financial Officer (Principal
Financial and Accounting Officer)
and Secretary
By: /s/ D. Campbell Deacon Date: July 18, 1997
------------------------------------------------
D. Campbell Deacon, Director
By: /s/ Edward Jan Smith Date: July 18, 1997
--------------------------------------------------
Edward Jan Smith, Director
By: /s/ Matthew Gassenbeck, III Date: July 18, 1997
----------------------------------------------
Matthew Gaasenbeek, III, Director
43
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- -------
1 3(ii) Amended By-Laws of National Enterprises, Inc.,
adopted February 11, 1972 as amended to March 15,
1993.
2 10(i) Share Purchase Agreement, dated November 28, 1996, N/A
among National Enterprises Inc. and Danca
Investments Inc., pertaining to the sale of all of
the issued and outstanding shares of NRC, Inc.
Filed as Exhibit 1.I to Form 8-K filed March 27,
1997 and incorporated herein by reference.
3 10(i) Share Purchase Agreement, dated November 28, 1996, N/A
among National Enterprises Inc. and Danca
Investments Inc., pertaining to the sale of all of
the issued and outstanding shares of National
Building Systems, Inc. Filed as Exhibit 1.II to
Form 8-K filed March 27, 1997 and incorporated
herein by reference.
4 10(i) Share Purchase Agreement, dated November 28, 1996, N/A
among National Enterprises Inc. and Danca
Investments Inc. pertaining, to the sale of all of
the issued and outstanding shares of Arendswood
Homes, Inc. Filed as Exhibit 1.III to Form 8-K
filed March 27, 1997 and incorporated herein by
reference.
5 10(i) Agreement, dated November 30, 1997, among National N/A
Enterprises, Inc., Argosy Mining Corp. and Mercury
Immobilien und Verwaltungs AG, pertaining to the
acquisition of Argosy Mining G.m.B.H. Filed as
Exhibit 2.IV to Form 8- K filed March 27, 1997 and
incorporated herein by reference.
6 10(ii) National Enterprises, Inc. 1994 Stock Option
Plan.
7 21 List of subsidiaries of National Enterprises, Inc.
8 27 Financial Data Schedule.
AMENDED BY-LAWS
NATIONAL ENTERPRISES. INC.
Adopted February 11, 1972
As Amended to March 15, 1993
ARTICLE I
Shareholders
Section 1.01. Annual Meeting. The annual meeting of the
Amended: shareholders of the Corporation will be held on the last Thursday
12/08/74 of May of each year at a time to be designated by the Board of
10/29/76 Directors. If that day is a legal holiday, the meeting shall be
01/29/81 held on the next succeeding day not a legal holiday. The
03/21/85 bus(pound)ness to be transacted at such meeting shall be the
02/26/86 election of directors and such other business as shall be
05/30/86 properly brought before the meeting. If the election of directors
shall not be held on the day hereinabove designated for any
annual meeting, or at any adjournment of such meeting, the Board
of Directors shall call a special meeting of the shareholders as
soon as conveniently possible thereafter At such meeting the
election of directors shall take place, and such election and any
other business transacted thereat shall have the same force and
effect as at an annual meeting duly called and held.
Amended: Section l.02. Special Meeting. Special meetings of
01/19/73 shareholders may be called by the President, by the Board of
05/30/86 Directors, by shareholders holding at least 25% of the votes
entitled to be cast on any issue proposed, provided these
shareholders have signed one (1) or more written consents
demanding the meeting and declaring its purpose or by persons
authorized to do so by these By-Laws or the Articles of
Incorporation.
Section l.03. Place of Meeting. All meetings of shareholders
shall be held within the State of Indiana and at the principal
office of the Corporation, unless otherwise specified by the
person or persons calling the meeting and set forth in the
respective notices or waivers of notice of the meeting.
Amended: Section 1.04. Notice of Meeting. Notice of any meeting of
05/30/86 shareholders shall be deemed to have been given whenever a
written or printed notice, stating the place, day and hour of the
meeting, and in the case of a special meeting or when required by
the Indiana business Corporation Law or by the Articles of
Incorporation or by the By-laws, the purpose or purposes for
which the meeting is called, is delivered or mailed by the
secretary or by the officers or persons calling the meeting, to
each shareholder of record entitled by the Articles of
Incorporation and by the Indiana Business Corporation Law to vote
at such meeting at such address as appears on the records of the
Corporation, no fewer than ten (10) days nor more than sixty (60)
days before the date of the meeting. Notice of any shareholders'
meeting 'nay be waived by any shareholder if the waiver is in
writing and delivered to the Corporation for inclusion in the
minutes. Attendance at any meeting. in person, shall constitute a
waiver of lack of notice or defective notice of such meeting if
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<PAGE>
the shareholder does not voice objection at the beginning of the
meeting and does not object to the consideration of a particular
matter when the matter is presented. No notice need be given of any
adjourned meeting of, the shareholders if the new time, date and place
is announced at the meeting prior to adjournment.
Amended: Section 1.05. Voting at Meetings. Every holder of the shares of
05/30/86 the corporation shall have one vote for each share standing in his
name on the books of the Corporation.
Section 1.06. Voting by Consent without Meeting. Any action
required or permitted to be taken at a meeting of the shareholders may
be taken without a meeting if, prior to such action, a consent in
writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter
thereof, and such written consent is filed with the minutes of the
proceedings of the shareholders.
Section 1.07. Proxies A shareholder may vote either in person or
by proxy executed in writing by the shareholder or a Amended: duly
Amended: authorized attorney-in-fact. No appointment of a proxy shall be valid
05/30/86 unless received by the Secretary or another corporate officer or the
tabulatory agent designated by the Corporation. No proxy shall be
valid after eleven months from the date of its execution unless a
longer time is expressly provided therein.
Amended: Section 1.08. Quorum. At any meeting of the shareholders fifty
04/26/79 percent (50%) of the outstanding shares entitled by the Articles of
01/31/80 Incorporation to vote at such meeting, represented in person or by
05/30/86 proxy, shall constitute a quorum. Except as otherwise provided by The
Indiana Business Corporation Law. a majority of the quorum may decide
any question which may properly come before the meeting.
Amended: Section 1.09 Record Date. (a) For the purpose of determining
05/30/86 shareholders entitled to vote at any meeting of shareholders or at any
adjournment thereof, the Board of Directors may fix in advance a date
as the record date for any such determination of shareholders, such
date in any case to be not more than seventy days prior to the date of
such meeting. In the absence of such a determination by the Board of
Directors, such date shall be ten days prior to the date of such
meeting. Any person who acquired title to a share after the record
date shall, upon written request to the shareholder of record, be
entitled to receive from the shareholder of record, a proxy, with
power of substitution to vote that share. When a determination of
stockholders entitled to vote at any meeting has been made as provided
in this section, such determination shall apply to any adjournment of
such meeting.
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<PAGE>
Amended: (b) For the purpose of determining shareholders entitled to
05/30/86 receive payment of any dividend. or in order to make a determination
of shareholders for any other proper purpose, except as otherwise
provided. in Subsection (a) above, the Board of Directors may fix in
advance a record date for such purpose. If no record date is fixed for
the determination of shareholders entitled to receive payment of a
dividend, the end of the day on which the resolution of the Board of
Directors declaring such dividend is adopted shall be the record date
for such determination.
Amended: Section 1.10. Presiding officers; Order of Business. Meetings of
04/24/78 the stockholders shall" be presided over by the Chairman of the Board
04/24/80 of Directors, or if he is not present, by the President, or if neither
05/30/86 is. present, by a chairman to be chosen by the stockholders who are
entitled to vote and who are present in person or by proxy. The
Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of meetings of the stockholders, but
if neither the Secretary nor an Assistant Secretary is present, any
person chosen by a majority of the stockholders entitled to vote at
the meeting who are present in person or by proxy shall serve as
secretary of the meeting. The order of business shall be as follows:
1. call of Meeting to Order.
2. Proof of Notice of Meeting.
3. Reading of Minutes of Last Previous Meeting.
4. Reports of officers.
5. Reports of Committees.
6. Election of Directors.
7. Miscellaneous Business.
Amended: ARTICLE II
01/19/73
02/23/73 Board of Directors
03/01/74
07/26/74 Section 2.01. Number and Qualification. The business of the
02/27/76 Corporation shall be managed by a Board of Directors consisting of
02/24/77 from one to five persons. Directors need not be shareholders or
03/16/78 citizens of the United States.
01/31/80
02/25/82
03/21/85
05/30/85
07/11/89
02/01/90
12/08/90
03/15/93 Section 2.02. Election. Tenure and Removal. The directors shall
be elected by the shareholders at the annual meeting of the
Amended: shareholders and shall serve until the next annual meeting of
05/30/86 shareholders and until their successors be duly elected and qualified
unless sooner removed. The shareholders. may remove any director, with
or without cause, in the manner provided in The Indiana Business
Corporation Law.
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<PAGE>
Section 2.03. Meetings. Meetings of the Board of Directors may be
held either within or without the State of Indiana. An annual meeting
of the Board of Directors shall be held immediately prior to the
Amended: annual meeting of the shareholders or as soon thereafter as convenient
01/19/73 Regular meetings of the Board of Directors may be held at such times
05/30/86 and places and on such notice as the Board of Directors may from time
to time designate Other meetings of the Board of Directors way be held
upon the call of the Chairman of the Board, the President, or two or
more members of the Board of Directors, *at any place upon notice
specifying the time and place of the meeting. If the notice is given
personally or by telegram (or cablegram or similar means), it shall be
given at least twenty-four (24) hours in advance of the meeting. If
the notice is given by ordinary mail, it shall be given at least
seventy-two (72) hours in advance of the meeting. Notice given by mail
shall be deemed given at the time of mailing, and notice given by
telegram or similar means shall be deemed given at the time of sending
or the telegram. No notice need be given of adjourned meetings. A
director's attendance at or participation in a meeting waives any
required notice to the director of the meeting unless the director at
the beginning or the meeting (or promptly upon his arrival) objects to
holding the meeting or transacting business at the meeting and does
not thereafter vote for or consent to action taken at the meeting. In
lieu of notice of a meeting, a director may sign a written waiver of
notice, either before the meeting, at the time of the meeting, or
after the time of the meeting and such notice shall be filed with the
minutes or corporate records Notice of a meeting of the Board of
Directors need not state the purpose of, nor the business to be
transacted at, such meeting.
Section 2.04. Quorum. At any meeting of the Board of Directors, a
majority of the directors shall constitute a quorum for the
Amended: transaction of any business, except that for the purpose of filling
05/30/86 vacancies on the Board of Directors, a majority of the remaining
directors shall constitute a quorum. The act of a majority of the
directors present at a meeting at which a quorum is present shall be
the act or the Board of Directors, unless the act of a greater number
is required by The Indiana Business Corporation Law, by the Articles
of Incorporation, or by these By-Laws.
Section 2.05. Compensation. Directors, and members of any
committee of the Board of Directors, shall be entitled to such
reasonable compensation for their services as directors and members of
any such committee as shall be fixed from time to time by the Board or
Directors, and shall also be entitled to reimbursement for any
reasonable expenses incurred in attending such meetings. Any director
receiving compensation under these provisions shall not be barred from
serving the Corporation in any other capacity and receiving reasonable
compensation (pound)or such other services.
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Section 2.06. Committees. (a) The Board of Directors may, by
resolution adopted by a majority of the actual number of directors
Amended: elected and qualified, from time to time, designate from among its
05/30/86 members one or more committees, each of which, to the extent provided
in such resolution or in these By-Laws, shall have and exercise all of
the authority of the. Board of Directors, but no such committee shall
have the authority of the Board of Directors in reference to those
matters specified by the Indiana Business Corporation Law
IC23-l-34-6(e). The designation of any such committee and the
delegation thereto of authority shall not operate to relieve the Board
of Directors, or any member thereof, of any responsibility imposed by
law. No member of any such committee shall continue to be a member
thereof after he ceases to be a director of the Corporation. The Board
of Directors shall have the power at any time to fill vacancies, to
change the size or membership of, to change the powers and duties of,
and to discharge any such committee.
(b) A majority of any such committee may determine its action and
may fix the time and place of its meetings. Each such committee shall
keep a written record of its acts and proceedings and shall submit
such record to the board of Directors at each regular meeting thereof
and at such other times as requested by the Board of Directors.
Failure to submit such record, or failure of the Board to approve any
action indicated therein will not, however, invalidate such action to
the extent it has been carried out by the Corporation prior to the
time the record of such action was, or should have been, submitted to
the Board of Directors as herein provided.
Section 2.07. Action by Consent Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting, if
prior to such action a written consent to such action approximately
describing the action to be taken is signed by all members of the
Board or of such committee, as the case may be, and such written
consent is tiled with the minutes of proceedings of the Board or
committee.
ARTICLE III
Officers
Section 3.01 Number. The principal officers of the Corporation
Amended: shall be a President, an Executive Vice President, one or more Vice
04/27/78 Presidents, a Treasurer and a Secretary. In addition, there may be
05/30/86 such subordinate officers as the Board of Directors may deem
12/10/90 necessary. Any person may hold two or more offices, except that the
04/29/92 duties of the President and Secretary shall not be performed by the
same person.
Amended: Section 3.02. Term of Office. The principal officers shall be
02/26/86 chosen annually by the Board of Directors on or about the date of the
annual meeting of shareholders, Subordinate officers may be elected
from time to time by the Board of Directors or by the Executive
Committee. Each officer shall serve until his successor shall have
been chosen and qualified, or until his death, resignation or removal.
Section 3.03. Removal. Any principal officer may be removed by
the Board of Directors whenever in its judgment, the best interests of
the Corporation will be served thereby. Any subordinate officer may be
removed by the Board of Directors whenever in its respective judgment,
the best interests of the Corporation will be served thereby. The
removal of an officer shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of
an officer or agent. shall not of itself create contract rights.
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<PAGE>
Amended: Section 3,04. vacancies. Any vacancy in an office from any cause
05/30/86 may be filled for the unexpired portion of the term by the Board of
Directors.
Amended: Section 3.05. Duties. (a) The Chairman of the Board shall have
04/27/78 the authority and perform the duties which are incident to that office
or which are properly required of him by the Board of Directors. He
shall preside at all meetings of the Board of Directors.
Amended: (b) The President shall be the Chief Executive Officer of the
04/27/78 Corporation, and he shall have the authority and perform the duties
which are incident to that office or which are properly required of
him by the Board of Directors. He shall have overall responsibility
for and authority over ail operations 6(pound) the Corporation. He
shall sign or countersign all certificates, contracts or other
instruments of the Corporation. He shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, he
shall preside at all meetings of the Board of Directors.
(c) The Executive Vice President shall exercise the functions of
Amended: the President during the absence or disability of the President. The
04/27/78 Executive Vice president shall have the authority and perform the
05/30/86 duties which are incident to his office or which are properly required
04/29/92 of him by the Board of Directors.
(d) The Secretary and the Treasurer shall perform such duties as
Amended: are incident to their offices, or are properly required of them by the
05/30/86 Board of Directors, or are assigned to them by the Articles of
Incorporation or these By-Laws. The Secretary shall be responsible for
preparing minutes of, the shareholders' and directors' meetings and
for authenticating records of the corporation. The Assistant
Secretaries, in the order of their seniority, shall, in the absence of
the Secretary, perform the duties and exercise the powers of the
Secretary, and shall perform such other duties as may be assigned by
the Board of Directors.
(e) Other subordinate officers appointed by the Board of
Directors shall exercise such powers and perform such duties as may be
delegated to them by the resolutions appointing them, or by subsequent
resolutions adopted from time to time.
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<PAGE>
(f) In case of the absence or disability of any officer of the
Corporation and of any person hereby authorized to act in his place
during such period of absence or disability, the Board of Directors
may from time to time delegate the powers and duties of such officer
to any other officer, or any director, or any other person whom it may
select.
ARTICLE IV
Capital Stock
Amended: Section 4.01. Consideration for Issuance of Shares. Shares of
05/30/86 stock of the Corporation may be issued and sold by the Corporation for
such consideration and upon such terms and conditions as the Board of
Directors shall fix and determine.
Section 4.02. Certificates for Shares. Shares may, but need not
be, represented by certificates. Any certificate for shares issued by
the Corporation shall be in form consistent with The Indiana Business
Corporation Law and the Articles of Incorporation as the Board of
Directors may from time to time prescribe.
Section 4.03. Loss or Destruction. In case of loss or destruction
of a certificate for shares, another certificate may be issued in lieu
thereof in such manner and upon such terms as the Board of Directors
shall authorize, either by general resolution or by special resolution
in each particular case.
Section 4.04. Holder of Record. The Corporation shall be entitled
to treat the holder of record of any shares of the Corporation as the
holder in fact thereof, and accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have
express or other notice thereof
ARTICLE V
Amended: Indemnification of Directors and Officers
11/20/86
Section 5.01. As used in this By-Law:
(1) Director means any person who is or was a director of the
Corporation and any person who, while a director of the Corporation,
is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan, or other enterprise, whether for
profit or not.
(2) Officer means any person who holds or held a principal office
in the Corporation and any person who, while an officer of the
Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, whether for profit or not.
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(3) Expenses include attorneys' fees.
(4) Official capacity means
(A) when used with respect to a director, the office of
director of the Corporation.
(B) when used with respect to an officer, the elective or
appointive office in the Corporation held by the
officer.
in either case does not include service for any other foreign or
domestic corporation or any partnership, joint venture, trust,
employee benefit plan, or other enterprise, whether for profit or not.
(5) Party means a person who was, is, or is threatened to be
made, a defendant or respondent in a proceeding.
(6) Proceeding means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal.
(7) Liability means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an
employee benefit plan) and reasonable expenses incurred with respect
to a proceeding.
Section 5.02. The Corporation shall indemnify any person made a
party to any proceeding by reason of the fact that he is or was a
director or officer against liability incurred in the proceeding if.
(l) He conducted himself in good faith; and
(2) He reasonably believed
(A) in the case of conduct in his official capacity with
the Corporation, that his conduct was in its best
interests, and
(B) in all other cases, that his conduct was at least not
opposed to its best interests; and
(3) in the case of any criminal proceeding he
(A) had reasonable cause to believe his conduct was lawful;
or
(B) had no reasonable cause to believe. his conduct was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea bf nolo contendere or its equivalent,
shall not, of itself, be determinative that the person did not
meet the requisite standard of conduct set out in this Section
5.02.
Section 5.03. A director or officer who has been wholly
successful, on the merits or otherwise, in the defense of any
proceeding referred to in Section 5.02 shall be indemnified by the
Corporation against reasonable expenses incurred by him in connection
with the proceeding, without inquiry. into whether he met the standard
of conduct set out in Section 5.02.
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Amended: Section 5.04. The determination that a person is entitled to
02/10/90 indemnification under Section 5.02 shall be made by any one or more of
the following procedures:
(1) by the Board of Directors, by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) if a quorum cannot be obtained under Subsection (1), by
majority vote of a committee duly designated by the Board of Directors
(in which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;
(3) by special legal counsel
(A) selected by the Board of Directors or its committee in
the manner prescribed in Subsection (1) or (2), or
(B) if a quorum of the Board of Directors cannot be
obtained under Subsection (1) and a committee cannot be
designated under subsection (2), selected by a majority
vote Of the full Board of Directors (in which selection
directors who are parties may participate); or
(4) by the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may
not be voted on the determination.
Section 5.05 Reasonable expenses incurred by a director or
officer who is a party to a proceeding shall be paid or reimbursed by
the Corporation in advance of the final disposition of such proceeding
upon receipt by the Corporation of
(1) a written affirmation by the director or officer of his
good-faith belief that he baa met the standard of conduct necessary
for indemnification by the Corporation as set forth in this Bylaw, and
(2) a written undertaking by or on behalf of the director or
officer to repay such amount if it should ultimately be determined
that he has not met such standard of conduct (unless he has been
wholly successful, on the merits or otherwise, in the defense of such
proceeding).
The undertaking required by Subsection (2) shall be an unlimited
general obligation of the director or officer but need not be secured,
and it shall be accepted without reference to financial ability to
make repayment.
Section 5.06. The Corporation may enter into a contract with any
person who serves or continues to serve as a director or officer of
the Corporation, under the terms of which the Corporation shall be
obligated to indemnify such person, to the full extent permitted by
law, against liability incurred in any proceeding to which such person
is made a party by reason of the fact that he is or was a director of
the Corporation.
Section 5.07. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the
Corporation, insuring against any liability arising out of his status
as a director or officer, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions
of this By-law or otherwise.
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<PAGE>
Section 5.08. In lieu of, or in addition to, insurance, the
Corporation may establish one or more irrevocable trusts or other
segregated funds for the benefit of its directors and officers to
cover the obligations which it may incur to them pursuant to this
Bylaw or any contract made pursuant to Section 5.07, *upon such terms
and subject to such conditions as the Board of Directors may
determine, and may deposit therein from time to time such amounts as
the Board 0(pound) Directors shall direct.
Section 5.09. The indemnification provided for in this Bylaw or
in any contract made pursuant to Section 5.07 shall not exclude any
other rights to indemnification to which any person may be entitled
under IC 23-l-37-11 or any other applicable law.
Section 5.10. The repeal or amendment of this Bylaw shall not
effect the right of any director or officer (or former director or
officer) to indemnification to the full extent provided in this Bylaw
in respect of any proceeding which arose (or is alleged to have
arisen) oat of his conduct as director or officer prior to such appeal
or amendment.
ARTICLE VI
Amendments
Section 6.01. These By-Laws may be altered, amended or repealed
at any annual, regular or special meeting of the Board of Directors by
the affirmative vote of a majority of the Board of Directors.
- 10 -
NATIONAL ENTERPRISES, INC. 1994 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purposes of this National Enterprises, Inc. 1994 Stock Option Plan (the
"Plan") are to encourage key Employees of National Enterprises, Inc. (The
"Company") to develop a proprietary interest in the Company, and to compensate
certain members of the Board of Directors of the Company for their services.
SECTION 2. ADMINISTRATION
The Plan shall be initially administered by the Board of Directors of the
Company (the "Board"). A majority of the Board shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all members of the Board, shall be
deemed the acts of the Board for purposes of this Plan.
Subject to the terms of the Plan and applicable law, the Board shall have the
sole power, authority and discretion to: (i) designate the Employees and
Directors who are to be Participants; (ii) determine the number of Options to be
granted to a Participant; (iii) determine the terms and conditions of any
Option; (iv) interpret, construe and administer the Plan and any instrument or
agreement relating to an Option granted under the Plan; (v) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; (vi) make a
determination as to the right of any Person to receive payment of (or with
respect to) an Option; and (vii) make any other determinations and take any
other actions that the Board deems necessary or desirable for the administration
of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions with respect to the Plan or
any Option granted thereunder shall be within the sole discretion of the Board,
may be made at any time, and shall be final, conclusive, and binding upon all
Persons.
At any time the Board may delegate its authority to administer the Plan to a
Compensation Committee (the "Committee"), as designated by the Board and
composed of not less than two members of the Board. A majority of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by all
members of the Committee, shall be deemed act of the Committee.
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SECTION 3. SHARES AVAILABLE FOR OPTIONS
3.1 CALCULATIONS OF NUMBER OF SHARES. The number of shares available for
granting Options under r the Plan shall be 1,500,000 Shares, subject to
adjustment as provided in Section 3.2 Further, if any Opsin granted under the
Plan is forfeited, canceled, surrendered, or otherwise terminates or expires
without the delivery of Shares or other permitted consideration, then the Shares
subject to such Option shall again be available for granting Options under the
Plan.
3.2. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR
REORGANIZATION
The number and/or value of Shares covered by an Option shall be adjusted
from time to time as follows:
(a) Subject to any required action by shareholders of the Company, the
number of Shares covered by each outstanding Option, and the exercise price,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares of the Company resulting from a subdivision or consolidation of
Shares or the payment of a stock dividend (but only in Shares) or any other
increase or decrease in the number of Shares effected without receipt of
consideration by the Company.
(b) Subject to any required action by shareholders of the Company, if the
Company shall be the surviving corporation in any Reorganization, merger or
consolidation, each outstanding Option shall pertain to and apply to the
securities to which a holder of the number of Shares subject to the Option would
have been entitled, and if a plan or agreement reflect any such event is in
effect that specifically provides for the exchange, conversion or exchange of
Shares, then any adjustment to Shares relating to an Option hereunder shall not
be inconsistent with the terms of any such plan or agreement.
(c) In the event of a change in the Shares of the Company as presently
constituted, which is limited to a change of par value into the same number of
Shares with a different par value or without par value, the Shares resulting
from any such change shall be deemed to be the Shares within the meaning of the
Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Board, whose determination
shall be final, binding and conclusive.
Except as expressly provided in the Plan, any person to whom an Option is
granted shall have no rights by reason of any subdivision or consolidation of
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, reorganization, merger or consolidation or spinoff of
assets or stock of another corporation, and any issue by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustments by reason thereof shall be made with
respect to, the number or exercise price of Shares subject to an Option.
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The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
Reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell or transfer all or any part of
its business or assets.
SECTION 4. ELIGIBILITY
Any Employee or Director shall be eligible to be a Participant. Grants may be
made to the same Employee or Director on more than one occasion.
SECTION 5. OPTIONS
The Board is hereby authorized to grant Options to Employees and Directors with
the following teens and conditions and with such additional terms and
conditions, which are not inconsistent with the provisions of the Plan, as the
Board shall determine:
(i) EXERCISE PRICE. The per Share exercise price of an Option shall be
determined by the Board at the date of grant.
(ii) TIME AND METHOD OF EXERCISE. The Board shall determine the time or
times at which an Option may be exercised in whole or in part, and the
method by which payment of the exercise price with respect thereto may be
made; provided, however, no Option shall be exercisable prior to the first
anniversary of the adoption of the Plan, except as provided in Section 7.
Subject to any limitations in the Option Agreement, a Participant may
purchase Shares subject to the exercisable portion of an Option in whole at
any time, or in part from time to time, by delivering to the Secretary of
the Company, written notice specifying the number of Shares with respect to
which the Option is being exercised, together with payment in full of the
purchase price of such Shares plus, if so elected by Participant as
provided in Section 8.2, any applicable federal, state or local taxes for
which the Company has a withholding obligation in connection with such
purchase. Such payment shall be payable in full in cash or by check
acceptable to the Company at the time of purchase.
(iii) TERMS OF OPTIONS. The term of each Option shall be for such period as
may be determined by the Board; provided, however, that in no event shall
the term of any Option exceed a period of 10 years and one month from the
date of its grant.
(iv) TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Options, to the extent
vested and exercisable as or the date a Participant who is an Employee
ceases to be an Employee for any reason other than Termination for Cause or
Voluntary Termination, may be exercised within one year of such date, but
not thereafter; provided, however, that in no event shall any Options be
exercisable after the expiration date of such Option as set forth in the
related Option Agreement. If a Participant who is an Employee ceases to be
an Employee as a result of death, such Options may be exercised within one
year of such Participant's death by the person to whom his rights shall
pass by will or the laws of descent and distribution. If a Participant who
is an Employee ceases to be an Employee as a result of Disability or
Retirement, such Options may be exercised within one year of such
Participant's Disability or Retirement by either the Participant or such
Participant's legal representative. In the event of a Participant who is an
Employee has his or her employment terminated with the Company by reason of
Termination for Cause or Voluntary Termination, the Options outstanding on
such date of termination may not be exercised after such termination of
employment. With respect to any Director who is a Participant but not also
an Employee, if he or she voluntarily resigns from the Board of Directors
or is removed or fails to be re-elected to the Board of Directors for any
reason other than death or retirement, then his or her Options shall be
treated in the same manner as a Participant who ceased to be an Employee by
reason of Termination for Cause or Voluntary Termination; otherwise if such
Participant ceases to be a member of the Board or Directors due to death or
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retirement (using the same standard as Retirement of an Employee), then his
or her Options shall be treated in the same manner as a Participant who
ceased to be an Employee by reason of death or Retirement. Subject to
Section 7, to the extent Options or any portion thereof are not exercisable
an the date the Participant who is an Employee ceases to be an Employee or
the Participant who is a Director but not also an Employee ceases to be a
Director, such Options or portion thereof shall automatically lapse and be
canceled unexercised on such date. In all events, the provisions of Section
7 shall take precedence over the provisions of this Section 5(iv); in
particular, but without limitation, if a Change in Control occurs, the
vesting and disposition of the Participant's Options shall be governed by
Section 7(d) rather than the provisions of this Section 5(iv),
notwithstanding the fact that in connection with such Change in Control the
Participant's employment or membership an the Board of Directors of the
Company has bun terminated.
(v) LIMITS ON TRANSFER OF OPTIONS. No Option or rights thereunder shall be
assignable, alienable, saleable or transferable by a Participant otherwise
than by will or by the laws of descent and distribution. Bach Option shall
be exercisable during that Participant's lifetime only by the Participant
or, if permissible under. applicable law, by the Participant's guardian or
legal representative. No Option or any rights thereunder may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company.
(vi) SHARE CERTIFICATES. Upon exercise of an Option, delivery of a
certificate for hilly paid and nonassessable Shares shall be wade to the
Person exercising the Option either at such time during ordinary business
hours after 15 days but not more than 30 days from the date of receipt of
the notice by the Company as shall be designated in such notice, or at such
time, place and manner as may be agreed upon by the Company and the Person
exercising the Option.
(vii) OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement, which shall have such terms and provisions, not inconsistent
with the Plan, that the Board determines.
SECTION 6. AMENDMENT AND TERMINATION
The Board in its discretion may terminate the Plan at any time with respect to
any Shares for which a grant has not theretofore been made. The Board shalt also
have the right to alter or amend the Plan or any part thereof from time to time;
provided, however, that no change in any Option theretofore made may be made
which would impair the rights of the Participant without the consent of such
Participant; and provided further, that notwithstanding any other provision of
the Plan or any Option Agreement, without the approval of the shareholders of
the Company no such amendment or alteration shall be made that would:
(i) increase the total number of Shares available for Options under the
Plan, except as provided in Section 3.2 hereof;
(ii) change the data of Persons eligible to receive Options;
(iii)extend the maximum period during which Options may be granted under
the Plan; or
(iv) materially increase the benefits accruing to Participants under the
Plan.
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SECTION 7. VESTING UPON THE OCCURRENCE OF CERTAIN EVENTS
(a) Each Option grants hereunder may only be exercised to the extent that
the Participant is vested in such Option Bach Option shall vest separately in
accordance with the option vesting schedule, if any, determined by the Board in
its sole discretion, which will be incorporated in the Option Agreement entered
into between the Company and each Participant. The option vesting schedule will
be accelerated in the event the provisions of paragraphs (b), (c), (d) or (e) of
this subsection apply; or if, in the sole discretion of the Board, the Board
determines that acceleration of the option vesting schedule would be desirable
for the Company.
(b) In the event of the dissolution or liquidation of the Company, each
Option granted under the Plan shall terminate as of a date to be fixed by the
Board; provided, however, that not less than thirty (30) days' written notice of
the date so fixed shall be given to each Participant and each such Participant
shall be fully vested in and shall have the right during such period to exercise
the Option, even though such Option would not otherwise be exercisable under the
option vesting schedule. At the end of such period, any unexercised Option shall
terminate and be of no further effect.
(c) In the event of a Reorganization:
(1) If them is no plan or agreement respecting the Reorganization, or
if such plan or agreement does not specifically provide for the change,
conversion or exchange of the Shares under outstanding and unexercised
Options for other securities then the provisions of the above paragraph (b)
of this Section 7 shall apply as if the Company had dissolved or been
liquidated on the effective date of the Reorganization; or
(2) If there is a plan or agreement respecting the Reorganization, and
if such plan or agreement specifically provides for the change, conversion
or exchange of the Sharps under outstanding and unexercised Options for
securities of another corporation, then the Board shall adjust the Shares
under such outstanding and unexercised Options (and shall adjust the Shares
remaining under the Plan which are then available to be awarded under the
Plan, if such plan or agreement makes no specific provision therefor) in a
manner not inconsistent with the provisions of such plan or agreement for
the adjustment, change, conversion or exchange of such Shares and such
Options.
(d) In the event of a Change in Control of the Company, all Options shall
become fully vested and immediately exercisable.
SECTION 8. GENERAL PROVISIONS
8.1 NO RIGHTS TO OPTIONS. No person shall have any claim to be granted any
Option under the Plan, and there is no obligation for uniformity of treatment of
Persons under the Plan. The terms and conditions of Options need not be the same
with respect to each Participant.
8.2 WITHHOLDING. The amount, as determined by the Board, of any federal, state
or local tax required to be withheld by the Company due to the exercise of an
Option shall be satisfied, at the election of the Participant, either (a) by
payment by the Participant to the Company of the amount of such withholding
obligation in cash at the time of payment for the Shares purchased under the
Option (the "Cash Method") or (6) through either the retention by the Company of
a number of Shares out of the Shares being acquired through the exercise of the
Option or the delivery of already owned Shares having a Fair Market Value equal
to the amount of the withholding obligation (the "Share Retention Method"). The
cash payment or the amount equal to the Fair Market Value of the Shares so
withheld, as the case may be, shall be remitted by the Company to the
appropriate taxing authorities. The Board shall determine the time and manner in
which a Participant may elect to satisfy a withholding obligation by either the
Cash Method or Share Retention Method.
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8.3 CORRECTION OF DEPICTS, OMISSIONS AND INCONSISTENCIES. The Board may correct
any defect, supply any omission, or reconcile any inconsistency in the Plan or
any Option in the manner and to the extent it shall deem desirable in the
establishment or administration of the Plan.
8.4 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the Plan
shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
8.5 NO RIGHT TO EMPLOYMENT. The grant of an Option shall not be construed as
giving a Participant the right to be retained in the employ of the Company or to
remain on the Board of Directors of the Company. Further, the Company may at any
time dismiss a Participant from employment or remove such Participant from the
Board of Directors free from any liability or any claim under the Plan unless
otherwise expressly provided in the Plan or in any Option Agreement.
8.6 GOVERNING LAW. The validity, construction and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with applicable Federal law, and to the extent not preempted thereby, with the
laws of the State of Texas.
8.7 SEVERABILITY. If any provisions of the Plan or any Option is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to
any person or Option, or would disqualify the Plan or any Option under any law
deemed applicable by the Board, such provision shall be construed or deemed
amended to conform to applicable laws. If it cannot be So construed or deemed
amended without, in the determination of the Board, materially altering the
intent of the Plan or the Option, such provision shall be stricken as to such
jurisdiction, Person or Option and the remainder of the Plan and any such
Options shall remain in full force and effect.
8.8 NO TRUST OR FUND CREATED. Neither the Plan nor any Option shall create or be
construed to create a trust or separate fund of any kind or fiduciary
relationship between the Company and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from the Company or
any Affiliate pursuant to an Option, such right shall be no greater than the
right of any unsecured general creditor of the Company.
8.9 NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Option, and the Board shall determine whether cash,
other securities, or other property shall be paid or transferred in lieu of any
fractional Shares, or whether such fractional Shares or any rights thereto shall
be canceled, terminated or otherwise eliminated.
8.10 HEADINGS. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
8.11 NO LIMITATION. The existence of the Plan and the grants of Options made
hereunder shall not affect in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the capital structure or
business of the Company, any merger a consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Shares or the rights thereof or
pertaining thereto, the dissolution or liquidation of the Shares at any Sale or
transfer of all or any part of Company's Shares or business, or any other
corporate act or proceeding.
8.12 COMPLIANCE WITH SECURITIES LAWS. Anything contained herein to the contrary
notwithstanding, the Company shall not be obligated to sell or issue any Shares
under the Plan unless and until the Company is satisfied that such sale or
issuance complies with (i) all applicable requirements of the exchange on which
the Shares are traded (or the governing body of the principal market in which
such Shares are traded, if such Shares are not then listed on an exchange), (ii)
all applicable provisions of the 1933 Act, and (iii) all other laws or
regulations by which the Company is bound or to which the Company is subject.
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8.13 INVESTMENT REPRESENTATION. Unless the Shares subject to Options granted
under the Plan have been registered under the Securities Act of 1933, as amended
(the "1933 Act"), (and, in the case of any Participant who may be deemed an
affiliate (for securities law purposes) of the Company, such Shares have been
registered under the 1933 Act for resale by such Participant), or the Company
has determined that an exemption from registration is available, the Company may
require prior to and as a condition of the issuance of any Shares that the
person exercising an Option hereunder furnish the Company with a written
representation in a form prescribed by the Board to the effect that such person
is acquiring said Shares solely with a view to investment for his a her own
account and not with a view to the resale or distribution of all or any part
thereof, and that such person will not dispose of any such Shares otherwise than
in accordance with the provisions of Rule 144 under the 1933 Act unless and
until either the Shares are registered under the 1933 Act or the Company is
satisfied that an exemption from such registration is available.
SECTION 9. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by the shareholders
of the Company
SECTION 10. TERM OF THE PLAN
No Option shall be granted after ten years and one month from the effective date
of the Plan. However, unless otherwise expressly provided in the Plan or in an
applicable Option Agreement, any Option theretofore granted may extend beyond
such date, and any authority of the Board to amend, alter, suspend, discontinue
or terminate any such Option, or to waive any conditions or rights under any
such Option, shall extend beyond such date.
SECTION 11. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean the Company or any subsidiary of the Company.
(b) "Change in Control" shall mean, after the effective date of this Plan,
(i) the occurrence of an event of a nature that would be required to be reported
in response to Item 1 or Item 2 of a Form 8-K Current Report of the Company
promulgated pursuant to Section 13 and 15(d) of the 1934 Act, as amended;
provided that, without limitation, such a Change in Control shall be deemed to
have occurred if (a) any "person", as such term is used in Sections 13(d) and
14(d) of the 1934 Act (other than John Overzet, his estate, any of the member of
his family, or any affiliate of him, the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company's
then outstanding securities or (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof, unless the election by the
Board or the nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the two-year period or whose election
or nomination for election was previously so approved; (ii) the shareholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than eighty percent (80%)
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
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provided, however, that a merger or consolidation effected to implement a
reorganization or recapitalization of the Company, or a similar transaction
(collectively, a "Reorganization"), in which no "person" acquires more than
twenty percent (20%) of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control of the Company;
or (iii) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Director" shall mean any member of the board of directors of the
Company.
(e) "Disability" shall mean such total and permanent disability as
qualifies the Participant for benefits under the long-term or extended
disability plan of the Company covering the Participant at the time.
(f) "Employee" shall mean any employee of the Company.
(g) "Fair Market Value" shall mean with respect to the Shares, as of any
date, (i) the last reported sales price regular way on the New York Stock
Exchange or, if not reported for the New York Stock Exchange, on the Composite
Tape, or, in case no such sale takes place on such day, the average of the
reported closing bid and asked quotations on the New York Stock Exchange; (ii)
if the Shares are not listed on the New York Stock Exchange or no such
quotations are available, the closing price of the Shares as reported by the
National Market System, or similar organization, or, if no such quotations are
available, the average of the high bid and low as ked quotations in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or similar organization; or (iii) in the event that there shall be
no public market for the Shares, the fair market value of the Shares as
determined (which determination shall be conclusive) in good faith by the Board,
based upon the value of the Company as a going concern, as if such Shares were
publically-owned stock, but without any discount with respect to minority
ownership.
(h) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
(i) "Option" shall mean a right granted under the Plan to purchase Shares
under the Plan.
(j) "Participant' shall mean an Employee or Director granted an Option
under the Plan.
(k) "Person" shall mean any individual, corporation, partnership,
association, joint- stock company, trust, unincorporated organization or
government or political subdivision thereof.
(l) "Reorganization" shall have the meaning set forth in Section 11(a)
above.
(m) "Retirement" shall mean with respect to a Participant who is an
Employee, the termination of employment with the Company (other than due to
Termination for Cause, Disability or death) an or after (i) reaching age 65 or
(ii) with consent of the Board, reaching age 55.
(n) "Shares shall mean shares of the Company's common stock and any shares
of capital stock or other securities of the Company hereafter issued or issuable
upon, in respect of or in substitution or exchange for such Shares.
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(o) "Termination for Cause" shall mean with regard to a Participant who is
an Employee (i) the Participant's gross negligence or willful misconduct in the
performance of the duties and services required of the Participant; (ii) the
Participant's final conviction of a felony or of a misdemeanor involving moral
turpitude; (iii) the Participant's material breach of any material provision of
such Participant's employment agreement with the Company, which remains
uncorrected for thirty (30) days following written notice to the Participant by
the Company, of such breach; or (iv) to the extent the Participant does not have
an employment agreement with the Company, such Participant's involvement in a
conflict of interest (as defined below) for which the Company makes a
determination to terminate the employment of such Participant. For purposes of
the forgoing sentence, "conflict of interest" shall mean a breach of the
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of the Participant's employer and to do no act which would injure
the business interests or reputation of the Participant's employer. The decision
as to whether "cause" exists for termination of the employment relationship by
the Participant's employer is delegated to the Chairman of the Board and the
President of such employer for determination (unless the Participant holds one
of such positions, in which case the next highest ranking officer who is not a
Participant shall make such determination). If the Participant disagrees with
the decision reached by the appropriate officers or the Participant's employer,
the dispute will be limited to whether the appropriate officers reached their
decision in good faith.
(p) "Voluntary Termination" shall mean termination of employment with the
Company by the Participant who is an Employee for any reason whatsoever, other
than (i) an involuntary termination, as defined under the terms of such
Participant's employment agreement, if any or (ii) termination by reason of the
Participant's Retirement, Disability or death.
SECTION 12. STATUS OF OPTIONS
Options granted pursuant to this Plan arc not intended to qualify as Incentive
Stock Option within the meaning of Section 422 of the Code, and the terms of
this Plan and Options granted hereunder shall be so construed, provided,
however, that nothing in this Plan shall be interpreted as a representation,
guarantee or other undertaking an the part of the Company that Options granted
pursuant to this Plan are not, or will not be, determined to be Incentive Stock
Options, within the meaning or Section 422 of the Code.
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NATIONAL ENTERPRISES, INC. 1994 STOCK OPTION PLAN
TERMS AND CONDITIONS
The terms and conditions set forth below are hereby incorporated by reference
into the attached award agreement ("Agreement") by and between National
Enterprises, Inc. (the "Company") and the employee named therein (the
"Participant"). Terms defined in the plan are used herein with the same meaning.
1. Participant has agreed to perform services for the Company or its Affiliates
and to accept the grant of the option provided in the Agreement ("Option") in
accordance with, and subject to, the terms and provisions of the Plan and the
Agreement.
2. Except for its earlier termination as provided below, the Option shall vest
and become exercisable six months after the Grant Date.
3. The Option shall not be exercisable following the date which is ten years and
one month after its Grant Date or the earlier lapse or termination of such
Option as provided herein. To the extent exercisable, the Option may be
exercised in whole or in part.
4. Participant agrees that the Company or its Affiliates may withhold any
federal state, or local taxes upon the exercise or cancellation of the Option,
at such time and upon such terms and conditions as required by law, and as
permitted by the Plan. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to deliver any Shares pursuant to the exercise or
the Option until Participant has satisfied such withholding obligations or made
arrangements for satisfying such obligations that are acceptable to the Company
and permitted in the Plan.
5. To the extent exercisable and subject to the foregoing restrictions, the
Option may be exercised from time to time by a notice in writing of such
exercise, with states the Option Grant Number set forth in the Agreement and the
number of Shares in respect of which the Option is being exercised. Such notice
shall be delivered to Edward J. Smith of the Company at the Company's offices,
1778 N. Plano Road, Suite 200, Richardson, Texas 75081. An election to exercise
shall be irrevocable. The sate of exercise shall be the date the notice is
hand-delivered or mailed, whichever is applicable.
1
<PAGE>
6. An election to exercise an Option shall be accompanied by the tender of the
full purchase price of the Shares for which the election is made. Payment shall
be made in cash or by check acceptable to the Company.
7. The Option is not transferable by Participant, otherwise than by will or laws
of descent and distribution, and may be exercised during the lifetime of
Participant only by Participant, or in the event of Participant's legal guardian
or representative.
8. Upon occurrence of any of the events described in Section 7 of the Plan, 100%
of the Options outstanding on the date of such adoption, approval or termination
shall be vested pursuant to Section 7.
9. In the event Participant's employment with the Company and its Affiliates is
terminated by reason of Termination for Cause or Voluntary Termination, the
Option outstanding on such date of termination may not be exercised after such
termination of employment.
10. Notwithstanding any other provision of the Agreement, Participant will not
exercise any Options and the Company shall not be obligated to deliver any
Shares or make any cash payments, if counsel to the Company determines such
exercise, delivery or payment would violate any law or regulation of any
governmental authority or agreement with any national securities exchange upon
which the Shares are listed.
11. In the event of a conflict between the terms of this Agreement and the Plan,
the Plan shall be the controlling document. Capitalized terms used herein and
not otherwise defined shall have the meaning ascribed to them in the Plan.
2
<PAGE>
FORM OF
GRANT OF STOCK OPTIONS AGREEMENT
- -------------------------------
- -------------------------------
- -------------------------------
I am pleased to inform you that the Board of Directors of National Enterprises,
Inc. (The "Company") has granted you an option to purchase from the Company
shares of common stock in the Company as follows:
Option Grant # --------------------
Grant Date --------------------
Option Price per Share --------------------
Total Number of Shares Granted --------------------
By signing below, you agree that this option is granted under and governed by
the terms and conditions of the Company's 1994 Stock Option Plan (the "Plan"), a
copy of which has been delivered to you, including the Terms and Conditions
attached hereto and incorporated hereby by reference, and you acknowledge the
shares that are subject to the option have not been registered under the
Securities Act of 1933. This grant shall be void and of no effect unless you
execute and return this Agreement to the undersigned within 30 days of the above
date. The attached copy of this Agreement is for your records.
NATIONAL ENTERPRISES, INC.
By:
Name:
Title:
OPTIONEE:
- --
DATE:
List of Subsidiaries of National Enterprises, Inc.
1. Argosy Mining G.m.b.H. (Austria), 100% of the interests in which are held
by National Enterprises, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Enterprises Inc.'s Consolidated Balance Sheet at December 31, 1996 and
Consolidated Statement of Operations for the year ended December 31, 1996, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 170,150
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 295,120
<PP&E> 200,192
<DEPRECIATION> 0
<TOTAL-ASSETS> 495,342
<CURRENT-LIABILITIES> 105,073
<BONDS> 0
0
0
<COMMON> 47,212,893
<OTHER-SE> (47,336,624)
<TOTAL-LIABILITY-AND-EQUITY> 495,342
<SALES> 492,320
<TOTAL-REVENUES> 493,981
<CGS> 0
<TOTAL-COSTS> 457,528
<OTHER-EXPENSES> 77,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,624)
<DISCONTINUED> (32,660)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,282)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
