<PAGE> 1
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended December 31, 1994
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to _________________
Commission File Number: 0-16484
FirstMiss Gold Inc.
(Exact name of registrant as specified in its charter)
Nevada 64-0748908
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5190 Neil Road, Suite 310, Reno, Nevada 89502
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including Area Code: 702/827-0211
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Class Outstanding at January 31, 1995
Common Stock, $.01 Par Value 18,135,900
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Part I. Financial Information
Item 1. Financial Statements
FirstMiss Gold Inc. and Subsidiary
Consolidated Balance Sheets
(Unaudited. In Thousands of Dollars)
<TABLE>
<CAPTION>
Dec. 31 June 30
1994 1994
------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 635 1,979
Trade accounts receivable 1,766 2,190
Inventories:
Ore and in process 5,118 7,488
Materials and supplies 5,914 5,266
------- -------
Total inventories 11,032 12,754
------- -------
Prepaid expenses and other current assets 1,138 181
Deferred income taxes, current 1,712 2,581
------- -------
Total current assets 16,283 19,685
------- -------
Property, plant and equipment, at cost 145,710 135,820
Less accumulated depreciation and depletion 74,328 69,022
------- -------
Net property, plant and equipment 71,382 66,798
------- -------
Deferred income taxes 4,466 2,264
------- -------
$ 92,131 88,747
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 4,953 5,165
Payable to First Mississippi 1,701 910
Income taxes payable 842 74
Other accrued expenses 328 555
------- -------
Total current liabilities 7,824 6,704
------- -------
Notes payable to First Mississippi 32,521 29,339
Other long-term liabilities 3,045 2,985
Stockholders' equity:
Common stock 181 181
Contributed and paid-in capital 33,940 33,862
Retained earnings 14,620 15,676
------- -------
Total stockholders' equity 48,741 49,719
------- -------
$ 92,131 88,747
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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FirstMiss Gold Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited. In Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
Dec. 31 Dec. 31
------------------ -----------------
1994 1993 1994 1993
------------------ -----------------
<S> <C> <C> <C> <C>
Net sales $17,832 24,495 39,772 45,331
Cost of sales 19,106 19,963 37,241 39,192
------ ------ ------ ------
Gross profit (loss) (1,274) 4,532 2,531 6,139
Selling, general and
administrative expenses 524 430 1,182 928
Exploration expenses 586 744 2,298 1,857
------ ------ ------ ------
Earnings (loss) from operations (2,384) 3,358 (949) 3,354
Interest and other income 35 58 87 90
Interest expense 343 496 759 987
------ ------ ------ ------
Earnings (loss) before
income taxes (2,692) 2,920 (1,621) 2,457
Income tax expense(benefit) (940) 1,094 (565) 816
------ ------ ------ ------
Net earnings (loss) before
cumulative effect of change
in accounting principle (1,752) 1,826 (1,056) 1,641
Cumulative effect of change
in accounting principle - - - 1,350
------ ------ ------- ------
Net earnings (loss) $(1,752) 1,826 (1,056) 2,991
====== ====== ======= ======
Earnings (loss) per common share:
Before cumulative effect of
accounting change $ (0.10) 0.10 (0.06) 0.09
Cumulative effect of
accounting change - - - 0.07
------ ------ ------ ------
Total earnings (loss) per
common share $ (0.10) 0.10 (0.06) 0.16
====== ====== ====== ======
Average shares and equivalents
outstanding 18,129 18,155 18,140 18,135
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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FirstMiss Gold Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited. In Thousands of Dollars)
<TABLE>
<CAPTION>
Six months ended
Dec. 31
---------------------
1994 1993
---------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,056) 2,991
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 8,864 9,691
Deferred compensation - 2
Loss (gain) on sale of property, plant and equipment 9 (15)
Net change in assets and liabilities:
Trade accounts receivable 424 (624)
Inventories 1,722 (2,950)
Deferred income taxes (1,334) (1,553)
Prepaid expenses and other current assets (957) (431)
Accounts payable (212) (2,907)
Payable to First Mississippi 1,742 1,270
Other accrued expenses (227) 42
Income taxes payable 768 1,018
Deferred use taxes - (6)
Other long-term liabilities 60 281
--------- -------
Net cash provided by operating activities 9,803 6,809
--------- -------
Cash flows from investing activities:
Capital expenditures (13,235) (3,052)
Deferred stripping costs (222) (2,828)
Proceeds from sale of property, plant and equipment 1 15
--------- -------
Net cash used by investing activities (13,456) (5,865)
--------- -------
Cash flows from financing activities:
Purchase of gold for repayment of gold loan - (4,454)
Proceeds from issuance of common stock 78 -
Proceeds from notes payable to First Mississippi 3,700 1,000
Repayment of notes payable to First Mississippi (1,469) -
--------- -------
Net cash provided by (used in) financing
activities 2,309 (3,454)
--------- -------
Net decrease in cash and cash equivalents (1,344) (2,510)
Cash and cash equivalents at beginning of period 1,979 3,690
--------- -------
Cash and cash equivalents at end of period $ 635 1,180
========= =======
Supplemental disclosures:
For the six months ended December 31, 1994 and
1993, $950 and $669, rectively, of interest
expense included in payables to First Mississippi
was added to long-term notes payable as an addition to the notes.
Cash paid during the period for:
Interest, net of amounts capitalized $ 50 174
======== ======
Income taxes $ - -
======== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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FirstMiss Gold Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - GENERAL
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the financial statements reflect all adjustments (of a
normal and recurring nature) which are necessary to present fairly the
financial position, results of operations and cash flows for the interim
periods. These financial statements should be read in conjunction with the
Annual Report of the Company on Form 10-K for the year ended June 30, 1994.
NOTE 2 - FORWARD SALES AGREEMENTS
At December 31, 1994, the Company had hedge commitments under the spot
deferred sales contracts for the delivery of gold as follows:
<TABLE>
<CAPTION>
Delivery Average
Date Price per Ounce Ounces
-------- ---------------- ------
<S> <C> <C>
1/1/95-6/30/95 $392 107,400
7/1/95-6/30/96 $398 123,000
</TABLE>
Based on the market price of gold on December 31, 1994, the unrealized
loss on these contracts is $279.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Three months and six months ended December 31, 1994, compared with the
three months and six months ended December 31, 1993.
Results for the second quarter ended December 31, 1994, were losses
of $1.8 million or $0.10 per share compared to earnings of $1.8 million or
$0.10 per share for the same period last year. Results for the six months ended
December 31, 1994, were losses of $1.1 million or $0.06 per share compared to
earnings of $3.0 million or $0.16 per share for the same period last year when
a required change in income tax accounting added $1.4 million or $0.07 per
share. Low mill feed grades were primarily responsible for the losses in both
the quarter and six months.
The following table highlights sales and production information:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
12/31/94 12/31/93 12/31/94 12/31/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Ounces sold 46,462 62,862 103,306 117,263
Average Realized Price/oz. $384 390 385 387
Average Market Price/oz. $384 377 385 374
Ounces Produced:
Mill 41,885 54,971 93,407 101,991
Heap Leach 4,577 7,942 9,899 15,323
Cash Cost/oz.:
Mill $365 272 315 291
Heap Leach $254 196 247 179
Combined $354 262 308 276
Total Cost /oz.:
Mill $427 334 371 356
Heap Leach $270 205 261 189
Combined $411 318 360 334
</TABLE>
Sales for the quarter and six months were off 27% and 12%,
respectively, from a year earlier, primarily due to lower production from both
the mill and heap leach. Milling of lower grade stockpile ores during the
second quarter, when underground construction activity in the pit limited pit
ore production, was responsible for the lower mill feed grades. Mill feed
averaged 0.146 and 0.178 ounces per ton for the quarter and six months,
respectively, versus 0.222 and 0.189 the same periods prior year. Heap leach
output was adversely affected by lower ore grades and less tons leached.
Cost of sales for the quarter was down $0.9 million from a year
earlier to $19.1 million, even though mill throughput was up 9 percent, due to
lower mining and depreciation costs. For the six months, cost of sales was
$2.0 million less than last year due to lower mining, milling, and depreciation
costs. Total cost per ounce and cash cost per ounce
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were up for the quarter and six months, however, due to the lower ore grades.
Mill throughput for the quarter and six months averaged 3,408 and 3,242 tons
per day, respectively, versus 3,125 and 3,338 tons per day for the same periods
last year.
Exploration spending totaled $1.7 million for the quarter, including
$1.0 million in capitalized development at Turquoise Ridge, and $3.4 million
year-to-date, an increase of $0.4 million and $0.9 million, respectively, over
the same periods last year. The majority of the exploration spending was
related to the Turquoise Ridge project.
Interest expense for the quarter and the six months was lower than
last year reflecting payoff of the gold loan on June 30, 1994. Long term
borrowing from First Mississippi increased to $32.5 million at December 31,
1994 from $25.3 million a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flow for the six months was up 44 percent to $9.8
million. Liquidation of payables reduced operating cash flow in the same period
last year, while reductions in ore stockpile inventories contributed to the
improvement in the current period.
Investing activities for the six months included capital expenditures
of $10.1 million for underground development. Cash from operations was
insufficient to cover all capital expenditures during the six months, requiring
additional loans from First Mississippi.
As a result of a change in mining method in the first quarter,
dictated by rock conditions and irregular ore geometry, underground production
is now projected at approximately 1,000 tons per day rather than the 2,000 tons
per day initially planned. As a result, additional outside funding may be
needed to complete the Getchell Main Underground mine and to continue to
develop Turquoise Ridge. First Mississippi has been the primary source of
outside funding in recent years but is not obligated to make future advances.
Prior to June 30, 1994, the Company's ability to access debt financing was
restricted due to liens and covenants in its original gold loan agreement.
With the gold loan paid, the Company may access traditional sources of debt
financing. Financing may also be obtained by selling equity.
OUTLOOK
Conversion of the Getchell Main Underground to drift-and-fill mining
was completed during the quarter. Contract mine development was also completed
and the Company has assumed responsibility for all underground operations.
Underground production is currently averaging approximately 400 tons per day
grading in excess of 0.300 ounces per ton, with 1,000 tons per day output
expected by the beginning of the fourth quarter. Higher underground
production, combined with the return of the open pit to normal rates, should
improve mill feed grades.
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Mill throughput is planned to continue at or above the 3,000 ton per
day design capacity using a blend of underground, open pit and stockpiled lower
grade ores with final open pit ores milled by the end of first quarter of
fiscal 1996.
At Turquoise Ridge, drilling to date has identified mineralization
over a strike and dip of approximately 2,000 feet by 1,000 feet respectively.
The deposit remains open down dip and along strike in both directions. The
focus of development drilling will now shift to an infill-program to better
define the geology and geometry of the higher grade portions of the
mineralization and to aid in design and development planning of an underground
access.
An oxide exploration program initiated earlier in the year has had
encouraging results and additional drilling is planned. If current oxide
exploration programs are unsuccessful, mining of oxide ores are currently
projected to cease by the end of the first quarter of fiscal 1996.
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Part II. Other Information
Item 2. Changes in Securities
Pursuant to the Company's Articles of Incorporation, the Board of
Directors has established the 1994-A Series Stock and has authorized
the issuance of 1,000 shares of such stock upon conversion of the
1994-A Series Convertible Subordinated Debentures described below.
The 1994-A Series Stock is not entitled to receive any dividends.
Each share of 1994-A Series Stock will be convertible into one share
of the Company's Common Stock, subject to adjustments in certain
events including the issuance of stock dividends on the Company's
Common Stock, distribution of property other than cash or Common
Stock, and any subdivision, combination, recapitalization, merger,
consolidation, exchange of share or the like which results in any
change in the Common Stock subsequent to November 3, 1994.
The 1994-A Series Stock outstanding at any time may be redeemed at the
option of the Company upon specified notice, unless converted prior to
redemption, at a redemption price of $9.53125 per share. Under Nevada
law, no redemption could be made if the Company were insolvent or
would be rendered insolvent by such redemption or if such redemption
would reduce the Company's net assets below the aggregate amount
payable to holders of shares having prior or equal rights to the
Company's assets upon involuntary dissolution.
Upon any liquidation or dissolution of the Company, the holders of the
1994-A Series Stock will be entitled to a liquidation preference of
$9.53125 per share before any distribution of assets may be made to
the holders of Common Stock or other shares junior to the 1994-A
Series Stock. After the holders of the 1994-A Series Stock have
received such amount, they may not participate in any remaining assets
and surplus funds of the Company.
The holders of shares of 1994-A Series Stock will not be entitled to
vote except in certain circumstances as provided by law. Holders of
1994-A Series Stock do not have pre-emptive rights.
The Company has created a series of debentures designated as the
Company's 1994-A Series Convertible Subordinated Debentures (the
"Debentures"), and has authorized the issuance of Debentures in an
aggregate principal amount of $9,531.25 pursuant to debenture options
granted on November 3, 1994, to certain Directors under the Company's
Long-Term Incentive Plan. The debenture options may be exercised at
any time within ten years after their grant.
Debentures purchased pursuant to the options will mature on November
2, 2004, and in certain circumstances may be redeemed prior to their
due date.
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Subject to certain conditions, the Debentures will be convertible at a
conversion price of $9.53125 per share into fully paid and
non-assessable shares of 1994-A Series Stock at any time more than six
months after the award of the debenture option and prior to maturity,
redemption or payment thereof.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders on November 2, 1994, the Company
stockholders, pursuant to proxies solicited under Regulation 14A,
elected three directors for terms to expire in 1997, or until their
successors are elected and qualify. The following votes were cast:
<TABLE>
<CAPTION>
Directors:
----------
<S> <C> <C>
Robert C. Horton 17,078,303 shares voted for
------------
13,400 shares withheld
------------
N/A shares broker nonvotes
------------
Pete Ingersoll 17,077,303 shares voted for
------------
14,400 shares withheld
------------
N/A shares broker nonvotes
------------
G. W. Thompson 17,078,303 shares voted for
------------
13,400 shares withheld
------------
N/A shares broker nonvotes
------------
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4 - The Statement of Resolution establishing the
Company's 1994-A Series Stock.
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K. No report on Form 8-K was filed by the
Registrant during the three months ended December 31, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTMISS GOLD INC.
2/10/95 /s/ G. W. Thompson
Date G. W. Thompson
President and Chief Executive Officer
2/10/95 /s/ Roger D. Palmer
Date Roger D. Palmer
Assistant Controller
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
EXHIBITS
4 - Statement of Resolution establishing the Company's 1994-A Series
Stock at page thirteen.
27 - Financial Data Schedules
<PAGE> 1
EXHIBIT 4
Statement of Resolution
WHEREAS, the Articles of Incorporation, as amended, of this Corporation
authorize the issuance of up to 10,000,000 shares of preferred stock issuable
from time to time in one or more series; and
WHEREAS, the Board of Directors of this Corporation is authorized to
determine the form, series and amounts in which such preferred stock shall be
issued; the price or prices at which such stock shall be sold; the dividend,
preferences, conversion rates, conversion prices, voting privileges, redemption
prices, and other terms and conditions relative to the issuance of such
preferred stock; and
WHEREAS, the Board of Directors desires to establish a series of preferred
stock known as the "1994-A Series Convertible Preferred Stock" to be available
for issuance solely upon conversion of the Corporation's 1994-A Series
Convertible Subordinated Debentures related to those certain debenture options
automatically granted November 3, 1994, with the terms and provisions of such
Debenture Options and the 1994-A Series Convertible Subordinated Debentures to
be issued in accordance with the Long-Term Incentive Plan, and further desires
to determine and fix the rights, preferences and other terms and conditions
relating to such series and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
establishes a series of preferred stock of the Corporation to be designated
1994-A Series Convertible Preferred Stock, which shall be available for
issuance solely upon conversion of the Corporation's 1994-A Series Convertible
Subordinated Debentures which, in turn, will be available for issuance in
accordance with and upon exercise of certain options, all of which shall be
granted on the same date pursuant to the Corporation's 1987 Long-Term Incentive
Plan entitling the holders thereof to purchase such series of debentures (such
date being referred to as the "Original Grant Date");
BE IT FURTHER RESOLVED, that the 1994-A Series Convertible Preferred Stock
shall consist of 1,000 shares;
BE IT FURTHER RESOLVED, that the rights, preferences and other terms and
conditions of the 1994-A Series Convertible Preferred Stock shall be as
follows:
1. PAR VALUE. The par value for the 1994-A Series Convertible Preferred
Stock shall be $.01 per share.
2. DIVIDENDS. The holders of record of 1994-A Series Convertible
Preferred Stock shall be entitled to receive no dividends.
3. REDEMPTION. The 1994-A Series Convertible Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation by vote of its
Board of Directors, at any time or from time to time, at a redemption price per
share equal to the "Purchase Price," as defined below, and such price is
hereinafter referred to as the "Redemption Price." The Purchase
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Price per share shall be the market value, as determined by the Board of
Directors, of one share of the Corporation's Common Stock on the Original Grant
Date.
In case of the redemption of only a part of the outstanding 1994-A Series
Convertible Preferred Stock, this Corporation shall designate by lot the shares
to be redeemed or shall effect such redemption pro rata.
Not more than 60 days, but at least 10 days prior to the date fixed for
redemption, a written notice shall be mailed to each holder of record of 1994-A
Series Convertible Preferred Stock whose shares are to be redeemed, by
certified mail with postage prepaid, addressed to each such holder at his
address as shown on the records of the Corporation (a) notifying each holder of
the election of the Corporation to redeem such shares, (b) stating the date
fixed for redemption thereof, (c) setting for the Redemption Price, and (d)
stating the place at which each such holder may obtain payment of the
Redemption Price upon surrender of his share certificates.
On or after the date fixed in such notice of redemption, each holder of
1994-A Series Convertible Preferred Stock to be redeemed shall present and
surrender his certificate or certificates representing such stock to this
Corporation at a place designated in such notice and thereupon the Redemption
Price of such shares shall be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. In case less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the date fixed in
any such notice as the date of redemption, unless default is made in the
payment of the Redemption Price, all rights of the holders thereof as
shareholders of the Corporation, except the right to receive the Redemption
Price, shall cease and terminate, and such shares shall not thereafter be
transferred on the books of the Corporation, and such stock shall not be deemed
to be outstanding for any purpose whatsoever.
The Corporation may at its option at any time after such notice of
redemption has been given, deposit a sum sufficient to redeem, on the date
fixed for redemption, the shares of 1994-A Series Convertible Preferred Stock
called for redemption and not yet redeemed with a bank or trust company in
Mississippi or Nevada, as a trust fund for the benefit of the respective
holders of the shares designated for redemption, and such deposit, from and
after the date fixed for redemption, shall constitute full payment of the
Redemption Price of the shares to the holders thereof and shall be conclusive
evidence that no default shall be made in the payment of the Redemption as to
such shares.
Shares of the 1994-A Series Convertible Preferred Stock redeemed by the
Corporation shall not thereafter be disposed of as shares of such Series, but
upon acceptance by the Secretary of State of Nevada for filing of a statement
of cancellation relating to the redeemed shares, such shares
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shall become authorized and unissued shares of Preferred Stock which may be
designated as shares of any other series.
4. LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the holders of
shares of 1994-A Series Convertible Preferred Stock outstanding shall be
entitled to receive, or to have deposited in trust for them as provided in
Section 3 hereof, out of assets of the Corporation, before any distribution of
any assets shall be made to the holders of Common Stock or other shares junior
to the 1994-A Series convertible Preferred Stock as to distribution of assets,
an amount which shall be equal to the Purchase Price, as defined above, for
such shares. After the holders of 1994-A Series Convertible Preferred Stock
shall have received such amount, they shall not participate in any remaining
assets and surplus funds of the Corporation.
If the amounts which each of the holders of the shares of the 1994-A Series
Convertible Preferred Stock, and any other series of Preferred Stock of the
Corporation ranking equally as to distribution of assets with the shares of
1994-A Series Convertible Preferred Stock, are entitled to receive in such
events are not paid, or deposited in trust, in full, the shares of the 1994-A
Series Convertible Preferred Stock and of such other series shall share ratably
in any distribution of assets in accordance with the amounts which would be
payable on such distribution if all amounts to which the holders of the 1994-A
Series Convertible Preferred Stock and of each such series are entitled were
paid, or deposited in trust, in full.
Neither the merger of the Corporation with or into any other Corporation or
the sale of all or substantially all of its assets shall be deemed a
dissolution, liquidation or winding up of the Corporation within the meaning of
this Section.
5. CONVERSION RIGHTS. The holders of shares of 1994-A Series Convertible
Preferred Stock shall have conversion rights as follows:
(a) The shares of 1994-A Series Preferred Stock shall be convertible, at
the option of the respective holders thereto, at the office of the Corporation
into fully paid and nonassessable shares of Common Stock of the Corporation, as
follows:
(i) The number of shares of Common Stock into which a share of 1994-A
Series Convertible Preferred Stock is to be converted shall be determined by
multiplying one share times the "Conversion Multiplier," as described below. On
the "Original Grant Date," as defined above, the Conversion Multiplier shall be
one, and unless and until the Conversion Multiplier is adjusted as provided
below, each share of 1994-A Series Convertible Preferred Stock shall be
convertible into one share of Common Stock.
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(ii) If the Corporation shall at any time after the Original Grant Date
effect a subdivision of the outstanding Common Stock, the Conversion Multiplier
then in effect immediately before such subdivision shall be proportionately
increased, and conversely, if the Corporation shall at any time after the
Original Grant Date combine the outstanding shares of Common Stock, the
Conversion Multiplier then in effect immediately before such combination shall
be proportionately decreased. Any adjustment hereunder shall become effective
at the close of business on the date the subdivision or combination becomes
effective.
(iii) If the Corporation shall at any time after the Original Grant
Date make or issue, without payment of consideration, a distribution payable in
additional shares of Common Stock, the Conversion Multiplier then in effect
shall be increased as of the close of business on the record date for the
determination of holders entitled thereto or the date on which the stock
transfer books of the Corporation are closed with respect thereto, or, if no
such record date has been fixed and the stock transfer books are not so closed,
the date of such making or issuance, by multiplying the Conversion Multiplier
then in effect by a fraction:
(A) the numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to such date, plus the number of
shares of Common Stock issuable in payment of such distribution; and
(B) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to such date;
Provided, however, that if such record date shall have been fixed or if the
stock transfer books are so closed and such dividend is not fully paid or if
such distribution is not fully made on the date therefor, the Conversion
Multiplier shall be recomputed accordingly as of the close of business on such
date of alteration.
(iv) If the Corporation shall at any time after the Original Grant Date
make or issue, without payment of consideration, a distribution payable to
holders of Common Stock in securities or other assets of the Corporation (other
than cash or shares of Common Stock), provisions shall be made so that the
holders of the 1994-A Series Convertible Preferred Stock shall receive upon the
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities or other assets of the
Corporation that they would have received had their 1994-A Series convertible
Preferred Stock been converted into Common Stock on the date of such event and
had they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities or other assets
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this Section 5 with respect to
the rights of the holders of the 1994-A Series Convertible Preferred Stock.
(v) In case of any capital reorganization or any reclassification of
the capital stock of the Corporation or in case of the consolidation or
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merger of the Corporation with or into another corporation or the conveyance of
all or substantially all of the assets of the Corporation to another
corporation, each share of 1994-A Series Convertible Preferred Stock shall
thereafter be convertible into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such share of 1994-A
Series Convertible Preferred Stock would have been entitled upon such
reorganization, reclassification, consolidation, merger or conveyance; and, in
any such case, appropriate adjustment (as determined in good faith by the Board
of Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders of the
shares of 1994-A Series Convertible Preferred Stock, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the shares of 1994-A Series
Convertible Preferred Stock.
(vi) In each case of an adjustment of the Conversion Multiplier or the
number of shares of Common Stock or other securities issuable upon conversion
of the 1994-A Series Convertible Preferred Stock, the Corporation shall compute
such adjustment in accordance herewith and prepare a certificate showing such
adjustment, and shall, upon request, provide a copy of such certificate to each
registered holder of the 1994-A Series Preferred Stock. The certificate shall
set forth such adjustment, showing in detail the facts upon which such
adjustment is based, including a statement of (A) the Conversion Multiplier at
the time in effect for the 1994-A Series Convertible Preferred Stock, and (b)
the number, type and amount, if any, of other property that at the time would
be received upon conversion of the 1994-A Series Convertible Preferred Stock.
(b) Before any holder of 1994-A Series Convertible Preferred Stock shall be
entitled to convert the same into shares of Common Stock, he shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
Corporation and shall give written notice to the Corporation that he elects to
convert the same and shall state in writing therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. If the holder fails to specify the name in which certificates are to be
issued, they shall be issued in his name. The Corporation, as soon as
practicable thereafter, shall issue and deliver at such office to such holder
of 1994-A Series Convertible Preferred Stock, or to his nominee or nominees,
certificates for the number of full shares of Common Stock to which he shall be
entitled as aforesaid, together with cash in lieu of any fraction of a share as
hereinafter provided. Such conversion shall be deemed to have been made as of
the date of such surrender of the shares of 1994-A Series Convertible Preferred
Stock to be converted (or, in the event of a proposed redemption and if the
Corporation so allows, on the date of receipt of satisfactory notice of
conversion if certificates of 1994-A Series Convertible Preferred Stock so
converted are thereafter delivered to the Corporation within 30 days), and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on said date.
5
<PAGE> 6
(c) In Case:
(i) the Corporation shall take a record of the holders of shares of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, other than ordinary cash dividends; or
(ii) the Corporation shall take a record of the holders of shares of
its Common Stock for the purpose of entitling them to subscribe for or purchase
any shares of stock of any class or to receive any other rights; or
(iii) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another corporation, or
conveyance of all or substantially all of the assets of the Corporation into
another corporation; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, then the Corporation shall cause to be mailed to
the holders of record of 1994-A Series Convertible Preferred Stock or any
security convertible into 1994-A Series Convertible Preferred Stock at their
last addresses as they shall appear on the records of the Corporation, at least
20 days (or 10 days in any case specified in clauses (i) and (ii) above) prior
to the applicable record date hereinafter specified, a notice stating (1) the
date on which a record is to be taken for the purpose of such dividend or
distribution of rights, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record would be entitled to such dividend
or distribution of rights, or (2) the date on which such capital
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that the holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
assets deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up.
(d) The Corporation will at all times reserve and keep available out of its
authorized Common Stock and/or share of its Common Stock then owned or held by
or for the account of the Corporation, solely for the purpose of delivery upon
conversion of 1994-A Series Convertible Preferred Stock, such number of shares
of Common Stock as shall then be deliverable upon the conversion of all
outstanding or potentially issuable 1994-A Series Convertible Preferred Stock.
All shares of Common Stock which shall be so deliverable shall be duly and
validly issued and fully paid and nonassessable.
(e) If any shares of Common Stock required to be reserved for purposes of
conversion of 1994-A Series Convertible Preferred Stock require registration
with or approval of any governmental authority under any Federal or state law,
or listing upon any national securities exchange, before such shares may be
issued upon conversion, the Corporation will in
6
<PAGE> 7
good faith and as expeditiously as possible endeavor to cause such shares to be
fully registered, approved or listed, as the case may be.
(f) The Corporation will pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock on
conversion of shares of 1994-A Series Convertible Preferred Stock pursuant
hereto. The Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the shares of 1994-A
Series Convertible Preferred Stock so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of any such tax, or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(g) No fractional shares of Common Stock shall be issued upon the
conversion of shares of 1994-A Series Convertible Preferred Stock. If any
fractional interest in a share of Common Stock would, except for the provisions
of this Subsection, be deliverable upon the conversion of any shares of 1994-A
Series Convertible Preferred Stock, the Corporation shall, in lieu of
delivering the fractional share therefor, adjust such fractional interest by
payment to the holder of such surrendered shares of 1994-A Series Convertible
Preferred Stock of an amount in cash equal (computed to the nearest cent) to
the current market value of such fractional interest, as determined in good
faith by the Board of Directors of the Corporation.
6. VOTING RIGHTS. Except as provided by law or as provided above, the
holders of 1994-A Series Convertible Preferred Stock shall not be entitled to
notice of stockholders' meetings or to vote upon the election of Directors or
upon any other matter.
7
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<FISCAL-YEAR-END> JUN-30-1995
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