SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report: March 11, 1997
NOVA NATURAL RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 33-81944 84-1227328
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
789 Sherman St.,Suite 550,Denver,Colorado 80203
(Address of principal executive offices) (Zip Code)
(303)863-1997
(Registrant's telephone number, including area code)<PAGE>
ITEM 6. Liquidity and Capital Resources
During 1996, disputes arose between Thomas F. Kane, then a
director, and the other directors of the Company concerning
decisions by the other directors and the business operations of the
"Company." Mr. Kane asserted, inter alia, that the continued
operation of the Company was not in the best interests of the
owners of the Company's Preferred Stock who, if the Company were
liquidated, would receive all of the proceeds in the liquidation
after payment to the Company's creditors. Mr. Kane also asserted
that continuation of the Company's business would cause the
dissipation of assets which otherwise would be distributable to
owners of the Company's Preferred Stock upon liquidation. Mr. Kane
recommended and proposed that the Company be liquidated and
threatened to commence litigation to force the liquidation and
dissolution of the Company. The Company's other directors
disagreed with Mr. Kane, determined to continue the Company as a
going concern and determined to oppose any attempt to liquidate and
dissolve the Company. In resolution of these disputes, the
Company, Mr. Kane and Brian Spillane, the Company's President and
a director, entered into an Agreement, dated February 5, 1997 and
closed February 21, 1997, for the purchase of all of Mr. Kane's
Common and Preferred Stock. A copy of that Agreement is appended.
By terms of that Agreement, the Company purchased from Mr. Kane
895,415 shares of his Preferred Stock and 510,342 shares of his
Common Stock. All of the stock purchased by the Company was
retired upon completion of the purchase. Mr. Spillane purchased
from Mr. Kane 203,426 shares of Mr. Kane's Preferred Stock and
115,942 shares of his Common Stock. Mr. Spillane paid $50,000 for
the stock he purchased from Mr. Kane. The Company paid $150,000
and agreed to pay an amount equal to 12% of the net proceeds from
the sale of the Cement Kaolin Mine less $13,992, from the proceeds
of the sale as and when received by the Company. Alternatively, if
the Cement Kaolin Mine is not sold on or before June 1, 1997, the
Company agreed to pay to Mr. Kane a $.10 per ton royalty, as and
when received by Nova, on sales of kaolin from the Mine up to an
aggregate of $70,008. The Agreement among the Company, Mr.
Spillane and Mr. Kane, also contained certain releases of claims
between and among the parties, and certain other representations.
AGREEMENT
THIS AGREEMENT is made this 5th day of February, 1997 between
NOVA NATURAL RESOURCES CORPORATION, a Colorado corporation
("Nova"), and BRIAN SPILLANE ("Spillane") (Nova and Spillane shall
be referred to collectively as the "Purchasers"), and THOMAS F.
KANE ("Kane").
RECITALS
A. Kane is the record and beneficial owner of 626,284 shares
of common stock of Nova and 1,098,841 shares of convertible
preferred stock of Nova. Kane's shares of Nova common and
convertible preferred shall be collectively referred to in this
Agreement as the "Shares." Kane is also a director of Nova.
B. Spillane is a director, the president and a shareholder
of Nova. Kane and Robert McDonald, Chairman of the Nova Board of
Directors, own all of the issued and outstanding shares of Nova
convertible preferred stock.
C. Disputes have arisen between Kane and Nova with respect
to decisions by the other directors of Nova and to the business
operations of Nova. Kane has asserted, inter alia, that the
continued operation of Nova are not in the best interests of the
owners of Nova convertible preferred stock who, if Nova were
liquidated, would receive all of the proceeds in liquidation after
payment to Nova's creditors. Kane also has asserted that
continuing Nova's business will cause the dissipation of assets
which would otherwise be distributable to owners of Nova's
convertible preferred stock upon liquidation. As such, Kane has
recommended and proposed that Nova be liquidated. Kane has
threatened to commence litigation to force the liquidation and
dissolution of Nova.
D. Nova's other directors have disagreed with Kane and
determined to continue Nova as a going concern. Nova's other
directors have indicated to Kane that they would oppose any attempt
to liquidate and dissolve Nova and would contest any litigation
commenced by Kane.
E. Each party acknowledges that the other party has asserted
colorable claims, positions and defenses. Nonetheless, the parties
agree that any such litigation would be materially detrimental to
all parties' interests and to the viability of Nova and to the
ability of Nova's management to achieve profitable operations.
Nova and the other directors believe that the continued involvement
of Kane in the management of Nova's affairs and the continuation of
the parties disputes also would be materially detrimental to Nova's
operations, business and shareholders.
F. The parties acknowledge and believe that a resolution of
such claims through the purchase by the Purchasers of the Shares is
in the best interests of the parties and Nova's shareholders.
G. The parties' ability to assess the value of the Shares
and an appropriate amount to be paid to Kane for the purchase of
the Shares and for settlement of all disputes between and among all
the parties is impacted by the value and disposition of a certain
cement-grade kaolin mine owned by Nova in Minnesota. Nova is
currently in negotiation and has reached a tentative agreement for
the sale of the cement-grade kaolin property (the "Cement-Kaolin
Property") with Northern Con-Agg, Inc., a Minnesota corporation
("Con-Agg"), for an aggregate purchase price of approximately
$700,000, subject to certain adjustments and offsets (the "Kaolin
Mine Purchase"). The parties wish to provide for certain
adjustments in the purchase price of the Shares and in the payment
of that price depending upon the ultimate disposition of the Kaolin
Mine Purchase.
NOW, THEREFORE, the parties agree as follows:
1. Incorporation of Recitals. The parties acknowledge that
the Recitals are a substantive part of, incorporated in and a
portion of the consideration for this Agreement,
2. Representations and Warranties Concerning the Shares.
Kane warrants and represents that:
a. The Shares being sold to the Purchasers are composed
of 1,098,841 shares of Nova convertible preferred stock and 575,523
shares of Nova common stock owned of record and beneficially by
Kane and 50,761 shares of Nova common stock owned of record by Kane
Holding, Inc. and beneficially by Kane.
b. Except for 535,430 shares of Nova common stock owned
of record by PKLC II, L.L.C., Kane does not have a beneficial
interest or right to control the voting or disposition of any other
security issued by Nova and currently outstanding.
c. Upon execution of this Agreement and at Closing (as
hereinafter defined), the Shares shall be free and clear of all
liens, security interests, encumbrances, and claims and interests
of any person other than Kane.
d. To the best of Kane's knowledge, the execution,
delivery and performance of this Agreement by Kane and his
participation in the consummation of the transactions contemplated
hereby are within Kane's full legal right, power and authority and
do not contravene, permit the termination of or constitute a
default (or an event which, with or without the giving of notice or
the passage of time, or both, will constitute a default) under any
agreement or other instrument binding upon Kane; does not require
the approval or consent of any third party; and will not result in
the creation or imposition of any lien, charge or encumbrance in
favor of any third party upon the Shares. The execution, delivery
and performance by Kane of this Agreement do not violate any
provision of applicable law or regulations or any judgment,
injunction, award, decree or order to which Kane is subject.
e. Except as otherwise provided in this Agreement, at
the date of Closing, Kane will not have incurred for Nova any
contractual or other obligation not disclosed and approved by Nova.
f. The execution and consummation of this Agreement and
the sale of the Shares will not violate Section 16 of the
Securities Exchange Act of 1934, as amended, any rules or
regulations thereunder or any similar state law or regulation.
3. Purchase and Sale of the Shares. At Closing, Kane shall
sell, and Purchasers shall purchase for the price set forth in
paragraph 4 and to be paid as set forth in paragraph 5, the Shares
in the following amounts:
Purchaser Shares Purchased
Convertible
Preferred Common
Nova 895,415 510,342
Spillane 203,426 115,942
4. Purchase Price.
a. The aggregate purchase price for the Shares shall be
$200,000 plus EITHER:
(1) If, on or before June 1, 1997, the Cement-Kaolin
Property is sold, whether by Nova to Con-Agg under the Kaolin Mine
Purchase or otherwise, Kane shall be paid an amount equal to 12% of
the net proceeds less $13,992 (to be deducted from the last
payments received by Nova) from such Purchase as and when received
by Nova. Payment to Kane shall be made by check or wire transfer
within ten (10) days after each and any such receipt of proceeds by
Nova. As used in this Paragraph 4, "net proceeds" shall mean the
gross proceeds of the sale of the Kaolin Mine Purchase or after
sale of the Cement-Kaolin Property less legal fees, direct sales
costs, core test expenses and costs incurred in removing certain
personal property from the mine property (not to exceed $35,000 in
the aggregate); OR
(2) If the Cement-Kaolin Property is not sold or if the
Kaolin Mine Purchase is not so consummated on or before June 1,
1997, a $.10 per short ton royalty, as an when received by Nova, on
sales of kaolin from the Cement-Kaolin Property, up to an aggregate
of $70,008.
b. The parties acknowledge that the purchase price for the
Shares was reached and determined by them after consideration,
among other matters, of the irreconcilable disputes and conflicts
between Kane and Purchasers; the use of a sale of the Shares as a
settlement of such disputes and conflicts and related avoidance of
litigation; differing valuations of Nova as a going concern and in
liquidation; the fact that the preferred stock is not registered
and is not freely tradeable; and the lack of a significant market
for Nova securities and difficulty of disposing of a large block of
Nova stock.
5. Closing. Closing of the purchase and sale of the Shares
shall take place no later than three (3) business days after the
execution of this Agreement at a time and place mutually agreed by
the parties. At Closing:
a. Kane shall (a) endorse appropriately and deliver to
the pertinent Purchasers certificates representing the Shares, or
if necessary, provide appropriately endorsed certificates for
delivery to Nova's transfer agent and reissuance to the pertinent
Purchasers, or, if such certificates cannot be produced, provide a
lost certificate bond in form satisfactory to Nova's transfer
agent, and (b) deliver a letter of resignation as a director of
Nova.
b. The Purchasers shall deliver to Kane cashier's checks
or cash in the aggregate of $200,000 in the following increments:
Nova (as part of its purchase price) -- $150,000; Spillane (for his
entire purchase price) -- $50,000. The balance of the purchase
price by Nova shall be paid as provided in Paragraph 4(a).
6. Cancellation of Kane Options. Effective upon Closing, and
without any other action by any party, all options to purchase Nova
securities owned of record by Kane shall be canceled and of no
further effect.
7. Nova Representations and Warranties. Nova represents and
warrants to Kane that:
a. Nova has the power and authority to execute,
acknowledge and deliver this Agreement, to consummate the
transactions contemplated hereby, and to take all other actions
required to be taken by it under this Agreement.
b. Nova has taken, or by Closing will have taken, all
actions required by law, its Articles of Incorporation, its Bylaws
and otherwise to authorize the execution, acknowledgment and
delivery of this Agreement.
c. This Agreement is valid and binding upon Nova in
accordance with its terms.
d. The execution and performance of this Agreement and
the purchase of Kane's stock by Nova will not violate the
provisions of the Colorado Business Corporation Act relating to
redemption or repurchase of stock.
8. Due Diligence. The parties acknowledge and represent that
each has been, or has had the opportunity to be, represented by
counsel in all transactions contemplated by this Agreement and has
had the opportunity to conduct all due diligence activities
necessary in connection with the negotiation, execution and
compliance with this Agreement.
9. Release by Kane. Except as provided in this Agreement,
upon Closing, Kane, his representatives, agents, affiliates and
predecessors (collectively, "Kane") release and forever discharge
Nova and its officers, directors, employees, agents, attorneys,
representatives, predecessors and successors (collectively,
"Nova") of and from all manner of actions, causes of action, suits,
debts, covenants, accounts, damages, liabilities, losses, costs,
expenses and claims of any nature, in law or equity, known or
unknown, accrued or unaccrued, suspected or claimed, which
Kane ever had, now has or hereafter may have or allege against Nova
and which arise out of any transaction predating Closing.
10. Release by Nova. Except as provided in this Agreement,
upon Closing, Nova, its officers, directors, employees, agents,
attorneys, representatives, predecessors and successors
(collectively, "Nova") releases and forever discharges Kane and his
agents, attorneys, representatives, affiliates, predecessors and
successors (collectively, "Kane") of and from all manner of
actions, causes of action, suits, debts, covenants, accounts,
damages, liabilities, losses, costs, expenses and claims of any
nature, in law or equity, known or unknown, accrued or unaccrued,
suspected or claimed, which Nova ever had, now has or hereafter may
have or allege against Kane and which arise out of any transaction
predating Closing.
11. Mutual Non-disparagement. From and after the execution
of this Agreement, neither Kane nor Purchasers shall, directly or
indirectly, make any derogatory verbal or written statements about
the other.
12. Non-assistance by Kane. From and after the execution of
this Agreement, Kane shall neither assist in any manner nor provide
any information to any person who is asserting a claim or
initiating any proceeding against Nova, its officers, directors,
employees, attorneys, accountants, affiliates or representatives.
Nothing in this Paragraph 12 shall prohibit or prevent Kane from
complying with any order of a court, government agency, self-
regulatory organization or similar entity or with a subpoena issued
under the authority of any such tribunal.
13. Mutual Indemnification. Kane and the Purchasers each
agree to indemnify and hold the other and all pertinent affiliates,
officers, directors, representatives, attorneys and successors
harmless from any and all claims, liabilities, losses, damages,
costs and expenses, including reasonable fees and disbursements of
counsel, related to or arising, directly or indirectly, out of any
failure or breach by any of them of any representation or warranty,
covenant, obligation or undertaking made by any such party in this
Agreement, or any other statement, certificate or other instrument
delivered pursuant to this Agreement.
14. Special Indemnification of Kane. Nova shall indemnify
and hold Kane harmless from any and all claims, liabilities,
losses, damages, costs and expenses, including reasonable fees and
disbursements of counsel, related to or arising, directly or
indirectly, out of Kane's sale of the Shares under this Agreement.
The indemnification contained in this Paragraph shall apply only to
those matters threatened in writing, asserted in writing or
litigation commenced on or within two years after Closing.
15. Arbitration. Any dispute arising out of this Agreement
and the transactions contemplated hereby shall be resolved by
binding arbitration, in the following manner:
a. Any such party shall serve upon the other party(ies)
a written notice of a demand to arbitrate. The notice shall
specify with particularity the nature of the dispute, the
provisions of this Agreement and law at issue and the proposed
relief sought by such party(ies).
b. Within fifteen (15) days of receipt of such notice,
the opposing party(ies) may submit a response with equivalent
specificity.
c. Within thirty (30) days after service of such
notice, the party seeking arbitration shall submit the dispute for
binding arbitration to the American Arbitration Association
pursuant to its commercial arbitration rules (except as otherwise
provided in this Paragraph 15). The provisions of the Colorado
Arbitration Act shall govern such proceedings.
d. The arbitration shall be conducted by a single
arbitrator in Denver, Colorado, unless the parties to the dispute
agree to a different location. Within 10 days of the filing of the
response to demand for arbitration, the parties shall make the
Initial Disclosures required under Rule 26(a)(1) of the Federal
Rules of Civil Procedure (1996). The parties shall further comply
with the requirements for disclosure of expert testimony and
pretrial (pre-arbitration) disclosures of Rules 26(a)(2) and (3) of
the Federal Rules of Civil Procedure (1996). The arbitrator(s) may
award appropriate sanctions for failure to comply with these
requirements.
e. The decision of the arbitrator with respect to any
matter submitted to arbitration shall be final, enforceable,
binding and unappealable to any court or tribunal with respect to
all parties to this Agreement. Such decision shall be enforceable
with the same force and effect as if issued by any court of
competent jurisdiction.
f. Fees and costs of the arbitration, including
reasonable attorneys' fees, shall be awarded to the prevailing
party. If there be no prevailing party, such fees and costs may be
awarded in the discretion of the arbitrator who, in making such
award, shall assess the relative good or bad faith of the parties
throughout the dispute. All arbitration proceedings shall be
conducted to expedite resolution and minimize cost.
g. In the event that any party, acting through any
officer, agent or recognized official, evidences an intention to
commit an intentional act in violation of this Agreement for which
injunctive or other equitable relief would be the only reasonable
remedy, the other party may disregard the provisions of this
Paragraph 15 and may file action in any court with jurisdiction in
Colorado for purposes of enjoining such activity and to obtain
specific performance of the terms of this Agreement. The parties
agree that any final judgment by a court of competent jurisdiction,
as permitted hereby, in any action or proceeding, may be enforced
in any other state or federal court by suit on the judgment or in
any other manner provided by law.
16. Further Actions. Each of the parties to this Agreement
shall execute and deliver such other agreements and documents and
take all other actions as may be reasonably necessary to effectuate
the intent of and the transactions contemplated by this Agreement.
17. Materiality of Representations, Warranties and Covenants.
The representations and warranties of the parties contained in
Paragraphs 2 and 7 of this Agreement or otherwise made in writing
shall be deemed material and, notwithstanding any investigation by
any party, shall be deemed to have been relied on by the party in
whose favor the representation or warranty was made.
18. Survival of Representations, Warranties and Covenants.
All of the covenants, agreements, promises, representations and
warranties contained in this Agreement shall survive the execution,
acknowledgment and delivery of this Agreement, the sale of the
Shares by Kane to Purchasers and the other transactions
contemplated by this Agreement.
19. Notices. Any notices or other communication required to
be permitted under this Agreement shall be sufficiently given if
delivered in person, sent by overnight courier or by registered or
certified mail, postage pre-paid, addressed as follows or by
facsimile transmission to the numbers set forth below:
If to Purchasers:
Nova Natural Resources Corporation
789 Sherman Street, Suite 550
Denver, Colorado 80203
Facsimile: 303-863-1969
with a copy to:
Neil E. Ayervais
Lohf, Shaiman & Jacobs, P.C.
950 South Cherry, Suite 900
Denver, Colorado 80222
Facsimile: 303-753-9997
If to Kane:
Thomas F. Kane
13845 Rivoli Drive
Palm Beach Gardens, Florida 33410
or such other address as shall be furnished in writing by
any such party. Such notice or communication shall have been
deemed to have been given as of the date so transmitted.
20. "Affiliate." As used in this Agreement, "affiliate"
shall mean a person who controls, is controlled by or is in common
control with another person. Direct or indirect ownership of more
than a 30% voting interest shall constitute control for these
purposes.
21. Expenses. Each party shall pay its own expenses and
costs incidental to the preparation of this Agreement and to the
consummation of the transactions contemplated by this Agreement.
22. Assigns. This Agreement and any rights and obligations
hereunder may not be assigned in whole or part by any party, shall
give no third party beneficiary rights to any person and shall be
binding upon and inure to the benefit of the parties and their
respective heirs and successors.
23. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter of this Agreement and
shall not be amended except by a written instrument signed by all
of the parties to this Agreement.
24. Construction. The language used in this Agreement will
be deemed to be language chosen by all parties to express their
intent, and no rule or strict construction will be applied to any
party.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive and procedural laws of
the State of Colorado, including those governing arbitration.
26. Severability. If any provision of this Agreement is
challenged as invalid, illegal or unenforceable, the tribunal
adjudicating such challenge shall
(a) interpret such provision, in a manner consistent
with the intent of the parties, so as to preserve the
enforceability of such provision; or
(b) if necessary and if such tribunal cannot preserve
the enforceability of the challenged provision, interpret other
provisions of this Agreement, in a manner consistent with the
intent of the parties, so as to preserve the enforceability of the
Agreement; and
(c) in any case, hold valid, legal and enforceable the
unchallenged provisions of this Agreement.
27. Waiver. No waiver by any party of the right to enforce
any obligation under this Agreement shall be effective unless
contained in a writing signed by such party, and any waiver of
rights shall not impair the future enforceability of the obligation
then waived.
IN WITNESS WHEREOF, the parties have executed this Agreement
this 5th day of February, 1997.
PURCHASERS:
NOVA NATURAL RESOURCES CORPORATION
By: /s/ Brian B. Spillane
Brian B. Spillane, President
/s/ Brian B. Spillane
Brian B. Spillane
SELLER:
/s/ Thomas F. Kane
Thomas F. Kane
Thomas F. Kane
Frenchmen's Creek
13845 Rivoli Drive
Palm Beach Gardens, Florida 33410
February 17, 1996
Board of Directors
Nova Natural Resources Corporation
P.O. Box 481388
1900 Wazee Street, Suite 305
Denver, Colrado 80148
Dear Gentlemen:
Pursuant to Section 5 (a) of the Agreement between Nova Natural
Resources Corporation ("Nova") and me of even date herewith, I am
writing to resign from the Board of Directors of Nova effective
immediately.
Sincerely,
/s/ Thomas F. Kane
Thomas F. Kane
