<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1997.
REGISTRATION NO. 333-27923
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEVADA MANHATTAN MINING INCORPORATED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
NEVADA 1041 88-0219765
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
5038 NORTH PARKWAY CALABASAS, SUITE 100
CALABASAS, CALIFORNIA 91302
(818) 591-4400
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE
OF BUSINESS)
------------------------
JEFFREY S. KRAMER
CHIEF FINANCIAL OFFICER
NEVADA MANHATTAN MINING INCORPORATED
5038 N. PARKWAY CALABASAS, SUITE 100
CALABASAS, CALIFORNIA 91302
(818) 591-4400
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
LLOYD S. PANTELL, ESQ.
LLOYD S. PANTELL, APLC
10940 WILSHIRE BOULEVARD, SUITE 1550
LOS ANGELES, CALIFORNIA 90024
TELEPHONE (310) 443-9559
FACSIMILE (310) 443-3281
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
------------------------
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM PRICE MAXIMUM OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
Common Stock, $0.01 par
value(2)..................... $ $22,755,000 $6,896(3)
- --------------------------------------------------------------------------------------------------
Total............................................................................ $6,896(3)
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of completing the amount of the
registration fee pursuant to Rule 457 based upon a bona fide estimate of the
maximum offering price.
(2) Includes 612,593 shares of Common Stock held by, or to be issued to, certain
shareholders referred to in the Prospectus as "Selling Shareholders."
(3) The Prospectus contained in this Registration Statement is identical to the
Prospectus contained in Amendment No. 1 to Form SB-2 filed in connection
with Registration No. 333-17423 on May 1, 1997. Applicant hereby combines
such Prospectus pursuant to Rule 429(a). For the purposes of Rule 429, all
securities sought to be registered pursuant to Registration No. 333-17423
(i.e. $22,755,000) are being carried forward. The entire filing fee ($6,896)
associated with the securities sought to be registered pursuant to this
Registration Statement has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES
ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
NEVADA MANHATTAN MINING INCORPORATED
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 REGISTRATION
STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
---------------------------------------------------------- -------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front Cover of
Prospectus................................................ Outside Front Cover
2. Inside Front and Outside Back Cover Pages of Prospectus... Inside Front Cover Page
3. Summary Information and Risk Factors...................... Summary of Offering; Risk
Factors
4. Use of Proceeds........................................... Use of Proceeds
5. Determination of Offering Price........................... Risk Factors
6. Dilution.................................................. Risk Factors; Description of
Securities Being Offered
7. Selling Security Holders.................................. Principal and Selling
Shareholders
8. Plan of Distribution...................................... Plan of Distribution
9. Legal Proceedings......................................... Legal Matters, Auditors, and
Legal Proceedings
10. Directors, Executive Officers, Promoters and Control
Persons................................................... Management; Principal and
Selling Shareholders
11. Security Ownership of Beneficial Owners and Management.... Management; Principal and
Selling Shareholders
12. Description of Securities................................. Description of Securities Being
Offered
13. Interest of Named Experts and Counsel..................... Management
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................ Management -- Limitations on
Director and Officer Liability
15. Organization Within Last Five Years....................... Inapplicable
16. Description of Business................................... Description of Company's
Business and Property
17. Management's Discussion and Analysis of Financial Position
and Results of Operations................................. Management's Discussion and
Analysis of Financial Position
and Results of Operations
18. Description of Property................................... Description of Company's
Business and Property
19. Certain Relationships and Related Transactions............ Management -- Significant
Employees and Consultants;
Management -- Summary
Compensation Table;
Management -- Options and Stock
Appreciation Rights;
Description of Company's
Business and Property -- the
Nevada Property
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM SB-2 REGISTRATION
STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
---------------------------------------------------------- -------------------------------
<C> <S> <C>
20. Market for Common Equity and Related Stockholder
Matters................................................... Summary of Offering; Risk
Factors; Plan of Distribution;
Principal and Selling
Shareholders; Description of
Securities Being Offered
21. Executive Compensation.................................... Management -- Significant
Employees and Consultants;
Management -- Executive
Compensation
22. Financial Statements...................................... Financial Statements of Company
23. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure....................... Inapplicable
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 30, 1997
NEVADA MANHATTAN MINING, INC.
MINING - DEVELOPMENT - EXPLORATION
SHARES
OF COMMON STOCK
($.01 PAR VALUE)
AT $ PER SHARE
Nevada Manhattan Mining, Inc. (The "Company"), is a Nevada corporation
which was formed in 1985 (originally under the name "Epic Enterprises, Ltd.")
for the purpose of engaging in the mining of precious metals with an emphasis in
the mining of gold and silver.
On the terms and conditions which follow, the Company and certain of its
existing shareholders (the "Selling Shareholders") hereby offer a minimum of
$1,500,000 of its common stock shares and a maximum of $9,000,000 of its common
stock (the "Common Stock") at a price of $ per share which shall be issued,
if at all, on or before the Offering Commitment Date (presently scheduled for
December 31, 1997). The balance of the shares hereby offered represent Common
Stock in the possession of the Selling Shareholders or which are required to be
registered in order to effect the conversion of convertible debt securities
recently issued by the Company. The Selling Shareholders and the entities
holding the convertible debt securities or registration rights will be entitled
to sell any portion of their shares of Common Stock being registered pursuant to
this Offering. The Common Stock will be offered only to persons who meet the
suitability requirements outlined elsewhere in this Prospectus. The minimum
investment for each prospective Investor will be an investment of $5,000 in
shares of Common Stock. The minimum aggregate amount of Subscriptions which may
be accepted by the Company prior to the Offering Commitment Date in order to
activate this Offering will be $1,500,000. Prior to that time, all Subscription
funds will be held in an interest-bearing depository account in a bank or
financial institution selected by the Company. If at least $1,500,000 in
Subscriptions are not accepted by the Company by the Offering Commitment Date,
all Subscription funds, plus any interest earned thereon (at the rate of 3% per
annum) will be promptly returned to the prospective Investors who tendered such
Subscriptions.
The Company's Common Stock is currently traded on the Electronic Bulletin
Board. As of July 30, 1997, the "bid" and "ask" prices of the Common Stock were
$6.25 and $6.312, respectively.
The offering represented by this Prospectus (the "Offering") involves
certain factors which should be considered by all prospective Investors. See
"RISK FACTORS."
(Cover continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------
Per Unit..................................... $ $ $
- ---------------------------------------------------------------------------------------------------------
Total Minimum................................ $ $ $
- ---------------------------------------------------------------------------------------------------------
Total Maximum................................ $ $ $
=========================================================================================================
</TABLE>
(1) The minimum amount of shares which may be purchased by a prospective
Investor will be Five Hundred (500) shares at a price of Dollars ($ .00)
per share or a total of Thousand Dollars ($ ,000). The Company reserves
the right to sell the Common Stock in additional increments of one hundred
(100) shares provided the minimum number of shares ( ) is purchased.
(2) The Company intends to offer the Common Stock on a best-efforts basis. Sales
will only be made by Affiliates of the Company including the Company's board
of directors and executive officers. The Company may also enter into
Underwriting Agreements with broker-dealers who are members of the National
Association of Securities Dealers, Inc. It is anticipated that sales and
underwriting commissions equal to ten percent (10%) of Subscriptions will be
paid to those persons or entities entering into Underwriting Agreements.
(3) Does not include the provision of up to One Hundred Twenty Thousand Dollars
($120,000) for Organization and Offering Expenses or the use of proceeds
relative to the sale of Common Stock by the Selling Shareholders. See
Section of the Prospectus entitled "USE OF PROCEEDS."
THE DATE OF THIS PROSPECTUS IS , 1997.
LOGO
<PAGE> 5
(Cover page continued)
In particular, prospective Investors should consider that:
- the Company has recently commenced the mining and extraction of precious
metals from the Nevada Property, timber production on certain of the
Brazilian Timber Properties, and exploration activities on certain of the
Indonesian Concessions. The Company has generated approximately $290,000
in revenues as of May 31, 1997, due primarily from its operations in
Brazil. No revenue has been generated to date from the Indonesian
Concessions. The Company has realized a net loss of $3,685,509 for the
fiscal year ending May 31, 1997 and has an accumulated deficit of
$15,836,084 since inception. No assurance can be given that the Company
will be able to profitably conduct mining or timber operations even if
all Subscriptions are sold pursuant to this Offering.
- mining and natural resources operations are speculative by their nature.
Prospective Investors should consider that unexpected problems, expenses,
and delays are typically encountered in the development of complex mining
and timber properties thereby further complicating the ability of
companies to successfully develop its properties.
- the Company has identified 1,500 tons on which proven and probable
reserves exist (in addition to the 5,500 tons on which $40,000 in gold
ore has been produced) on the Nevada Property and has not identified any
other proven and probable reserves on any of its remaining mining
properties at present.
- having completed the initial phase of exploration and development on the
Nevada Property and having received permits to commence operations
thereon, additional development and other expenses and further permitting
related to the Nevada Property is likely to be ongoing.
- the Company's operations are subject to substantial governmental
regulation including federal, state, and local regulations concerning
mine safety and environmental protection. Compliance with these
regulations may cause significant delays in the ongoing permitting
process or may prevent the Company from ultimately maintaining the
permits necessary to continue commercial mining operations on the Nevada
Property, to continue operations on the Brazilian Timber Properties,
and/or continue its exploration activities on the Indonesian Concessions.
In addition, the Company's operations in Indonesia are subject to the
potential inability to obtain adequate legal protection through the
Indonesian legal system.
- prospective Investors who subscribe to the Common Stock will be subject
to an immediate dilution of up to Dollars Cents ($ ) per
share.
- the Company does not currently intend to pay dividends and the rights of
shareholders of the Common Stock to receive dividends are subordinate to
the holders of the Company's Preferred Stock.
- while the Company is currently trading on the Electronic Bulletin Board
of NASDAQ, no assurance that the current market for the Common Stock can
be maintained.
i
<PAGE> 6
SUMMARY OF THE OFFERING
This summary is provided for quick reference only and is qualified in its
entirety by the terms and conditions outlined in the remainder of this
Prospectus and by the financial statements including the notes thereto appended
to this Prospectus. Prospective Investors are urged to carefully review the
entire Prospectus and to consult with their legal and/or professional advisors
before reaching an investment decision.
THE COMPANY
The Company was initially formed to develop the Nevada Property and other
gold mining properties which it had previously owned and has since abandoned.
The Company has recently acquired the rights to harvest various species of
hardwoods in up to 750,000 hectares (approximately 1,900,000 acres) of virgin
timber properties located on various tracts throughout the state of Para, Brazil
and the rights to acquire a sawmill facility near the town of San Miguel do
Guama. In addition, the Company has also acquired the rights to seven (7) gold
mining concessions and three (3) coal mining concessions in Indonesia.
The Company has its principal executive offices at 5038 North Parkway
Calabasas, Suite 100, Calabasas, California 91302. Its telephone number is (818)
591-4400 and its facsimile number is (818) 591-4411. See "DESCRIPTION OF
COMPANY'S BUSINESS AND PROPERTY."
PRINCIPAL OBJECTIVES OF THIS OFFERING
The Net Proceeds derived from this Offering will be used for the following
purposes:
<TABLE>
<CAPTION>
MINIMUM SUBSCRIPTIONS MAXIMUM SUBSCRIPTIONS
--------------------- ---------------------
<S> <C> <C>
Acquisition and Development of Brazilian Timber
Properties(1)..................................... $ 500,000 $ 3,415,200
Expansion of Mine, Exploration and Development of
Nevada Property, and Mill Expansion(2)............ $ 400,000 $ 1,500,000
Exploration Activities on Indonesian
Concessions(3).................................... $ 225,000 $ 1,500,000
General and Administrative Expenses(4).............. $ 150,000 $ 1,000,000
</TABLE>
- ---------------
(1) The Company, through its eighty-percent (80%) subsidiary, Equatorial
Resources, has acquired the rights to harvest timber on up to 750,000
hectares of virgin timber properties located throughout the state of Para,
Brazil and to acquire a sawmill facility near San Miguel do Guama, Brazil.
The Company intends to expend up to $3,415,200 in connection with its
harvesting operations and to make improvements to its sawmill facility. The
Company is in various stages of due diligence and development as more
particularly described in the Section of the Prospectus entitled
"DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY."
(2) The Company anticipates expending up to $1,500,000 to expand mining
operations on the Nevada Property consistent with the Nevada Business Plan
as more described in the Section of the Prospectus entitled "DESCRIPTION OF
COMPANY'S BUSINESS AND PROPERTY."
(3) The Company currently projects that up to $1,500,000 will be expended on
exploration activities including data collection, reconnaissance surveying,
reporting, field work, sampling, data processing, laboratory analyses,
prospect evaluation, mineralization mapping, additional acquisitions, and
exploration drilling activities.
(4) Up to $1,000,000 of Net Proceeds has been allocated for working capital and
general and administrative expenses.
THE OFFERING
The Offering represents a proposal by the Company to sell up to $9,000,000
in shares of Common Stock at $ per share and to register up to 612,593
shares of Common Stock held by or which may be issued to the Selling
Shareholders for the benefit of such Shareholders. A minimum of $1,500,000 in
shares of Common Stock and a maximum of $9,000,000 are being offered by the
Company. The Selling Shareholders and the entities which hold convertible debt
securities recently issued by the Company and/or registration rights with
1
<PAGE> 7
respect to existing securities will be entitled to sell all or any portion of
the shares of Common Stock being registered on their behalf pursuant to this
Offering.
The Offering will expire at 5:00 p.m. (PDT) on December 31, 1997 (the
"Offering Commitment Date"), unless extended by the Company for a period or
periods up to and through March 31, 1998 (the "Offering Termination Date"), or
unless this Offering is terminated prior to such date by the Company. The
Company has designated U.S. Stock Transfer Corporation, Glendale, California,
its current transfer agent and registrar, to act as Transfer Agent. Prior to the
Offering Commitment Date, all Subscription funds will be held in an
interest-bearing depository account with (the "Bank"). The account
will earn interest at the rate of three percent (3%) per annum. Provided the
minimum number of Subscriptions are accepted by the Offering Commitment Date,
the Company will offer and sell shares of Common Stock through the Offering
Termination Date. If the minimum amount of Subscription funds are not accepted
by the Offering Commitment Date (i.e. $1,500,000), all funds held in the escrow
account will be promptly returned to the prospective Investors who tendered such
funds. Any interest earned on Subscription funds will be distributed to the
prospective Investors tendering such funds upon activation or termination of the
Offering, as the case may be. The minimum Subscription will be 500 shares or
$ . The Company reserves the right to sell additional one hundred (100)
share lots of Common Stock provided each prospective Investor agrees to
subscribe to a minimum of 500 shares.
SUITABILITY REQUIREMENTS
Offers and sales of shares of Common Stock will only be made to persons who
meet the following minimum suitability requirements:
1. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of Fifty
Thousand Dollars ($50,000); or
2. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of
Thirty-Five Thousand Dollars ($35,000) plus, during the year of investment,
anticipates gross income as defined by Internal Revenue Code section 61 in
excess of Sixty-Five Thousand Dollars ($65,000).
The Company will require all prospective Investors to execute and deliver
prospective investor questionnaires and subscription agreements so as to assure
that each prospective Investor meets the suitability requirements noted in the
previous paragraph.
PLAN OF DISTRIBUTION
The Common Stock will be offered by the Company and Affiliates on a
"best-efforts" basis to persons whom the Company believes to possess the minimum
suitability standards. In cases where offer and sales of the Common Stock are
affected by the Company and/or its Affiliates, no sales or underwriting
commissions will be paid. In the event the Company enters into Underwriting
Agreements with persons or entities who are broker-dealers and members of the
National Association of Securities Dealers, Inc. ("NASD"), the Company may allot
up to ten percent (10%) of the Subscription price for the Common Stock as sales
and underwriting commissions and an additional two percent (2%) of such
Subscription price as "due diligence" fees and expenses.
NO BOARD RECOMMENDATION
An investment in the Common Stock must be made pursuant to a prospective
Investor's independent investment evaluation. The advisability of such an
investment will depend upon a number of factors unique to each prospective
Investor as well as such independent evaluation of the merits of an investment
in the Common Stock. Accordingly, the Company's board of directors makes no
recommendation to prospective Investors or others regarding whether they should
purchase Common Stock.
2
<PAGE> 8
RISK FACTORS
THE PURCHASE OF SHARES OF COMMON STOCK INVOLVES A SUBSTANTIAL DEGREE OF
RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL MEANS WHO HAVE NO NEED FOR
LIQUIDITY IN THEIR INVESTMENT. THIS SECTION OF THE PROSPECTUS SETS FORTH THE
RISKS AND SPECIAL CONSIDERATIONS WHICH THE COMPANY BELIEVES MAY EXIST CONCERNING
AN INVESTMENT IN THE COMMON STOCK. PROSPECTIVE INVESTORS SHOULD RECOGNIZE THAT
FACTORS OTHER THAN THOSE SET FORTH BELOW MAY ULTIMATELY AFFECT AN INVESTMENT IN
A MANNER AND TO A DEGREE WHICH CANNOT BE FORESEEN AT THIS TIME. ALL PROSPECTIVE
INVESTORS ARE URGED TO CONSULT WITH THEIR ADVISORS PRIOR TO MAKING AN INVESTMENT
IN COMMON STOCK SO THAT THEY UNDERSTAND FULLY THE NATURE OF THE UNDERTAKING AND
THE RISKS WHICH MAY BE INVOLVED PRIOR TO INVESTING. FURTHERMORE, ALL PROSPECTIVE
INVESTORS ARE URGED TO REVIEW WITH THEIR COUNSEL, ACCOUNTANTS, AND PROFESSIONAL
ADVISORS THE FINANCIAL STATEMENTS ATTACHED TO THE PROSPECTUS. ANY DOCUMENTS
DESCRIBED IN THIS PROSPECTUS WHICH HAVE NOT BEEN ATTACHED AS EXHIBITS MAY BE
OBTAINED BY PROSPECTIVE INVESTORS AND/OR THEIR ADVISORS UPON REQUEST FROM THE
COMPANY.
HISTORY OF LOSSES
Although the Company was formed in 1985 to engage in precious metal mining
activities, its net worth is limited. The Company is and still should be
considered in its development stage, having a net worth of $7,537,653 as of May
31, 1997. As of May 31, 1997, the Company has realized an aggregate net loss
(since inception) of $15,836,084, or $1.09 per share. Until the fiscal year
ended May 31, 1997, the Company had failed to post revenues from operations.
Prospective Investors should be aware that the Company was a development-stage
company that only recently has begun to report sales. There is no guaranty that
the Company's operations will be successful or realize a profit in the future.
Moreover, the Company's net worth and the value of its Common Stock will
ultimately be dependent upon the overall success of timber operations currently
being conducted and to be conducted on the Brazilian Timber Properties, mining
operations conducted on the Nevada Property, and the Indonesian Concessions.
The financial information accompanying this Prospectus reflects the current
financial condition of the Company. It should be noted that the Company has not
yet reported a profit from operations since its inception to the present.
Management projects that the further exploration and development of its
properties will result in profitable operations although, for the reasons stated
elsewhere in this Prospectus, no guaranty to that effect can be made.
DEPENDENCE UPON MANAGEMENT
The business of the Company is and will be greatly dependent upon the
active participation of Christopher D. Michaels and Jeffery S. Kramer. The
Company also anticipates that it will be dependent upon the active participation
of other key personnel and/or consultants in the future. The Company presently
has employment agreements with both Mr. Michaels and Mr. Kramer and has entered
into agreements with key consultants; nevertheless, the loss of the services of
Mr. Michaels, Mr. Kramer and/or other key personnel (including such consultants)
regardless of reason could adversely affect the Company and the Company's
business. The Company does not maintain any life insurance policies enabling it
to receive benefits in the case of either Mr. Michaels' or Mr. Kramer's death.
In addition, Messrs. Michaels and Kramer are parties and subject to a consent
judgment wherein they are restrained from selling securities in interstate
commerce in violation of the provisions of section 5 of the Securities Act of
1933, as amended (the "Act"), or from engaging in any transaction, practice, or
course of conduct resulting in a violation of the antifraud provisions of the
Act. A violation of these provisions could result in the resignation of these
officers. To the extent that the services of Mr. Michaels or Mr. Kramer would be
unavailable to the Company for any reason, the Company might be required to
employ other executive personnel to manage and operate the Company. There is no
3
<PAGE> 9
assurance that the Company under such circumstances would be able to employ
qualified persons on terms suitable to the Company to assure the fulfillment of
the objectives stated in this Prospectus.
LACK OF DIVERSIFICATION
The Company has, in the past, maintained other mining properties for
exploration and development. These properties were located in Bolivia, South
America and Vancouver, British Columbia. Through its board of directors and
shareholders, the Company elected to abandon such other properties as a result
of uneconomic results. The Company's primary assets presently consist of the
Brazilian Timber Properties, the Nevada Property, and the Indonesian
Concessions. No assurance can be given that once the Company increases or
continues its timber operations in Brazil and completes its present exploration
and development of the Company's properties in Nevada and Indonesia as described
in further detail in this Prospectus, it will be able to establish and produce
significant revenues from such operations or become profitable. In addition,
there can be no assurance that continued development activities on the Nevada
Property and/or exploration activities currently being conducted on the
Indonesian Concessions will result in the establishment of commercial quantities
of mineralization. As a result, persons reading this Prospectus should be aware
that investment in the Common Stock represents an additional risk because the
Company's activities are presently confined to the conduct of timber operations
on the Brazilian Timber Properties, the exploration, development and gold
production on the Nevada Property, and preliminary exploration activities on
certain of the Indonesian Concessions.
HISTORY OF UNSUCCESSFUL OPERATIONS
Present management of the Company has in the past selected mining
properties which have proven to be uneconomic. There is no assurance that the
present mining, coal, and timber properties will prove to be economic or
profitable to the Company. If all or most of the properties prove to be
uneconomic, the Company may be unable to realize a profit from its operations
which may have a profound impact upon the value of the Company and the liquidity
of the Common Stock.
RISKS ASSOCIATED WITH THE COMPANY'S OPERATIONS
There are a number of risks inherent in the mining of minerals, coal and
timber operations which may have a dramatic impact on the value of the Company
and the liquidity of the Common Stock. These risks include, but are not limited
to, the ability to obtain permits, licenses and other governmental approvals,
equipment availability, implementation of proper mining and milling techniques,
title problems, compliance with environmental laws, rules, and regulations;
accuracy of reserve forecasts and dramatic fluctuations in the price of precious
metals, coal and timber/lumber prices. Because of these and other risk factors
associated with natural resource operations, the Company can give no assurance
that its shareholders will be able to realize either a return on investment or a
return of capital.
TITLE PROBLEMS TO BRAZILIAN TIMBER PROPERTIES
The Company has acquired its rights to the Brazilian Timber Properties
pursuant to harvesting agreements entered into by and between the Company's
subsidiary, Equatorial Resources, Ltd. ("Equatorial Resources"), and third
parties.
The Company has performed preliminary title work on the tracts of
properties on which current harvesting operations are being conducted. These
examinations have been conducted by legal counsel in Belem, Brazil, competent to
examine title. While Equatorial Resources has commenced timber production from
these properties, there can be no assurance that title problems and other claims
hostile to the chain of title on which the Company has relied will not arise in
the future.
Before any sums are expended by the Company on timber operations on the
other tracts of properties on which it has acquired harvesting rights the
Company intends to employ legal counsel to advise it of the status of title to
these concessions.
4
<PAGE> 10
In addition to the title problems and environmental problems commonly
associated with the development of timber properties in the United States,
foreign ownership of timber rights in foreign countries subjects a U.S.-based
company to the additional risk of political instability.
Brazil is a federative republic with broad powers granted to its federal
government. The country is divided into twenty-seven (27) states and a federal
district. It is a country rich in resources and natural advantages, but has
lagged behind its potential according to U.S. State Department publications. The
State Department further reports that the United States is Brazil's most
important commercial partner and largest investor. Bilateral agreements between
the two countries include a treaty of peace and friendship, an extradition
treaty, a joint participation agreement on communication satellites and
scientific cooperation, civil aviation, and maritime agreements. Brazil's
current federal government is headed by President Fernando Henrique Cardoso who
received 54% of the popular vote in 1994. President Cardoso's stated agendas for
Brazil include constitutional amendments for solidifying economic stabilization
and other measures designed to establish long-term stability and growth and to
improve Brazil's socioeconomic imbalances.
A recent federal law in Brazil grants certain rights to indigenous peoples
who invade individually-owned property in various regions of the country. In
cases where such invasion has occurred, the federal government has condemned the
properties and paid "just compensation" to the owners. Some of the properties in
which the Company has acquired rights are subject to this legislation. In the
case of its agreement relating to the Jonasa Concessions, any tracts
appropriated by the federal government, under this legislation are required to
be replaced by Jonasa. In the case of the tracts subject to the Terranorte
Agreement a physical inspection of the tract will be made prior to commencement
of harvesting operations. The Company and its subsidiary, Equatorial Resources,
will be subject to the risk of forfeiture of its rights in both the Jonasa
Concessions and the Terranorte Concessions in the event that Jonasa fails to
perform its obligation in the first instance or all or a portion of the tracts
on which operations are conducted on the Terranorte Concessions are condemned by
the federal government in the second instance.
It should be noted that the Company and many of its key personnel have
limited operating experience in Brazil and in timber operations. Such
inexperience could result in unsuccessful operations or unfavorable returns to
the Company
TITLE FAILURE TO THE NEVADA PROPERTY
Mineral interests in the United States are frequently owned by federal and
state governments and private parties. When a prospective mineral property is
owned by a private party or by a state, some type of property acquisition
agreement is necessary in order for a company to explore or develop such
property. Generally, these agreements take the form of purchase agreements, as
in the case of the mining agreement and property agreement discussed below, or
long-term mineral leases. All such purchase agreements and leases are generally
subject to termination in the event of a default.
In addition to the acquisition of mineral rights by state or private
parties, the Company also may acquire rights to explore for and produce minerals
on federally-owned lands. This acquisition is accomplished through the location
of unpatented mining claims upon unappropriated federal land pursuant to
procedures established by the General Mining Law of 1872, the Federal Land
Policy and Management Act of 1976 and various state laws (or the acquisition of
previously-located mining claims from a private party).
The location of a valid mining claim on federal lands requires the
discovery of a valuable mineral deposit, the erection of appropriate monuments,
the posting of a location notice at the point of discovery, the marking of the
boundaries of the claim in accordance with federal law and the laws of the state
in which it is located and the filing of a notice or certificate of location and
a map with the Bureau of Land Management and the real property recording
official of the county in which the claim is located. Failure to follow the
required procedures will render the mining claim void. If the statutes and
regulations for the location of a mining claim are complied with, the locator
obtains a valid possessory right to develop and produce minerals from the claim.
This right can be freely transferred and is protected against appropriation by
the government without just compensation.
5
<PAGE> 11
The interests represented by unpatented mining claims possess certain
unique vulnerabilities not associated with other types of property interests.
For example, in order to maintain each unpatented mining claim, the claimant
must pay a claim maintenance fee or, if qualified to do so under the small miner
exemption, annually perform not less than $100-worth of work or improvements on
or for the benefit of the claim and must file with state and federal authorities
appropriate documentation. Failure to pay the claim maintenance fee or perform
assessment work will render the claim subject to being declared void or subject
to relocation by third parties. Failure to make the required filings will make
the property deemed to be abandoned. In addition, under applicable regulations
and court decisions, in order for an unpatented mining claim to be valid, the
claimant must be able to prove that the mineral deposit on which the claim is
based can be mined at a profit both at the time the claim is located and at all
times thereafter. Thus, it is conceivable that, during times of declining metal
prices, claims which were valid when located could be invalidated by the federal
government.
No generally applicable title opinions or title insurance has been obtained
with respect to the Nevada Property with the attendant risk that some titles may
be defective. In fact, the agreements which relate to the current ownership of
the parties contain incomplete and inadequate descriptions of the mining claims.
However, on the basis of periodic status reports and reviews by the Company's
employees of the relevant land records, the Company has concluded that it has
satisfactory title to the Nevada Property subject to exceptions which the
Company does not believe materially impair the ability to continue to mine and
process the ore and to obtain the economic benefits thereof.
The Company has acquired its rights to the Nevada Property through a
variety of agreements with predecessors-in-interest. The precise nature and
amount of interest owned by the Company is now the subject of a lawsuit pending
in Nye County and more particularly described in the section of the Prospectus
entitled "LEGAL MATTERS, AUDITORS, AND LEGAL PROCEEDINGS." The Company is
seeking to obtain an order from the court declaring that the Company is the
owner of the undivided 100% interest in a substantial number of the mining
claims comprising the Nevada Property. If the Company is unsuccessful in its
request for declaratory relief, title to 50% of the interests in the Nevada
Property may be retained by persons or entities other than the Company.
The Company has recently executed a deed of trust encumbering the Nevada
Property in the principal amount of Two Million Dollars ($2,000,000) to Silenus
Limited pursuant to a privately-negotiated placement of 8% Senior Secured
Convertible Debentures described elsewhere in this Prospectus. Until such time
as all obligations due under the Debentures issued to Silenus Limited are paid,
converted or redeemed, and the encumbrances on the Nevada Property are
reconveyed to the Company, one of the primary assets of the Company, namely the
Nevada Property, will be subject to the terms and conditions of such
instruments. Any default under such agreement or the Deed of Trust which remains
uncured would subject the Company to the possible loss of the Nevada Property.
TITLE PROBLEMS ASSOCIATED WITH THE INDONESIAN CONCESSIONS
Mineral interests in Indonesia are controlled exclusively by the federal
government through the Ministry of Mines and Energy. Title to a mineral property
in Indonesia is subject to obtaining various forms of licenses for the
extraction of commercial quantities of minerals after obtaining property rights
from the fee owner. Title is confirmed by the issuance of a government seal
affixed to specific property location maps.
Because direct foreign ownership of mining concessions is difficult, if not
prohibited by Indonesian law, the Company and its subsidiary, Kalimantan
Resources, must rely upon its contractual rights under the various agreements
into which they and/or their predecessors have entered. These contracts are
described in greater detail elsewhere in this Prospectus. Should a dispute arise
as to the interpretation or enforcement of such agreements, resort to the
Indonesian judicial system will likely be required. It should be noted that
since members of the judicial branch are employed by the executive branch of the
government, a fair opportunity to assert a foreign company's rights under such
agreement may be limited.
Even if the contractual rights of Kalimantan Resources are clearly
delineated in its agreements, the Company's interests in the Indonesian
concessions are subject to title failures associated with the entities with
6
<PAGE> 12
whom Kalimantan Resources has contracted. The Company has not currently
completed its title investigations with respect to any of the Indonesian
Concessions. However, prior to the time at which any payments will be made to
the current holders of the licenses, the Company will have satisfied itself that
either it, Kalimantan Resources, or the parties with whom it has contracted
(and/or their predecessors in interest) will have good and merchantable title to
the particular licenses purported to be owned by such third parties.
Ownership of licenses to explore for and/or exploit natural resources in
foreign countries is also subject to political risks. The United States has
important economic, commercial and security interests in Indonesia because of
its growing economy and markets and its strategic location in relation to key
international straits. The U.S. and Indonesia maintain cordial and cooperative
relations, although the two countries are not bound by formal security treaties.
Indonesia is a republic based upon its 1945 constitution providing for a
limited separation of executive, legislative and judicial power. The president,
elected to a five-year term, is the overwhelmingly dominant government and
political figure. The president appoints the cabinet, currently composed of four
coordinating ministers (in the fields of political and security affairs,
economic and financial affairs, people's welfare and industrial and trade
affairs), thirteen state ministers, twenty-four ministers and three high
officials with the status of state ministers. Moreover, judges are employees of
the executive branch.
Unlike Western democratic systems, the legislative branch meets only once
during its five-year term, to formulate the overall principles and aims of the
government and to elect the president and vice president. Representative bodies
at all levels in Indonesia eschew voting, preferring to arrive at decisions
through "consultation and consensus."
Because of the presence of a strong executive branch, some foreign
companies have been forced to accede to government demands to revise licenses to
include the participation of Indonesian-owned companies, larger foreign
companies and, in some instances, the Indonesian government. The inability of a
foreign company to effectively enforce its rights in licenses issued by the
Indonesian government through the judicial branch of government represents a
risk of doing business in a developing country as compared to the United States.
GOVERNMENTAL REGULATION
Mining operations on the Nevada Property are and will be subject to
substantial federal, state and local regulation concerning mine safety and
environmental protection. Some of the laws and regulations which will pertain to
mining operations include maintenance of air and water quality standards; the
protection of threatened, endangered and other species of wildlife and
vegetation; the preservation of certain cultural resources and the reclamation
of exploration, mining and processing sites. These laws are continually changing
and, as a general matter, are becoming more restrictive. The location of the
Nevada Property is found in an area which strongly encourages mining operation.
However, the Company's inability to comply with such federal, state or local
ordinances and regulations on an ongoing basis may cause significant delays in
the permitting process or in the operations anticipated to be conducted on the
Nevada Property. In addition, delays in such compliance could result in
unexpected and substantial capital expenditures. Although no such problems or
delays are anticipated, no assurances can be given that the Company will be able
to comply with all applicable law and regulations and maintain all necessary
permits, licenses and approvals or, in the alternative, that compliance and/or
permitting will be obtained without substantial delays and/or expenses.
With regard to the Nevada Department of Conservation and Natural Resources,
Division of Environmental Protection ("NDEP"), the Company has received
authorization to proceed with its currently planned mining operations on the
Nevada Property pursuant to the applicable statutes and regulations relating to
a small mining operation. In the event, however, the Company's operations exceed
the designated limits for a limited mining operation, a full reclamation plan
will need to be prepared, submitted and approved by NDEP. The Company is
currently preparing such a reclamation plan. While the Company believes that it
will be able
7
<PAGE> 13
to obtain such approval, there is no guarantee that the required approval will
in fact be obtained by the Company.
A change in the nature or magnitude of the Company's presently anticipated
operations on the Nevada Property may trigger the need to obtain additional NDEP
and other federal, state or local governmental approvals, licenses or permits.
For example, water processing discharge needs may trigger the requirement that
the Company obtain a water pollution control permit. The Company is currently
preparing for submission of an application for a water pollution control permit.
Other significant permits, required by a change in operations on the Nevada
Property, might include an NDEP permit, air quality permit, waste management
permit, archeological clearance and wildlife permit. There is no guaranty that
the Company will be able to obtain any or all of the required federal, state or
local permits that might be required to expand its operations on the Nevada
Property.
Even if the Company does not change its currently planned operations on the
Nevada Property, the Company is nevertheless vulnerable to the various federal,
state and local laws and regulations governing regulations and protection of the
environment, occupational health, labor standards and other matters. The reason
for this is that these laws are continually changing, and as a general matter,
are becoming more restrictive.
To comply with these federal, state and local laws, the Company may in the
future be required to make capital and operating expenditures on environmental
projects both with respect to maintaining currently planned operations and the
initiation of new operations. Such projects may include, for example, air and
water pollution control equipment; treatment, storage and disposal facilities
for solid and hazardous waste; remedial actions required for the containment of
tailings pond seepage; continuous testing programs; data collection and analysis
land reclamation (specifically including existing mine and processing waste on
the Nevada Property); landscaping and construction projects. There is no
guaranty that the Company will technically or financially be able to comply with
any or all of these potential requirements.
ENVIRONMENTAL REGULATION AND LIABILITY
The Company's proposed mineral operations on the Nevada Property are and
will be subject to environmental regulation by federal, state and local
authorities. Under applicable federal and state law, the Company may become
jointly and severally liable with all prior property owners for the treatment,
cleanup, remediation and/or removal of substances discovered at the Property
which are deemed by federal and/or state law to be toxic or hazardous
("Hazardous Substances"). Liability may be imposed among other things for the
improper release, discharge, storage, use, disposal or transportation of
Hazardous Substances only in the areas which the Company disturbs.
Applicable law imposes strict joint and several liability on, among others,
"owners" and "operators" of properties contaminated with Hazardous Substances.
Such liability may result in any and all "owners", "operators" and
"transporters" of contaminated property being required to bear the entire cost
of remediation. The Company may utilize substances which have been deemed by
applicable law to be Hazardous Substances. The potential liability of the
Company under such laws will be derived from the Company's classification as
both an "owner" and "operator" of a contaminated property. While the Company
intends to employ all reasonably practicable safeguards to prevent any liability
under applicable laws relating to Hazardous Substances, mineral exploration by
its very nature will subject the Company to substantial risk that remediation
may be required. If the cleanup or remediation of hazardous substances is
required on the Nevada Property, substantial delays could occur in the
permitting process and/or in the further extraction of gold and other precious
minerals on the Nevada Property.
Much like environmental laws found in the United States, both the federal
and state governments in Brazil have adopted laws and standards relating to the
harvesting and reclamation of forests. While the Company and its subsidiary,
Equatorial Resources, have not yet fully familiarized themselves with all of
these laws and standards, Equatorial Resources has entered into an agreement
with Eco-Rating International, Incorporated ("Eco-Rating"), Zurich, Switzerland,
to better assist the Company and Equatorial Resources in understanding and
complying with such laws and standards. Under the terms of its agreement with
the
8
<PAGE> 14
Company, Eco-Rating has agreed to establish an "eco-efficiency model" designed
to enable Equatorial Resources to establish environmental management guidelines
for the conduct of activities on the Jonasa Concessions and ultimately the
remainder of the Brazilian Timber Properties consistent with all applicable
environmental laws and standards.
PUBLIC MARKET
The Company received approval for trading of its Common Stock on the
Electronic Bulletin Board (NASDAQ) in March 1996. From the period from December
1995 until March 1996, the Company published "bid" and "ask" prices on the "pink
sheets". The low and high prices for the Common Stock since commencement of
quotations are as follows:
<TABLE>
<CAPTION>
HIGH DATE LOW DATE
- ------ ---------------------------- ------ ----------------------------
<C> <S> <C> <C>
$14.50 March 3, 1997 $1.25 December 1995
</TABLE>
Over the past six months the average monthly volume of trading of the
Company's Common Stock has been approximately 800,000 shares. Prospective
Investors should be aware that the volume of trading on the Electronic Bulletin
Board traditionally has been limited and there can be no assurance that the
Electronic Bulletin Board will provide an effective market for a shareholder to
sell his or her Common Stock of the Company.
The Company's Registration Statement on Form 10 pursuant to the section
12(b) of the Securities Exchange Act of 1934 (the "Exchange Act") became
effective on June 2, 1997. The Company is now a "fully-reporting company" within
the meaning of the Exchange Act. For the periods ended May 31, 1996 and May 31,
1997, there were 834 and 1,140 shareholders respectively.
The Company has applied for listing with the American Stock Exchange
("AMEX") by requesting a preliminary listing eligibility opinion. The Company
has also applied for listing with the Philadelphia Stock Exchange.
The high and low interdealer prices for the calendar quarters since trading
began on the Electronic Bulletin Board (without retail markup, markdown or
commission) are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
--------------------------------------------------- ------- -------
<S> <C> <C>
December 31, 1995.................................. $ 1.25 $ 1.25
March 31, 1996..................................... $ 2.44 $ 1.35
June 30, 1996...................................... $ 3.75 $ 1.812
September 30, 1996................................. $ 4.25 $ 2.125
December 31, 1996.................................. $10.375 $ 2.875
March 31, 1997..................................... $ 14.50 $ 6.00
June 30, 1997...................................... $ 9.75 $3.0625
</TABLE>
CLASSIFICATION OF SECURITIES
Currently the Company's stock is not considered to be "penny stock"
pursuant to Section 3(a)(51)(A) of the Securities Exchange Act of 1934. However,
the Company makes no representations that it will be able to continue with such
classification. In the event the price of the Company's Common Stock decreases
below $5.00 per share, the Common Stock will be considered "penny stock." In
such case the Company will be subject to the increased disclosure requirements
associated with the issuers of such securities. In addition to increased
disclosure requirements, such situation may also result in either a decrease in
the liquidity of the stock or a total disappearance of a market for the Common
Stock. In either instance the difficulty associated with disposition of the
shares would greatly increase.
STOCK ISSUANCES UNDER MINING CONTRACTS
The Company has entered into various contracts with third parties to issue
Common Stock in consideration of services rendered in relation to various mining
properties. Common Stock has been issued to
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<PAGE> 15
the following parties: Harrison Western Construction Company (100,000 shares);
Maxwells Energy & Metals Technology Ltd. (400,000 shares); and Singkamas Agung
Ltd. (200,000 shares). Maxwells Energy & Metals Technology Ltd. is entitled to
receive an additional 4,000,000 shares of Common Stock if an investment banker
confirms by independent appraisal that the value of the properties subject to
the Principles of Agreement dated August 19, 1996 equals or exceeds $12,000,000.
Singkamas Agung Ltd. is entitled to receive an additional 3,800,000 shares of
Common Stock if an independent evaluation confirms that the value of the
properties subject to the Acquisition Agreement dated January 26, 1997 equals or
exceeds $40,000,000. Of the additional shares which may be issued to Singkamas
Agung Ltd., 950,000 shares are entitled to "piggy-back" registration rights.
Once these shares are issued to the various parties and such shares become
unrestricted, the sales of such securities could adversely affect the price of
Common Stock.
REGULATORY PROCEEDINGS
In May 1989, the Company received notice that the Securities and Exchange
Commission (the "Commission") had commenced an informal investigation into the
Company's compliance with the registration and disclosure requirements of the
Securities Act of 1933 (the " '33 Act") and the Securities Exchange Act of 1934
(the " '34 Act"). Thereafter the Commission commenced an extensive review of the
Company's books and records relating to the Company's business and mining
operations, its capital raising activities, and its financial condition and
history. Through all stages of the investigation, the Company voluntarily
cooperated with the Commission.
On August 3, 1993, the Commission and the Company agreed to terminate the
Commission's investigation by the entry of a consent judgment against the
Company and certain of the Company's past and present key employees. These key
employees include Christopher D. Michaels, Jeffrey Kramer and Stanley Mohr. The
terms and conditions of the consent judgment can be summarized as follows:
1. The Company and its officers, agents, servants, employees and
others receiving actual notice of the consent judgment neither admitted nor
denied any of the allegations alleged by the Commission;
2. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained and enjoined from violating section 5 of the '33 Act or from
selling securities in interstate commerce unless and until a registration
statement is in effect or the security or transaction is exempt from the
registration provisions of the '33 Act and/or the '34 Act;
3. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained from engaging in any transaction, practice, or course of
conduct, employing any course of conduct, or obtaining any money or
property by means of an untrue statement of a material fact, or any
omission to state a material fact, necessary to make the statements made in
light of the circumstances under which they were made not misleading in
violation of the antifraud provisions of the '33 Act and '34 Act.
As part of the consent judgment, the Company was required to engage an
independent certified public accountant to conduct a full and complete analysis
of the disposition of all funds received by the Company from investors and, to
the extent so discovered, to disgorge all ill-gotten gains.
On April 7, 1994, in response to the audits completed by the certified
public accountant, the Company and the Commission entered into a stipulation
regarding the resolution of all outstanding issues which then existed, which
stipulation was entered as an order by the United States District Court for the
Central District of California. Such stipulation contained an acknowledgement
that the Company and its executive officers had received no ill-gotten gains as
a result of prior activities by the Company in offering and selling its
securities, and that the consent judgment resolved once and for all, all issues
raised by the Commission as a result of the Company's prior activities. The
Company and the persons named in the formal order of investigation were not
required to pay any fines or required to disgorge any monies previously received
by it in connection with its securities.
On February 27, 1989, the Pennsylvania Securities Commission issued a cease
and desist order against the Company and Christopher D. Michaels, Jeffrey S.
Kramer, Stanley J. Mohr, and William Michaels
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<PAGE> 16
prohibiting them from violating Section 201 of the Pennsylvania Securities Act
of 1972 relating to the sale of unregistered "penny stocks."
As a result of the foregoing regulatory and judicial actions, the Company
may not be able to utilize the exemptions from registration available under
Regulation A and Rule 701 promulgated under the '33 Act and may not be able to
rely upon certain private placement exemptions afforded by applicable state blue
sky laws in connection with the offer and sale of securities in a transaction
which qualifies as exempt from qualification under the '33 Act. In such cases,
the Company would be required to register/qualify the transaction under said
blue sky laws, which would likely increase the cost of, and extend the time for
completing, any private placement of securities.
RELATIONSHIP WITH OTHER OFFERINGS
This Offering has been registered pursuant to Regulation S-B promulgated by
the Commission pursuant to the Securities Act of 1933 and the Securities
Exchange Act of 1934 (the "Federal Securities Laws"). From the period March 1,
1994, through February 28, 1997, the Company offered and sold 8,342,619 shares
of its Common Stock and 228,319 shares of Preferred Stock. In addition, the
Company concluded the private placement of its Debentures in a negotiated
transaction with certain investors more particularly described in the Section of
the Prospectus entitled "PRINCIPAL AND SELLING SHAREHOLDERS." With the exception
of the placement of the Debentures, these sales were made primarily to its
existing shareholders. The Company has relied upon applicable exemptions from
the registration requirements of the Federal Securities Laws and upon compatible
exemptions from securities registration under applicable state ("blue sky")
laws. In the event that it is determined that the Company sold and issued these
securities without complying with either the Federal Securities Laws or blue sky
laws, the purchasers of these securities may have the right to rescind the sale
of these securities and to recover the purchase price paid to the Company plus
interest accrued on such purchase price. The Company does not currently have
funds with which it could repay the purchase price and accrued interest from any
prior sale of securities. Moreover, it is doubtful that the Company could
continue operations if a significant number of existing shareholders were to
seek to rescind their purchases of securities. The financial statements of the
Company do not reflect a contingent liability for any such rescission rights.
FINANCIAL RISK OF PROPOSED ACTIVITIES
If substantially less than all of the Common Stock hereby offered by the
Company pursuant to this Offering is sold, the Net Proceeds derived from this
Offering will not be sufficient to finance all of the activities contemplated by
this Offering. The Company's activities in Indonesia and on the Nevada Property
in particular will be financed primarily, if at all, from the Net Proceeds
derived from this Offering and from existing capital which the Company then
possesses as a result of revenue earned from its Brazilian operations. The
Company's future operations in Brazil are projected to be financed from the Net
Proceeds derived from this Offering and from current operations being conducted
in Brazil. If the activities contemplated by the Company's Business Plan and its
operations in Brazil do not prove to be profitable or successful, the Company
may suffer a loss with respect to operations conducted on the Properties, or in
the alternative, may be required to abandon the Brazilian Timber Properties, the
Nevada Property and/or Indonesian Concessions as noneconomic. If such is the
case, prospective Investors may risk all or a substantial loss of their
investment in the Common Stock.
VALUATION OF COMMON STOCK
The price per share of the Common Stock has been established based upon the
current market price for the Common Stock. The current price is substantially
higher than the average share price paid by existing shareholders of the
Company. The Company has also considered several factors in determining the
purchase price per share for the Common Stock including the state of development
of the Properties, Company's management, the Company's current financial
condition, and the general condition of the securities market. Prospective
Investors should be advised that the price per share is not related to the
Company's value of its assets, net worth, or results of operations conducted on
the Properties. As a result, there is no assurance that
11
<PAGE> 17
prospective Investors will be able to liquidate their investment in the Common
Stock or on terms resulting in any ultimately favorable return on their
investment or upon any terms.
SIGNIFICANT DILUTION
The net book value of the Company per share as of May 31, 1997, was
approximately fifty-two cents ($.52) per share. After taking into consideration
the conversion rights of the shareholders holding or entitled to hold Preferred
Stock as of May 31, 1997 (but exclusive of any dividends paid in stock), the
total number of shares of Common Stock outstanding as of May 31, 1997, other
transactions described elsewhere in this Prospectus requiring the Company to
issue shares to others within sixty (60) days, and assuming all $9,000,000 of
the Company's Common Stock are sold pursuant to this Offering, the net tangible
book value of the Common Stock immediately after the Offering after deducting
One Million Two Hundred Thousand Dollars ($1,200,000) in Organization and
Offering Expenses will be approximately Dollar and Cents ($ ) per
share of Common Stock. Investors who subscribe to shares of Common Stock will
therefore realize an immediate dilution of Dollars and Cents
($ ) per share of Common Stock. Assuming only the minimum number of shares
are sold pursuant to this Offering, the net tangible book value of the Common
Stock immediately after the Offering after deducting One Hundred Eighty Thousand
Dollars ($180,000) in Organization and Offering Expenses will be approximately
cents ($. ) per share. Investors who subscribe to shares of Common Stock
under these circumstances will therefore realize an immediate dilution of
Dollars and Cents ($ ) per share. The price to be paid by Investors
pursuant to this Offering should be compared to the prices paid by and the
options granted to certain of the Company's executive officers, directors and
the Selling Shareholders. See "DESCRIPTION OF SECURITIES BEING OFFERED" and
"PRINCIPAL AND SELLING SHAREHOLDERS."
FLUCTUATION OF COMMODITY PRICES
Since its deregulation in August 1971, the market price for gold has been
highly speculative and volatile. Since 1980, gold has fluctuated from a high of
approximately $850 per ounce in January 1980 to a low of approximately $285 per
ounce in 1985. Currently gold is trading at approximately $320 per ounce. In
1996, gold averaged over $380 per ounce. Instability in gold prices may effect
the profitability of the Company's future operations.
Similarly coal and timber prices fluctuate. Natural resources have
traditionally evidenced volatile swings in pricing, thereby affecting overall
the relative profitability of engaging in these lines of business. For example,
timber prices increased fifty-two percent (52%) in 1996 while coal prices have
remained relatively stable for the past several years.
DIVIDENDS
The Company has not paid cash dividends on any of its Common Stock and does
not anticipate paying any cash dividends on any of its Common Stock for the
foreseeable future. Holders of the Preferred Stock are entitled to an annual
cash or stock dividend offered at the rate of eight percent (8%) per year
payable out of any funds legally available therefor and payable on January 1,
April 1, July 1, and October 1 of each year. Such dividends are cumulative so
that if full dividends in respect of any previous dividend period are not paid,
holders of the Preferred Stock are entitled to receive any deficiency before any
dividend or other distribution may be made or declared by the Company with
respect to any other class of stock including other series of preferred shares
should the Company elect to issue such additional series.
As of the date of this Prospectus, no accrued quarterly dividends payable
to the holders of the Preferred Stock (which were $160,500 as of May 31, 1997)
have been paid. Management of the Company is presently scheduling payment of
accrued dividends in Common Stock as authorized in the Company's "Certificate of
Determination of Preferences of Series A Preferred Stock" filed with the Nevada
Secretary of State on October 25, 1995 at the time that the Preferred Stock is
converted into Common Stock on or before the earlier of the effective date of
this Prospectus or December 31, 1997.
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<PAGE> 18
USE OF FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are found in the Sections of the Prospectus entitled "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION", "DESCRIPTION OF COMPANY'S BUSINESS AND
PROPERTY" and elsewhere. Prospective Investors are cautioned that the
assumptions upon which such statements are based cannot be guarantied by the
Company to occur in the future or that the overall success of the Company might
be materially adversely affected should such bases (or some of them) not occur.
Moreover, the safe harbor afforded by the Private Securities Litigation Reform
Act of 1995 is not available to the Company or management because such safe
harbor does not apply to initial public offerings.
TERMS OF THE OFFERING
GENERAL
The Company is hereby offering a minimum of $1,500,000 in shares of Common
Stock and a maximum of $9,000,000 in shares of its Common Stock. An additional
612,593 shares of Common Stock held in the names of or which may be issued to
the Selling Shareholders are being registered pursuant to this Offering. Selling
Shareholders will be entitled to sell all or any portion of the shares so
registered on their behalf pursuant to this Offering.
The primary purposes for which Net Proceeds derived from this Offering are
to be used include the following:
1. Expending up to Three Million Four Hundred Fifteen Thousand Two
Hundred Dollars ($3,415,200) to further develop the Brazilian Timber
Properties, to make improvements and additions to the sawmill facility
located near San Miguel do Guama and to acquire and develop additional
timber concessions or properties located adjacent to, in the vicinity of,
or in areas comparable with the Brazilian Timber Properties;
2. Further developing the Nevada Property consistent with the Nevada
Business Plan;
3. Expanding and/or delineating (to increase reserves and potential
reserves) the Nevada Property, acquiring up to a fifty percent (50%)
interest in the mill constructed approximately one mile from the Nevada
Property and/or constructing its own mill on the Property. In addition or
in the alternative, the Company may enter into a contract for milling
services with New Concept Mining or to purchase all of the equipment
necessary to construct a mill on site at the Nevada Property;
4. Expending up to One Million Five Hundred Thousand Dollars
($1,500,000) to explore and develop the Indonesian Concessions; and
5. Paying up to One Million Dollars ($1,000,000) in general and
administrative expenses and/or retaining all or a portion of said sum as
working capital.
SUBSCRIPTION
There are hereby offered a total of $9,000,000 in shares of the Company's
Common Stock at a price of $ per share. In addition, the Selling Shareholders
are registering 612,593 shares pursuant to this Offering. Each prospective
Investor must purchase a minimum of $5,000 in shares of Common Stock. In
addition, each prospective Investor will have the right to purchase additional
blocks of 100-share lots of Common Stock.
The Offering Commitment Date is presently scheduled for December 31, 1997,
although the Company hereby reserves the right to extend this Offering through
March 31, 1998 (the "Offering Termination Date"). On or before the Offering
Commitment Date, the Company will be required to accept Subscriptions amounting
to the purchase of at least $1,500,000 in shares of Common Stock or to terminate
the Offering
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without having sold any of the Common Stock. The Company reserves the right to
accept Subscriptions through the Offering Commitment Date unless this Offering
is terminated by the Company prior to such date.
Each Subscription for the Common Stock will be held in an escrow account
established with ________ (the "Bank"). Until such time as a minimum number of
Subscriptions are accepted or the Offering Commitment Date is reached without
the acceptance of the minimum number of Subscriptions necessary to activate this
Offering, Subscription funds will be held in the escrow account but may be
invested in short-term certificates of deposit, short-term government
securities, demand deposits and bank money market accounts.
If Subscriptions amounting to at least $1,500,000 (i.e. shares) are
not accepted on or before the Offering Commitment Date, all Subscription funds
together with any interest earned (at the rate of 3% per annum) on such funds
held in the escrow account will be promptly returned to the persons whose funds
were deposited in the escrow account. If Subscriptions amounting to at least
$1,500,000 are accepted by the Offering Commitment Date, further Subscriptions
which are accepted by the Company will be deposited into an account opened up on
behalf of the Company at the Bank and will not be subject to the terms and
conditions of the escrow account. Any interest earned on Subscription funds will
be distributed to prospective Investors tendering such funds upon activation or
termination of the Offering as the case may be.
The Company reserves the right to discontinue this Offering at any time and
also reserves the right, in its absolute discretion, to reject, in whole or in
part, any Subscription. No assurance can be given that any or all of the Common
Stock will be sold.
SUITABILITY OF INVESTORS
Sales of Common Stock may be made pursuant to this Offering only to persons
who represent that they meet the following minimum requirements:
1. He/she (either alone or together with his/her spouse) has a net
worth (inclusive of home, furnishings, and automobiles) in excess of
$50,000; or
2. He/she (either alone or together with his/her spouse) has a net
worth (exclusive of home, furnishings, and automobiles) in excess of
$35,000 and during the year of investment anticipates gross income as
defined by Internal Revenue Code section 61 in excess of $65,000.
The Company will require all prospective Investors to execute and deliver
prospective investor questionnaires and subscription agreements so as to assure
that each prospective Investor meets the suitability requirements noted in the
previous paragraph.
PLAN OF DISTRIBUTION
The Common Stock will be offered by the Company through its Affiliates on a
"best-efforts" basis to prospective Investors who the Company believes to
possess the minimum suitability standards outlined elsewhere in this Prospectus.
In cases where offers and sales of the Common Stock are affected by the Company
and/or its Affiliates, no sales or underwriting commissions will be paid. In the
event the Company enters into Underwriting Agreements with persons or entities
who are broker-dealers and members of the National Association of Securities
Dealers, Inc. ("NASD"), the Company may allot up to ten percent (10%) of the
Subscription price for the Common Stock as sales and underwriting commissions
and an additional two percent (2%) of such Subscription price as "due diligence"
fees and expenses.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE AND/OR THE
PHILADELPHIA STOCK EXCHANGE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
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DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY
THE COMPANY
Nevada Manhattan Mining Incorporated (the "Company") was formed on June 10,
1985, in the state of Nevada under the name of Epic Enterprises, Ltd. On
September 11, 1987, the Company amended its Articles of Incorporation changing
its name to Nevada Manhattan Mining Incorporated. The Company's articles
currently authorize the issuance of 49,750,000 shares of Common Stock with a par
value of one cent ($.01) per share and 250,000 shares of Series A Preferred
Stock with a par value of $1.00 per share (the "Preferred Stock") convertible
into Common Stock on the terms and conditions described elsewhere in this
Registration Statement. There were 12,273,565 shares of the Company's Common
Stock and 228,319 shares of the Preferred Stock issued and outstanding as of May
31, 1997. The average price per share paid for the Common Stock issued directly
by the Company has been approximately $2.00 per share. Holders of the Preferred
Stock have paid $10.00 per share with an effective purchase price for the Common
Stock (after giving effect to the conversion thereof on a one-for-ten basis) of
$1.00 per share. In addition, the Company has recently issued approximately
$3,500,000 of 8% Senior Secured Convertible Debentures in two
privately-negotiated transactions.
The Company was formed primarily to develop the Nevada Property, other gold
mining properties which it had previously owned, and certain gold mining
properties which it has recently acquired. Pursuant to prior action of both the
Company's directors and its shareholders, certain gold mining properties have
been abandoned. The Company has recently acquired various timber concessions and
a sawmill facility in Brazil and the rights to seven (7) gold mining concessions
and three (3) coal mining concessions in Indonesia.
The Company has its principal executive offices at 5038 North Parkway
Calabasas, Suite 100, Calabasas, California 91302. Its telephone number is (818)
591-4400 and its facsimile number is 818 591-4411.
Management of the Company presently consists of a five-member board of
directors (two of which are neither executive officers nor employees). The
Company employs two (2) full-time executive officers as well as seven (7)
full-time employees at its principal offices. The Company's subsidiary,
Equatorial Resources, Ltd., also employs approximately 90 persons in Brazil who
are employed in various capacities relating to either its sawmill facility or
its harvesting operations being conducted on the Brazilian Timber Properties.
THE COMPANY'S SUBSIDIARIES
Equatorial Resources, Ltd. Equatorial Resources, Ltd., (hereinafter
"Equatorial") was incorporated in the British Virgin Islands as an international
business company on December 13, 1996. Equatorial currently maintains offices in
Road Town, Tortola, British Virgin Islands with its primary business office
located in Calabasas, California. Equatorial's board of directors consists of
three (3) members with such number being able to increase to seven. Its
authorized capitalization is 25,000 shares of common stock and 25,000 shares of
preferred stock with its largest single shareholder being Nevada Manhattan
Mining Incorporated which owns 80% of Equatorial's outstanding common shares.
Equatorial's primary business purpose is the acquisition and development of
timber producing property in the Amazon Basin of Brazil. Since Equatorial's
inception, it has acquired the right to develop and/or harvest virgin timber
properties on up to approximately 750,000 hectares located in the state of Para,
Brazil, and the right to acquire a sawmill facility located near the town of San
Miguel do Guama, Brazil. In the development of such properties Equatorial
currently employs approximately 90 persons, most of whom are Brazilian nationals
employed in connection with the operations being conducted at the sawmill or in
connection with the timber harvesting operations on the Terranorte Concessions.
Kalimantan Resources, Ltd. Kalimantan Resources, Ltd., (hereinafter
"Kalimantan") was incorporated in the British Virgin Islands as an international
business company on September 16, 1996. Kalimantan currently maintains offices
in Road Town, Tortola, British Virgin Islands with its primary business office
located in Calabasas, California. Kalimantan's board of directors consists of 3
members with such number being able to increase to seven. Its authorized
capitalization is 1,000 shares of common stock with its sole shareholder being
Nevada Manhattan Mining Incorporated.
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Kalimantan's primary business purpose is to enter into contracts for the
exploration and if warranted the development and extraction of coal and gold ore
in Indonesia. Since Kalimantan's inception it has: entered into an agreement to
acquire a fifty-one percent (51%) interest in a gold exploration property
comprising 10,000 hectares (25,000 acres) located in East Kalimantan; entered
into two (2) additional agreements to acquire an additional six (6) gold mining
concessions aggregating over 23,400 hectares (58,500 acres) and three (3) coal
mining concessions comprising 290,000 hectares (725,000 acres); and entered into
an agreement with Maxwells Energy and Metals Technology Ltd. to substitute the
acquired original 10,000 hectare property for a 16,000 hectare (40,000 acre)
tract located elsewhere on the island of Kalimantan.
In 1989, the Company formed a Shareholder Advisory Committee (the "Advisory
Committee") comprised of up to 12 outside shareholders. The purpose of the
Advisory Committee is to participate in directors' meetings and compensation
meetings, as well as planning meetings related to all aspects of corporate
development. Members are selected annually from a group of shareholders who
respond to Company inquiries regarding interest in participating on the Advisory
Committee. Membership is rotated annually. One of the primary purposes of this
Committee is to provide independent, shareholder participation in critical
decisions relating to overall corporate strategy.
The Company has contracted with Harrison Western Mining and Construction,
Lakeland, Colorado, to supply labor, service, materials and equipment for Nevada
property operations. The Company has also entered into agreements with: Gold
King Mines Corporation to provide mining consulting services with respect to the
Nevada Property; Behre Dolbear & Company, Inc. and its affiliates, to provide
oversight and third-party validation services relative to the exploration and
development activities on the Indonesian Concessions; Eco-Rating International,
Inc., to provide an economic and environmental evaluation of the Company's
Brazilian Timber Properties; and with British Far East Holdings Ltd. to provide
certain financial and management consulting services.
THE COMPANY'S BUSINESS
The Company's business is the harvesting of timber and the production of
rough sawn lumber and other finished wood products in Brazil and the exploration
and mining of precious metals and coal in Nevada and Indonesia, To this end the
Company has within the last year acquired the right to conduct exploration
activities on three (3) coal properties in Indonesia, and the right to develop
and/or harvest virgin timber properties on up to approximately 750,000 hectares
located in the state of Para, Brazil, and the right to complete its acquisition
of a sawmill facility located near the town of San Miguel do Guama, Brazil which
it currently operates. The Company holds various rights in and to the following
properties: (i) various timber properties aggregating up to approximately
750,000 hectares and sawmill facilities all of which are located in the state of
Para, Brazil (the "Brazilian Timber Properties"); (ii) twenty-eight (28)
patented and sixty-five (65) unpatented claims aggregating approximately 1,800
acres (the "Nevada Property") which are located near the town of Manhattan,
Nevada (approximately 45 miles northeast of Tonopah, Nevada); (iii) seven (7)
gold concessions aggregating 39,400 hectares (98,500 acres) which are located in
both the gold belt area of Kalimantan, Indonesia, and on the island of Sumatra
(see "Indonesian Gold Concessions"); and (iv) three (3) coal properties located
in Kalimantan, Indonesia, comprising 290,000 hectares (725,000 acres) (the
"Indonesian Coal Concessions"). A more thorough description of the properties is
contained within portions of this Section of this Prospectus entitled "The
Brazilian Timber Properties," "The Nevada Property," and "The Indonesian
Concessions."
Management of the Company generally reviews all proposed natural resources
projects submitted by third parties. The Company initially will be heavily
dependent upon the operations presently being conducted in Brazil.
The Company has budgeted the sum of One Hundred Thousand Dollars ($100,000)
from sums anticipated to be spent for compliance with applicable environmental
laws. However, the Company can provide no assurance that the amount so budgeted
for environmental compliance will be consistent with the amounts actually spent
for compliance or that the actual amount of such compliance may not be
substantially greater than that which has been projected to be spent by the
Company pursuant to the budget.
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It should be noted that over the past three years, the Company has expended
almost dollars ($ ) on
development expenses on or relating to the Nevada Property. These expenses
relate primarily to developing the most effective means by which to extract the
ore and transport it to the New Concept mill approximately one mile from the
Nevada Property.
THE BRAZILIAN TIMBER PROPERTIES
The Company has acquired various rights to up to 750,000 hectares of timber
properties located on various tracts of land in the state of Para, Brazil. In
addition, the Company has entered into an agreement to acquire and is currently
operating a sawmill facility located near the town of San Miguel do Guama. The
property areas contain a variety of timber species of which initially only
seventeen (17) of the most commercial of the one hundred twenty-five (125)
available species have been selected and factored into the Company's economic
forecasts. The other species will be harvested at the appropriate time.
All shipping and associated transportation services will be provided by the
Jonasa Group, one of the largest private shipping companies in the Amazon Basin.
Their expertise and political position are anticipated to provide invaluable
support to the operation and as a participant in the joint venture, allow for
operating efficiencies that greatly enhance profitability.
To date, One Million Four Hundred Thousand Dollars ($1,400,000) has been
provided by the Company for initial start-up of its operations in Brazil. The
Company has budgeted up to an additional Three Million Four Hundred Fifteen
Thousand Dollars ($3,415,000) for the additional expansion noted above.
The United Nations Food and Agricultural Organization (F.A.O.), Simons
Corporation (Canada) and Reid, Collins & Associates, Ltd. (Canada), highly
respected forestry experts, have evaluated 24,000 hectares of the total holdings
and have posited that each hectare will yield approximately 200 cubic meters of
raw timber. If these evaluations are accurate with respect to all of the Jonasa
Concessions, the total potential asset value of all 276,000 hectares would be
approximately 55.2 million cubic meters of raw hardwood timber.
The Company has also agreed to pay the sum of Three Million Dollars
($3,000,000) to Ignatius Z. Theodorou on or before December 31, 1998 in
consideration of Mr. Theodorou's services rendered and transfer of rights to
various business opportunities including the rights to the Jonasa Concessions
and the sawmill facility at San Miguel do Guama.
The Company has received approximately $290,000 for the sawed lumber
produced to date. All of this revenue has been reinvested in improvements to the
mills and infrastructure on the property. The Company's subsidiary, Equatorial
Resources, Ltd., currently employs approximately 90 persons to operate the mills
and conduct the activities contemplated under the agreements pertaining to these
concessions. Potential markets for the lumber include the Far East, Brazil,
Europe and the United States.
The description of the Company's proposed activities relating to the
Brazilian Timber Properties which follows summarizes the activities more
particularly described in the 1997 Business Plan which is appended to the
Registration Statement of which this Prospectus is a part.
Terranorte Concessions. On May 30, 1997, the Company's subsidiary,
Equatorial Resources, entered into an Agreement to Harvest Timber and Develop
Timber Properties with Terranorte S.A. (the "Terranorte Agreement"). Under the
terms of the original agreement, Terranorte granted to Equatorial Resources the
exclusive right to either harvest the timber or to purchase certain species of
logs extracted by Terranorte located on approximately 20,000 hectares of virgin
timber property located near the town of Moju, Para, Brazil. In May 1997,
Equatorial Resources began harvesting operations employing its own crews and
purchasing harvested logs from Terranorte. Based upon the current market prices
for export quality Brazilian hardwood of $500 per cubic meter, the Company is
projecting its cost to harvest, produce and sell such product to be
approximately $300 per cubic meter, thereby resulting in a pre tax profit of
$200 per cubic meter.
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Terranorte and Equatorial Resources amended the Terranorte Agreement to
include the rights to harvest up to an additional 463,000 hectares of virgin
timber properties located in the vicinity of the Terranorte property.
Production on San Miguel Sawmill. On May 30, 1997, Equatorial Resources and
Jonasa Madeiras Limitada ("Jonasa Madeiras") entered into an Agreement to
Acquire Sawmill. Under the terms of the agreement, Jonasa Madeiras agreed to
convey all right, title, and interest in and to the sawmill facility, all
equipment relating to the sawmill facility, and 246 hectares of adjacent real
property, all of which is located near the town of San Miguel do Guama, Para,
Brazil. At present, Equatorial Resources has expended the sum of approximately
$335,000 in improvements to the sawmill facility and anticipates that an
additional $350,000 in improvements will be made over the next several months.
The sawmill facility currently consists of two manually-operated sawmills
and two semiautomated sawmills. Equatorial Resources has made deposits on
certain additional equipment to repair the semiautomated sawmill, to install a
third semi-automated sawmill, and to purchase additional specialty sawblades
designed to upgrade the sawmills and increase production.
The Jonasa Concessions. On November 11, 1996, the Company, through
Equatorial Resources Ltd. ("Equatorial Resources"), entered into a letter
agreement with Madeira Intex, S.A., International Exports, a company formed
under the laws of the Greek Democratic Republic ("Madeira"), whereby Madeira
agreed to assign its rights in and to a Joint Venture Agreement which Madeira
had entered into on June 29, 1984, with Companhia Agropecuaria do Rio Jabuti
("Jonasa").
The Joint Venture Agreement required Jonasa to assign to Madeira the
exclusive rights to extract and market all lumber licensed by the appropriate
Brazilian authorities for export. In turn, Madeira was required to provide the
financing for the management of cutting, preserving, protecting, inspecting and
shipping of the lumber species permitted and located on the timber property
owned by Jonasa. All such activities are required to be conducted in accordance
with the Association Technique International des Bois Tropicaux. The original
term of the agreement was for the period needed to extract 13,000,000 cubic
meters from an area of 100,000 hectares. At such time as this quantity was
extracted from the property, Madeira was required to provide the expertise and
financing necessary to reclaim the areas harvested under the Joint Venture
Agreement. Among the other obligations required to be performed by Madeira were
the obligations to provide all labor associated with the transportation and
harvesting of the timber; purchase all lumber cut up to 13,000,000 cubic meters;
issue a letter of credit allowing Jonasa to present sight drafts representing
the purchase price of the lumber to be harvested from the property and
stevedoring costs for the shipment of such lumber; comply with the rules and
regulations of the Association Technique International des Bois Tropicaux; and
supervise all shipping activities. The Joint Venture Agreement required Madeira
to purchase a minimum of 60,000 cubic meters per year. The purchase price of the
lumber to be sold by Jonasa and purchased by Madeira was as follows: for all
"merchantable quality" lumber, $90 per cubic meter; for "fair/average" quality,
$80 per cubic meter; and for "second quality", $67 per cubic meter. The above
purchase prices were to be revised annually commencing in 1986 based upon a
formula involving the average price increase or decrease of the usual
international price variations for same or similar tropical lumber from West
Africa, Central America and the Far East.
Through various addenda, the rights and responsibilities of Madeira were
modified so as to allow the original joint venture to remain in effect and to
allow Madeira to assign its rights and delegate its responsibilities to
Equatorial Resources. All of the various agreements were integrated into an
Agreement to Jointly Develop Timber Properties. Under this agreement, Jonasa has
granted to Equatorial Resources the exclusive right to harvest all of the timber
which Jonasa now or hereafter has the right to extract from the properties
comprising the Jonasa Concessions. In consideration of this grant, Equatorial
Resources has agreed to pay to Jonasa fifty percent (50%) of the net proceeds
received on the sale of all timber and related products produced and sold
pursuant to the agreement. The term "net proceeds" is defined to be the gross
sales price received for lumber sold, less the costs of harvesting, reclamation,
transportation to the mill, milling expenses, physicalization duties,
transportation f.o.b. to the ports of Belem and Breves, and certain operating
expenses associated with Equatorial Resources' operations in Brazil. The parties
have also designated Equatorial Resources as its exclusive export agent for all
products produced and sold under the joint venture.
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THE NEVADA PROPERTY
Current Ownership Interest. The Nevada Property consists of twenty-eight
(28) patented and sixty-five (65) unpatented claims aggregating approximately
1,800 acres. The Company believes it owns an undivided one hundred percent 100%)
interest in the Nevada Property based upon the agreements described below in
greater detail. The primary areas of current development are the Litigation Hill
Area and the White Caps Mine Area. Both areas will be discussed in greater
detail below. The Company has identified 1,500 tons to be mined by open pit
methods at 0.206 ounces per ton of gold of proven and probable reserves in the
Litigation Hill area. The Company has recently sold approximately $40,000 of
gold produced from the Nevada Property. The Company has not identified any other
reserves at the Nevada properties defined as proven and probable.
The Company originally acquired its rights to the Nevada Property pursuant
to a mining agreement dated April 4, 1987 [the "Nevada Property Agreement"] with
Anthony C. Selig and related entities (the "Selig Entities"). On December 9,
1987, the Selig Entities and the Company entered into an amendment to the Nevada
Property Agreement reducing both the area of interest and the purchase price of
the Nevada Property from Two Million One Hundred Thousand Dollars ($2,100,000)
to Six Hundred Thousand Dollars ($600,000) and modifying, amongst other things,
the schedule of semiannual payments due from the Company to the Selig Entities
in consideration of the purchase of the Nevada Property.
On March 2, 1989, the Company entered into an agreement entitled "Manhattan
Mining Property Agreement" with Argus Resources, Inc., a Nevada corporation, and
Argus Mines, Inc., a Nevada corporation (the "Argus Companies"); and the Selig
Entities (the "Nevada Mining Agreement"). This agreement was entered into after
a dispute had arisen between Argus Resources, Inc., and the Selig Entities under
the lease/purchase agreement which had been previously entered into between such
parties and which originally formed the basis upon which the Company derived its
rights to the Property. This agreement also modified certain terms and
conditions contained within the Nevada Property Agreement.
Under the terms of the Nevada Property Agreement, as amended, the Company
was required to pay, and did pay, to the other parties the sum of Twenty-Five
Thousand Dollars ($25,000) upon execution of the agreement. The Company also
agreed to pay the Argus Companies the additional sum of One Hundred Sixty-Five
Thousand Dollars ($165,000) in monthly installments of Seven Thousand Five
Hundred Dollars ($7,500) commencing on April 15, 1989, and continuing thereafter
until the entire sum was paid in full. The Nevada Property Agreement, as
amended, further required the Company to issue 1,000,000 (pre-reverse split)
shares of Common Stock as additional consideration to Argus Resources, Inc. In
fact, the Company paid the Argus Companies, Inc., and the Selig Entities all
amounts due under the Nevada Property Agreement, as amended, and issued 100,000
(post-reverse split) shares of Common Stock to Argus Resources, Inc.
Pursuant to the terms and conditions of the Nevada Property Agreement, as
amended, the Argus Companies executed a Corporation Quitclaim Deed conveying a
forty percent (40%) undivided interest in the Nevada Property to the Company on
March 9, 1989. Concurrently therewith, the Company delivered a Deed of Trust and
Assignment of Rents (the "Deed of Trust") to the Selig Entities to further
secure the obligations under the Nevada Property Agreement. Both the Corporation
Quitclaim Deed and the Deed of Trust were duly recorded in the office of the
county records by and for Nye County, Nevada.
In June 1993, the Company entered into a Joint Venture Agreement with
Marlowe Harvey/Maran Holdings, Inc. ("Marlowe Harvey"); Argus Resources, Inc.;
and the Selig Entities respecting the Nevada Property. Under the terms of the
Joint Venture Agreement, Marlowe Harvey was entitled to a fifty-one percent
(51%) interest in the Nevada Property in consideration of Marlowe Harvey
assuming certain obligations, including the purchase of the Deed of Trust from
the Selig Entities. The remaining forty-nine percent (49%) interest in the
Nevada Property was to be held equally by Argus Resources, Inc., and the Company
in consideration of their payment of their pro rata share of all amounts due
under the promissory note (the "Nevada Note") secured by the Deed of Trust
created by the Nevada Property Agreement, as amended. The failure of either
Argus Resources, Inc., or the Company to pay any amounts due under the note
during the first year of the joint venture was to be deemed a default requiring
the defaulting party to quitclaim its interest in the Nevada Property to the
remaining parties. The Argus Companies, Marlowe Harvey and the
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Company were also responsible for their pro rata share of all property
development expenses. At the time, Marlowe Harvey was the operator of the Nevada
Property and responsible for all operations relating to maintaining the Nevada
Property in accordance with the Mining Agreement.
On October 20, 1995, the Company and Mr. Harvey "as an individual and for
Maran Holdings and Argus Resources" executed an agreement (the "Amended Joint
Venture Agreement") which purports to amend the June 1993 Joint Venture
Agreement. The Amended Joint Venture Agreement obligates Marlowe Harvey to
convey to the Company within ten (10) days of the date of execution of such
Agreement fifty-two percent (52%) of the outstanding and issued stock in Argus
Resources, Inc.("Argus"), in exchange for the payment of One Hundred Forty-Seven
Thousand Dollars ($147,000) to be paid in the future from a percentage of Argus'
share of the net proceeds realized from the sale of gold production on the
Nevada Property. In addition, Marlowe Harvey agreed to convey a one percent (1%)
interest in the Nevada Property to the "management" of the Company (Messrs.
Michaels and Kramer) in exchange for a "production payment" of Forty-Seven
Thousand Dollars ($47,000) likewise to be paid from future production
attributable to Argus Resources, Inc. It was, and is, the intention of the
Company's officers to convey their rights under the Amended Joint Venture
Agreement to the Company in exchange for the Company's assumption of such
officers' obligations under such Agreement.
Both the obligations of the Company and its officers under the Amended
Joint Venture Agreement were to be secured by the pledge of Common Stock (in the
case of the Company, 1,235,429 shares) with "piggyback" registration rights to
be granted to Marlowe Harvey in two (2) years in the event $147,000 is not paid
from production by that time. If only a portion of the production payment is
made by October 20, 1997, the obligation to seek registration was to be ratably
reduced. The Company was further required to issue 1,186,981 shares of its
Common Stock to Maran Holdings, Inc., an affiliate of Argus, at the time at
which it was obligated to issue to Argus the shares to be used as security for
the production payment.
The Amended Joint Venture Agreement also required both the Company and its
joint venture partners to each make one-half of the property tax payments and
the payments due to the Selig Entities under the Nevada Property Agreement. Both
of these payments are due in January of each year.
In January 1996, the Company notified Marlowe Harvey that it had been
"ready, willing, and able" to convey the Common Stock pursuant to the terms of
the Amended Joint Venture Agreement. In addition, the Company made all of the
required property tax payments relating to the Nevada Property and the payments
due to the Selig Entities in reliance upon the terms of the Amended Joint
Venture Agreement. Marlowe Harvey has failed to reimburse the Company for its
one-half share of the property tax payments and the payments due to the Selig
Entities which were advanced on its behalf by the Company and has failed to make
the conveyances required by the terms and conditions of the Amended Joint
Venture Agreement. As a result, the Company instituted an action in Nye County,
Nevada, on November 4, 1996, originally seeking specific performance and damages
against Marlowe Harvey, Maran Holdings Inc., Calais Resources Inc., and Argus
Resources, Inc. The Company has recently amended the complaint to seek a
judicial determination that the Harvey Entities have forfeited all rights in and
to the Joint Venture Agreement and the Nevada Property. This action is described
in further detail under the Section of this Prospectus entitled "LEGAL MATTERS,
AUDITORS, AND LEGAL PROCEEDINGS." Depending on the outcome of the action, the
Company will either own 100% of the Nevada Property if successful or 50% if they
do not prevail. However, regardless of the outcome the Company will continue to
operate its portion of the Nevada Property.
In March 1997, the Company entered into a Sale and Purchase Agreement with
the Selig Entities. The Selig Entities were the original owners of the patented
and unpatented mining claims comprising the Nevada Property, having perfected
their rights to ownership pursuant to Federal and local law. Under the terms of
this agreement, the Selig Entities agreed to sell to the Company one hundred
percent (100%) of their interests in the Nevada Note, the Deed of Trust, and the
Nevada Property for the sum of Three Hundred Seventy Five Thousand Dollars
($375,000) payable as follows: One Hundred Thousand Dollars ($100,000) in March
1997 and the balance plus all accrued and unpaid interest (calculated at the
rate of 5.25%) on or before February 6, 1999. The Company in fact paid the first
installment of One Hundred Thousand Dollars ($100,000) in March 1997 and prepaid
the remaining balance in June 1997. As a result, all obligations to the Selig
Entities have been fulfilled by the Company and the original note and deed of
trust have been delivered by the Selig
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Entities to the Company. The agreement also acknowledges that the Company is the
only person or entity legally entitled to conduct mineral operations on the
Nevada Property. The Company is also required to pay all U.S. Bureau of Land
Management annual maintenance fees associated with the claims comprising the
Nevada Property. Such fees have been paid by the Company through August 1998.
The Company entered into a Subscription Agreement with Silenus Limited on
April 14, 1997 (the "Subscription Agreement"). As a result of entering into the
Subscription Agreement, the balance remaining under the March 1997 Sale and
Purchase Agreement with the Selig Entities is currently being held in a trust
account in anticipation of paying such balance and obtaining a reconveyance of
the Deed of Trust. In addition, the Company granted to Silenus Limited a
$2,000,000 deed of trust encompassing the Nevada Property until the Debentures
issued to Silenus are converted, redeemed or paid in full.
The Nevada Property is located in an historic mining district which has
experienced mining operations from 1866 to the present with the major activity
in the late 1860s, between 1906 and 1921 and from 1960 to the present. Placer
and lode mining took place principally in the Reliance Mine, the White Caps
Mine, the Union Amalgamated Mine, the Manhattan Consolidated Mine, the Earle
Mine, the Big Four Mine and the April Fool Mine. The United States Geological
Survey reports historic production through 1959 of 260,000 ounces of lode gold
and 206,000 ounces of placer gold mined in the Manhattan Mining District. Since
1959, the more significant gold production has occurred from the Echo Bay and
Nevada Gold Fields mines which border the Nevada Property. Such mines have
yielded production in excess of 500,000 ounces of gold.
The Nevada Property lies in several shallow gullies in a general area which
is located between 7,500 to 7,800 feet in elevation. Mineralization of the
Nevada Property appears to be structurally controlled by a series of parallel
east-northeast trending faults dipping from 50 to 75 degrees southwest and with
some cross or perpendicular faults. The Nevada Property consists of two distinct
areas which require different mining and production techniques. Gold
mineralization in the vicinity of "Litigation Hill" is near the surface and much
less expensive to mine. The lower grade ore can be "leached" while higher grades
of ore must be milled. Gold mineralization located in the White Caps Mine has
revealed two delineated ore bodies below the 600-foot level and a deeper
exploration target requiring substantially higher costs for extraction as
compared to "Litigation Hill." "Dewatering" the mine and driving a decline to
the 800-foot level could become quite costly. Additionally, gold ore obtained
from the White Caps Mine may be required to be processed using autoclave
technology or other proven methods in order to comply with environmental
regulations due to the ore's high content of antimony, mercury, arsenic and
sulphur; nevertheless, the Company believes that the deep ore bodies located
within the White Caps Mine may have sufficient potential to justify the large
development program. Both the "Litigation Hill" and White Caps Mine areas of the
Property will be discussed below.
The White Caps Mine was historically one of the more prolific gold mines in
the state of Nevada and is located in the Manhattan Mining District. Production
of gold began in 1911 and remained in production until 1935 when the vein was
lost and the lower levels of the mine encountered water. A total of 120,000
ounces of gold were produced during that period. The mine was closed in 1942 by
executive order relating to all "mining activities nonessential to the [World
War II] effort."
The mine was found to be flooded from its deepest point at the 1,300-foot
level to the 450-foot level. Beginning in 1957, a $400,000 program was put in
place to "dewater", renovate and reactivate the mine. Pumping of water began
that year and by 1958, the water level was down to the 800-foot level. At that
time some exploration resumed at the upper levels of the mine. At the 300-foot
level, antimony-mercury ore grading 60 percent and 8 percent, respectively, was
discovered.
An extensive antimony deposit (also containing gold and mercury values) was
located near the 500-foot level and plans were made to begin mining activities
after the renovation of the mine was completed. While continuing to explore for
gold mineralization on the lower levels of the mine, the owners leased out the
right to mine antimony-gold-mercury ore above the 600-foot levels in 1962 and
production thereafter began.
A diamond drilling program in 1962 relocated the gold ore vein which had
been lost in 1935 when it faulted out at the 600-foot level. Drilling of the
formation began at the head of the winze (i.e. incline shaft)
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and continued down to the 1,200-foot level. Eight regularly-spaced holes of
approximately 100 feet in length were drilled. These holes revealed a gold
mineralized area 65 feet wide with values ranging as high as 7.7 ounces per ton
and averages over .8 ounces per ton. This mineralization is found in the foot
wall of the old winze.
The next phase of the 1962 drilling program consisted of diamond drilling a
"hole" starting at the 1,200-foot level. Six holes of approximately 100 feet in
length each were drilled and revealed gold values averaging over 3 ounces per
ton with a high of 6 ounces per ton. This drilling program blocked out a proven
ore reserve of over 14,000 ounces of gold according to a 1964 report published
by the California Mining Journal. The program also indicated that an ore body
containing several hundred thousand ounces of gold is present in the relocated
vein which runs from the 600-foot level down to the 800-foot level and from the
1,200-foot level down to at least the 1,300-foot level.
Before production could begin, a fire was accidentally started by a pumping
subcontractor at the 300-foot level. The ore bins, shaft and head frame were
destroyed and the mine was closed in 1964. The low price of gold (then $35 per
ounce), high costs to rebuild the damaged mine and the lack of funds caused the
White Caps Mine to close in 1964 and has remained closed since that time. The
Company's plans include reentering this mine and resuming gold exploration and
production.
By contrast, "Litigation Hill" was the site of both Earle and Consolidated
Mines, all early producers of high-grade ore until the veins ran out. Recent
geomagnetic activity and a drilling program have located several small
commercial-sized deposits of medium-grade gold ore which can be either milled or
heap leached.
The Company has conducted a geophysics and geochemical survey of
"Litigation Hill." A Schlumberger resistivity survey indicated gold
mineralization down to a depth of 1,000 feet (the limit of the instrument's
sensitivity). Bulk sampling conducted by Nevada Gold Fields and Placer
Management Group, of the ore dumps remaining at these mines indicated an overall
average grade of .206 ounces per gold ton. Over 1,500 tons of ore were proven
with another 500 tons considered to be probable reserves.
The 1987 exploration of underground workings on "Litigation Hill" showed
that the Earle Mine had experienced massive cave-ins. Two samples were taken
from channel cuts. These samples, which were performed by Nevada Gold Fields and
Placer Management Group, indicated values of .120 ounces of gold per ton. The
Bath Mine was accessible through a stope which leads directly to the main
haulage decline. Channel cut samples were taken on pillars left in
previously-worked stopes. Values varied from .64 to 1.288 ounces of gold per
ton.
The Company initiated a rotary drilling program in 1988. Holes drilled
pursuant to the program varied in depth from 200 feet to 525 feet. Gold values
located in the carbonates at a depth of 70 feet indicate that open pit mining is
suitable for the lower grade ores which are present.
The Company commenced an exploration program during the years 1989 and
1990. This program consisted of two parts: conducting a magnetic survey of the
property and drilling 25 reverse circulation drill-angle holes varying in depth
from 50 to 150 feet. The magnetic survey identified the areas around "Litigation
Hill" and the White Caps Mine as strong targets for further exploration. The
drilling program located several areas of gold mineralization.
In September 1993, the joint venture partners began a decline (i.e. tunnel)
in order to intercept a drill hole which had been drilled by Freeport Mining
Company in 1983. The drill hole revealed that from 465 feet to 505 feet below
the surface, an average gold grade of .886 ounces of gold per ton over 40 feet
existed. The decline was completed during the Spring of 1994 and drill stations
were prepared. Exploration and drilling activities commenced and are ongoing as
of the date of this Prospectus. The decline is approximately nine feet by nine
feet and runs at an approximate twelve-degree grade. At the 500-foot level, a
turnaround or transfer bay has been added to enable the operators of the mine to
successfully remove ore in a cost-effective method.
The 1993 drilling program also included the mapping and sampling of the old
workings of the Consolidated Mine (which was closed in 1939) as well as the
drilling and sampling of the decline itself in the immediate potential ore zones
contained within the decline.
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In July 1995, the Company engaged the services of William R. Wilson, a
minerals industry consultant, to prepare a plan to develop the Nevada Property
(the "Nevada Business Plan"). According to the Nevada Business Plan, two
alternative plans for exploration and development of the Property exist. The
first plan would extend the existing decline in the White Caps Mine to the
565-foot level, rehabilitate and mine old workings in the Consolidated Manhattan
Mine, drift and mine a new area near the drill hole which was intercepted by the
decline formed during the 1993 program, rehabilitate the White Caps Shaft, and
mine the 565-foot level, 670-foot level, 800-foot level, 910-foot level,
1,120-foot level, 1,200-foot level and 1,300-foot level of the White Caps Mine.
According to the Nevada Business Plan, the major advantage to this
alternative would be that access to the lower levels of the White Caps Mine
would be considerably improved. It is anticipated that the lower levels may
yield higher grade ore as compared to the yields anticipated at current levels
of the mine.
A cash analysis pertaining to the first alternative projected capital costs
during the first year of operations to be $1,463,290, operating costs of
$1,719,699 and production of 7,960 ounces of gold resulting in revenues of
$3,088,430. As a result, the cash analysis prepared for the first alternative
projected a positive cash flow of $92,804 after taking into account
depreciation, depletion and amortization.
The second alternative identified in the Nevada Business Plan would extend
the decline in the White Caps Mine to the 565-foot level, rehabilitate and mine
old workings in the Consolidated Manhattan Mine, drift and mine a new area near
the drill hole which was intercepted by the decline formed during the 1993
program, mine the 565-foot level only in the White Caps Mine and conduct
underground sampling in the White Caps Mine in the 670-foot through 1,300-foot
levels.
The Nevada Business Plan identifies the major advantage to this alternative
to be significantly reduced capital costs combined with the opportunity to
sample underground the White Caps Mine without rehabilitating the White Caps
shaft. The disadvantages of this alternative are that mining access to the lower
portions of the White Caps Mine may not be completed and it is still not known
whether access can be obtained to each of the levels below the 560-foot level.
A cash analysis pertaining to the second alternative projected capital
costs during the first year of operations to be $605,840, operating costs of
$1,046,063 and production of 4,568 ounces of gold resulting in revenues of
$1,772,539. As a result, the cash analysis prepared for this second alternative
projected a positive cash flow of $425,326 after taking into account
depreciation, depletion and amortization.
In making its cash flow estimates noted above, the Company included the
calculations prepared by William R. Wilson. Mr. Wilson obtained these
calculations by us of standard mining industry cash flow calculation methods. In
deriving the Cash Flow estimates, Mr. Wilson utilized a proprietary cash flow
spreadsheet used by him since 1991 for domestic and international mining
projects analysis. The cash flow calculations are on a "cash basis," an industry
standard in comparing mining operations. The cash basis includes exploration,
development, mining, hauling, processing and refining costs. Some overhead costs
were not included in the cash flow analysis as of the time the analysis was
prepared because the Company had not determined what its actual mine-related
overhead costs would be. A ten percent allowance for general and administrative
expenses was included. Since the Company uses a mining contractor, Harrison
Western Construction Company, the majority of the mine related overhead is
included in the contractor's cost. The costs of the Company's on-site geologist
and project manager are included as the 10% general and administrative costs in
the cash flow analysis. The following major assumptions were used in the Cash
Flow projections:
- Mining costs of $43 per ton.
- Processing and environmental costs of $16 per ton.
- Mining General and Administrative costs of $6 per ton.
- Refining charges of $2 per ounce.
- Inclusion of depreciation using the straight line method and a 7 year
base and depletion at 15%.
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The Nevada Business Plan concludes by recommending the second alternative
as the preferable alternative for the Company to follow. In June 1996, the
Company initiated the second alternative by contracting with Harrison Western
Mining and Construction Company, Lakeland, Colorado, to execute this plan.
In July 1995, the Company notified Marlowe Harvey and related companies,
then the operator of the Nevada Property, that Marlowe Harvey was not in
compliance with contractual operations under the Nevada Property Agreement as
well as several applicable mining laws and regulations. At that time the Company
assumed the position of operator and continues to act in this capacity.
All permits for this operation have been issued and the Company is in
compliance with all state, federal and environmental regulations to the best of
its knowledge and belief.
The Company's operations in Nevada initially will be heavily dependent upon
the mill constructed approximately one mile from the Nevada Property which is
currently owned and operated by New Concept Mining, Inc. ("New Concept"). The
Company presently intends to use the New Concept mill for milling the ore
produced from the Nevada Property and selling gold bullion dore bars or
concentrate for sale to third-party buyers. Under the terms of an agreement
entered into with the Company, New Concept has agreed to provide the Company
with the capacity to initially process between 1,000-1,200 tons of ore per
month. New Concept has also agreed to increase processing capacity once the
Company's development program expands. The Company has also been engaged in
preliminary discussions with New Concept to purchase up to one half of the mill.
These discussions have not yet resulted in a binding agreement between the
Company and New Concept.
The Company has also budgeted the sum of One Hundred Thousand Dollars
($100,000) to be spent in the foreseeable future for compliance with applicable
environmental laws. However, the Company can provide no assurance that the
amount so budgeted for environmental compliance will be consistent with the
amounts actually spent for compliance or that the actual amount of such
compliance may not be substantially greater than that which has been projected
to be spent by the Company pursuant to the budget.
Over the past three (3) years, the Company has expended approximately One
Million Five Hundred Thousand Dollars ($1,500,000) on development expenses on or
relating to the Nevada Property. These expenses relate primarily to developing
the most effective means by which to extract the ore and transport it to the New
Concept mill approximately one mile from the Nevada Property.
THE INDONESIAN CONCESSIONS
General. In August 1996, the Company entered into an agreement to acquire a
fifty-one percent (51%) interest in a gold exploration property comprising
10,000 hectares (25,000 acres) located in East Kalimantan, Indonesia (the
"Kalimantan Property"). More recently, the Company has entered into two (2)
additional agreements to acquire an additional six (6) gold mining concessions
aggregating over 23,400 hectares (58,500 acres) and three (3) coal mining
concessions comprising 290,000 hectares (725,000 acres). In January 1997, the
Company and Maxwells Energy and Metals Technology Ltd., a Bahamian Company
("Maxwells"), agreed to substitute the original 10,000 hectare property (i.e.
the Kalimantan Property) for a 16,000 hectare (40,000 acre) tract (the "Sopang
Property") located elsewhere on the island of Kalimantan. Ownership of the
Indonesian Concessions will be acquired through the Company's new wholly-owned
subsidiary formed under the laws of the British Virgin Islands known as
Kalimantan Resources, Ltd. ("Kalimantan Resources"). NONE OF THE PROPERTIES
IDENTIFIED ABOVE HAVE ANY PROVEN AND RECOVERABLE RESERVES.
Mineralization of the Indonesian islands known as Kalimantan (the
Indonesian section of Borneo) and Sumatra occurred as a result of rifting of the
earth's crust at the ocean floor. There are approximately fifteen known
mineralized "arcs" comprising all of Indonesia. Six (6) of these arcs contain
the majority of the gold and copper deposits currently discovered in Indonesia.
The Central Kalimantan Arc is the area which has evidenced the majority of
recent attention of mineral exploration efforts although significant work is
also being undertaken in other areas. Located within the Central Kalimantan Arc
is the Kelian Mine which has been operating since 1992 and produces
approximately 450,000 ounces of gold per annum from ore grading
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approximately 1.8 grams per tonne of gold. Over seventy (70) tonnes of gold has
been produced to date. Based upon current estimated reserves, the mine is
scheduled to operate until 2003. Further south is the Mt. Muro Mine. Production
for 1996 at this mine was 187,000 ounces of gold. At present, it is impossible
to predict whether the Indonesian Concessions possesses any recoverable reserves
of gold ore or whether the yields noted in the above-described mines will be
indicative of the yields to be established on the Indonesian Concessions.
Three (3) agreements cover the various concessions which the Company and
Kalimantan Resources have acquired: (i) the Principles of Agreement by and
between the Company and Maxwells, as amended; (ii) the Acquisition Agreement
dated January 26,1997 by and between Kalimantan Resources and Singkamas Agung
Ltd.; and (iii) the Acquisition Agreement dated February 18, 1997, by and
between Kalimantan Resources and Kaliman Jaya Ltd.
As described in further detail elsewhere in this Prospectus, the Company
has developed a business plan (the "1997 Business Plan") relating to the
activities to be conducted on the concessions acquired under the above-described
agreements as well as the Brazilian Timber Properties. The proposed activities
described in this section of this Prospectus summarizes a portion of the 1997
Business Plan.
The Sopang Property. The Company acquired its interest in the Sopang
Property pursuant to a document entitled "Principles of Agreement" dated August
19, 1996 ("POA"). The parties to the POA are Maxwells and the Company. The
Company and Maxwells originally agreed to conduct exploration activities on a
10,000 hectare tract, but pursuant to an addendum to the POA, substituted the
16,000 hectare Sopang Property.
In exchange for a fifty-one percent (51%) interest in the concession
relating to the Sopang Property, the Company agreed to convey to Maxwells Four
Hundred Thousand (400,000) shares of its Common Stock. In addition, the Company
must issue an additional Four Million (4,000,000) shares of its Common Stock to
Maxwells should an investment banker confirm by independent appraisal that the
Sopang Property is valued to be at least Twelve Million Dollars ($12,000,000
U.S.) and/or such investment banker provides financing to the Company based upon
an evaluation of at least Twelve Million Dollars ($12,000,000 U.S.) or upon the
appreciation of the Common Stock in an aggregate amount exceeding Twelve Million
Dollars ($12,000,000) within ninety (90) days of an announcement by the Company
of its acquisition of the Indonesian Property. The Company recently received a
letter from Maxwells acknowledging that other than the issuance of 10,800
shares, no additional shares of Common Stock will be required to be issued until
the independent appraisal mentioned above has been performed. A provision of the
POA allows Maxwells to obtain a "nondilutive" percentage ownership in the Common
Stock to be issued under the POA should the Sopang Property produce at least
2,000,000 ounces of gold. As of the date of this Registration Statement, Three
Hundred Eighty Nine Thousand Two Hundred (389,200) of the Four Hundred Thousand
(400,000) shares required to be issued to Maxwells have in fact been issued
(200,000 shares of which are currently held in the name of Singkamas Agung, Ltd.
but which will be reissued in the name of Maxwells).
While the Company was entitled to defer exploration activities for six (6)
months, exploration activities have commenced and are ongoing on the Sopang
Property.
Under the POA, the Company is responsible for one hundred percent (100%) of
all exploration and operating expenses relating to the Sopang Property. Maxwells
also enjoys antidilution rights with respect to the Common Stock to be issued
under the POA provided exploration activities result in a valuation evidencing a
yield of at least two million (2,000,000) ounces of gold.
Maxwells has agreed to provide a voting trust in favor of existing
management. Maxwells is not, however, required to vote its shares with existing
management in connection with the registration of Common Stock issued or to be
issued to Maxwells. Maxwells' consent is also required in the case of any
issuance of the Company's capital stock exceeding Two Hundred Fifty Thousand
Dollars ($250,000).
The Company has undertaken efforts to confirm the chain of title which it
believes to exist with respect to the Sopang Property.
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Silobat Property. On January 26, 1997, the Company's wholly-owned
subsidiary, Kalimantan Resources, entered into an Acquisition Agreement with
Singkamas Agung Ltd., a Bahamian corporation ("Singkamas"), relating to one (1)
gold mining concession and three (3) coal mining concessions located in
Kalimantan, Indonesia (the "Acquisition Agreement"). Singkamas is an affiliate
of Maxwells and is owned and controlled by the same persons who own and control
Maxwells.
The gold mining concession subject to the Acquisition Agreement relates to
a 62-hectare (155-acre) tract located in West Kalimantan and is known as the
"Silobat Property." Currently, PT Kajiwahida Mandiri, an Indonesian limited
liability company ("PT Kajiwahida"), holds a Kuasa Pertambangan Eksploitasi
license ("KPE") and a Kuasa Pertambangan Pengangkutan and Penjualan license
("KPPE") issued by the Indonesian Directorate General of General Mining and the
Ministry of Mines and Energy on October 7, 1996. On December 21, 1996, PT
Kajiwahida entered into a Mining Authorization Transfer Agreement with PT Duta
Sena Rahayu, an Indonesian limited liability company ("PT Duta"), whereby PT
Kajiwahida agreed to transfer its KPE and KPPE licenses to PT Duta in exchange
for $5,000,000 payable as follows: $100,000 at the time of execution of the
Acquisition Agreement; four consecutive installment payments of $100,000 each on
the fourth days of February, March, April and May 1997; and a final payment of
$4,500,000 at such time as official test results from exploration activities
demonstrate the existence of at least 2,000,000 ounces of gold reserves. Should
exploration activities reveal gold reserves of less than 2,000,000 ounces, the
final payment is to be adjusted in relation to the amount of gold reserves so
established. In addition, PT Kajiwahida is obligated to seek the appropriate
governmental authority to expand its licenses to include a 2,000-hectare tract
contiguous to the 62-hectare tract currently comprising the Silobat Property.
On December 21, 1996, the shareholders of PT Duta and Kalimantan Resources
entered into a Cooperation Agreement whereby in exchange for assuming the
financial responsibilities under the Transfer Agreement, the shareholders of PT
Duta agreed to hold the shares of such limited liability company for the benefit
of Kalimantan Resources. On the same date, Kalimantan Resources entered into a
Participation Agreement with Singkamas whereby Kalimantan Resources agreed to
grant to Singkamas a net profits interest derived from the exploitation of the
Silobat Property.
The Acquisition Agreement with Singkamas requires Kalimantan to secure the
issuance by the Company of Four Million (4,000,000) shares of Common Stock as
follows: Two Hundred Thousand (200,000) upon execution of the Acquisition
Agreement and the balance to be issued upon verification by an independent
evaluation that the value of the Silobat Property and the three (3) Indonesian
Coal Concessions equal or exceed Forty Million Dollars ($40,000,000). In the
case of the initial issuance of shares and twenty-five percent (25%) of the
balance of the shares of Common Stock to be issued, Singkamas is entitled to
"piggyback" registration rights. The Company has issued Four Hundred Thousand
(400,000) shares of its Common Stock to Singkamas as of the date of this
Prospectus. Of this amount, Two Hundred Thousand (200,000) shares are to be
reissued to Maxwells.
To date, no funds have been transferred by Kalimantan to PT Kajiwahida or
any other party. However, Kalimantan Resources has been given authority to
conduct trenching and pitting and has conducted preliminary mapping, sampling
and trench hole pitting under the supervision of Behre Dolbear & Co. for the
purpose of evaluating the Silobat Property. Under the supervision of Behre
Dolbear, three separate sampling programs were conducted at the Silobat
Property. Based on that work which indicates the presence of analogous gold
values in four sampling pits, the Company intends to initiate a core drilling
program at the Silobat Property in the third quarter of 1997. The Company
(through its association with Singkamas) is currently in negotiations with PT
Kajiwahida to amend the terms of the Acquisition Agreement to reflect the accord
reached by the parties to enable Kalimantan to conduct further exploration
activities on the Silobat Property and to forego any payments due under the
Acquisition Agreement until such time as all governmental approvals associated
with annexing the 2,000-hectare tract have been secured.
The Silobat Property forms part of what was known as the Chinese District
of Western Borneo and has been the location of substantial exploitation by the
Chinese since the 1880s. In the 1960s, a Dutch company was granted a concession
to conduct mining operations on the Silobat Property, but such property was
abandoned shortly thereafter because of political unrest, sabotage and lack of
funding.
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The property is located 1 degree 1 minute north longitude and 109 degrees
12 minutes east latitude in the subdistrict of Sambas, Kalimantan Barat. The
topography of the property is characterized by swampy lowlands with isolated
hilly outcrops covered mainly with revegetation and local rubber plantations.
The geology is characterized by green-black mudstone, fine silt stone,
quartz-feldspar porphyry and quartz diorite rock types.
In 1977, 21 rock chip and 7 stream sediment samples were submitted for
analysis to the Superintendent Laboratories in Jakarta. Only small traces of
gold were detected in all rock samples submitted while stream sediment samples
yielded values of .5 to 1.05 ppm in four of the seven samples.
Munung (Monroe) Property. The Company's wholly-owned subsidiary, Kalimantan
Resources, entered into an Acquisition Agreement for Gold and Coal Concessions
February 18, 1997, with Kalimas Jaya Ltd., a Bahamian corporation ("Kalimas"),
relating to five (5) gold mining concessions and one (1) coal mining concession
(the "Kalimas Acquisition Agreement"). Kalimas is also an affiliate of Maxwells
and is owned and controlled by the same persons who own and control Maxwells.
Kalimas acquired its rights to the concession relating to the Monroe Property
pursuant to a Development Agreement dated February 14, 1997, by and between PT
Muara Mayang Coal Utama ("PT Muara") and Kalimas. Under the Development
Agreement, Kalimas obtained the right to acquire an 80% interest in a Kuasa
Pertambangan Penyelidikan ("KP") issued to PT Muara for the sum of $1,000,000
payable as follows: $150,000 upon execution of the Development Agreement and
verification by Kalimas that PT Muara possesses marketable title to the
concession without encumbrances and $850,000 upon commencement of production and
generation of net profits.
The Monroe Property comprises 6,096 hectares and is located in Central
Kalimantan, Indonesia. It is located in the same general area of the Kelian gold
mining concession which has produced over 450,000 per annum ounces of gold since
1992.
The existing KP issued on the Monroe Property allows PT Muara to conduct a
general survey and perform exploration activities for gold and other precious
metals. The Development Agreement requires PT Muara to use its "expert abilities
and efforts" to obtain additional licenses for the exploitation, production and
refining, and transportation and sale of all minerals obtained from the Monroe
Property.
The Kalimas Acquisition Agreement requires Kalimas to convey a 51% interest
in all current and future licenses which it acquires with respect to the Monroe
Property.
To date, no sums have been paid by Kalimas or Kalimantan Resources to PT
Muara nor has any exploration work been performed on the Monroe Property.
Kalimantan Resources currently intends to complete title work prior to engaging
in any exploration activities.
Telen (Tomak) Property. The second gold concession in which Kalimantan
Resources received rights under the Kalimas Acquisition Agreement is known as
the Telen or Tomak Property. This property comprises 687 hectares and is located
in East Kalimantan, Indonesia. Kalimas acquired its rights to the property
pursuant to a Development Agreement dated February 14, 1997, which it entered
into with PT Walea Bahimas, an Indonesian limited liability company. PT Walea
Bahimas currently holds a KP for general survey and exploration on the property.
Kalimas is required to pay a purchase price of $1,000,000 to acquire an 80%
interest in the current KP. The Development Agreement contains provisions
similar to those contained within the Development Agreement relating to the
Monroe Property with respect to payment terms. Moreover, PT Walea Bahimas will
only be entitled to receive the final $850,000 payment upon commencement of
commercial production and obtaining licenses for exploration and exploitation,
production and refining, and transportation and sale.
Kalimas is obligated to commence exploration in or before April 1997 or at
such other time as agreed upon by the parties. In addition to being required to
dig test pits as part of the exploration program, Kalimas has agreed to: conduct
shallow drilling to a depth of approximately 60 meters during the first 90-day
period, conduct deep drilling to a depth of at least 200 meters during the
second 90-day period, and securing a commitment of at least $300,000 during the
first three (3) years of exploration activities.
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The Kalimas Acquisition Agreement requires Kalimas to convey a 51% interest
in all current and future licenses which it acquires with respect to the Tomak
Property. In addition, Kalimas and the Company have agreed that Kalimas will be
entitled to receive a number of shares of Common Stock the amount of which is to
be determined no later than July 1997. The Kalimas Acquisition Agreement further
provides that the value of the Common Stock is to be determined at $10 per
share, which was the approximate value as of January 26, 1997.
To date, no sums have been paid by Kalimas or Kalimantan Resources to PT
Walea Balimas nor has any exploration work been performed on the Tomak Property.
Kalimantan Resources currently intends to complete title work prior to engaging
in any exploration activities.
Long Beleh (La Bella) Property. The La Bella Property represents the third
gold concession in which Kalimantan Resources acquired rights pursuant to the
Kalimas Acquisition Agreement. This property currently comprises 4,637 hectares
and is located in East Kalimantan, Indonesia. Kalimas acquired its rights in and
to a KP for general survey and exploration pursuant to a Development Agreement
dated February 14, 1997, with PT Muara Koman Mas ("PT Muara Koman"). The terms
and conditions for the acquisition of an eighty percent (80%) interest in the
current license and all future licenses held or to be held by PT Muara Koman are
identical to the terms and conditions described above and relating to the Tomak
Property. The obligations of Kalimas under the Kalimas Acquisition Agreement are
identical to the obligations which it possesses with respect to the Tomak
Property.
To date, no sums have been paid by either Kalimas or Kalimantan Resources
to PT Muara Koman nor has any exploration been performed on the La Bella
Property. Kalimantan Resources currently intends to complete title work prior to
engaging in any exploration activities.
Sengingi Property. The Sengingi Property is the fourth gold concession in
which Kalimantan Resources acquired rights pursuant to the Kalimas Acquisition
Agreement. Unlike the previous gold concessions mentioned in this Section of the
Prospectus, the Sengingi Property is a 4,000-hectare (10,000-acre) tract which
is located on the island of Sumatra in the province of Riau, Indonesia. Kalimas
acquired the right to obtain an eighty percent (80%) interest in a KP for
exploration and a KPE for exploitation with respect to 3,000 hectares of this
property from PT Aksara Mina Artha ("PT Aksara") pursuant to a Development
Agreement dated February 14, 1997. Under the terms of its agreement with PT
Aksara, Kalimas is obligated to pay PT Aksara $1,000,000 to be paid from
production derived from the property. In all other material respects, the terms
and conditions of the Development Agreement between Kalimas and PT Aksara and
the terms and conditions of the Kalimas Acquisition Agreement between Kalimas
and Kalimantan Resources are identical to the terms and conditions described
above with respect to the other gold concessions subject to the Kalimas
Acquisition Agreement.
Kuantan Property. The last gold concession subject to the Kalimas
Acquisition Agreement is known as the Kuantan Property. The Kuantan Property is
also located in Riau Province, Sumatra, Indonesia, and comprises 8,000 hectares.
Kalimas derives its rights pursuant to a Development Agreement dated February
14, 1997, between it and PT Aksara Tama Pramita ("PT Aksara Tama"). PT Aksara
Tama currently holds a KP for general survey and exploration. The general terms
and conditions upon which Kalimas is to acquire an eighty percent (80%) interest
in all current and future licenses on the Kuantan Property are similar to the
terms and conditions upon which all other licenses subject to the Kalimas
Acquisition Agreement have been acquired. The purchase price which Kalimas will
be required to pay for the Kuantan Property is $1,000,000 payable as follows:
$250,000 upon execution of the Development Agreement and verification by Kalimas
that PT Aksara Tama possesses marketable title to the concession without
encumbrances, and $750,000 to be paid upon commencement of production and
generation of net profits.
Indonesian Coal Concessions. As previously mentioned, Kalimantan Resources
and Singkamas entered into an Acquisition Agreement on January 26, 1997. In
addition to acquiring rights to the Silobat Property, Kalimantan Resources
obtained rights to three coal mining concessions aggregating over 286,000
hectares. Singkamas acquired its rights to these three coal mining concessions
pursuant to Development agreements entered into with the PT Andhika Group of
Companies, three Indonesian limited liability brother-sister companies
(collectively referred to as "PT Andhika"). Under the terms of these Development
Agreements,
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<PAGE> 34
Singkamas received the right to acquire seventy-seven and one-half percent
(77.5%) interest in the three contracts of work ("COWs") currently held by PT
Andhika.
Under the terms of the Acquisition Agreement between Singkamas and
Kalimantan Resources, Singkamas has agreed to assign a fifty-one percent (51%)
in and to the COWs (as well as a fifty-one percent [51%] interest in the Silobat
Property) in consideration of the issuance of 4,000,000 shares of the Company's
Common Stock described elsewhere in this Prospectus in greater detail.
In March 1997, Kalimantan Resources, engaged an Indonesian exploration crew
to travel to the properties and to perform preliminary evaluations of possible
coal reserves in place on the three (3) coal concessions located in Indonesia
where the Company and Kalimantan Resources have entered into contracts to
acquire certain exploration and exploitation rights. Behre Dolbear & Co. will
review the results of these activities and present recommendations based upon
such review.
The Company has been contacted by several large coal mining companies for
the purpose of entering into proposed joint ventures to conduct further
exploration and subsequent development of such properties. At present, no joint
venture agreements have been entered into by the Company.
The Company has entered into an agreement with Behre Dolbear & Company,
Inc. ("Behre Dolbear"), an internationally recognized mining consulting firm
which was established in 1911. Behre Dolbear will be responsible for providing
independent technical advisory third-party validation services to the Company as
more particularly outlined in the agreement. Under the supervision of Behre
Dolbear, three separate sampling programs were conducted at the Silobat
Property. Based on that work which indicates the presence of analogous gold
values in four sampling pits, the Company intends to initiate a core drilling
program at the Silobat Property in the third quarter of 1997. A more thorough
description of this agreement is described in the Section of this Prospectus
entitled "MANAGEMENT."
LEGAL PROCEEDINGS
On August 3, 1993, the Commission and the Company agreed to terminate the
Commission's investigation by the entry of a consent judgment against the
Company and certain of the Company's past and present key employees. These key
employees include Christopher D. Michaels, Jeffrey Kramer and Stanley Mohr. The
terms and conditions of the consent judgment can be summarized as follows:
1. The Company neither admitted nor denied any of the allegations
alleged by the Commission;
2. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained and enjoined from violating section 5 of the '33 Act or from
selling securities in interstate commerce unless and until a registration
statement is in effect or the security or transaction is exempt from the
registration provisions of the '33 Act and/or the '34 Act;
3. The Company and its officers, agents, servants, employees, and
others receiving actual notice of the consent judgment are permanently
restrained from engaging in any transaction, practice, or course of
conduct, employing any course of conduct, or obtaining any money or
property by means of an untrue statement of a material fact, or any
omission to state a material fact, necessary to make the statements made in
light of the circumstances under which they were made not misleading in
violation of the antifraud provisions of the '33 Act and the '34 Act.
As part of the consent judgment, the Company was required to engage an
independent certified public accountant to conduct a full and complete analysis
of the disposition of all funds received by the Company from investors and, to
the extent so discovered, to disgorge all ill-gotten gains.
On April 7, 1994, in response to the audits completed by the certified
public accountant, the Company and the Commission entered into a stipulation
regarding the resolution of all outstanding issues which then existed, which
stipulation was entered as an order by the United States District Court for the
Central District of California. Such stipulation contained an acknowledgement
that the Company and its executive officers had received no ill-gotten gains as
a result of prior activities by the Company in offering and selling its
securities,
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<PAGE> 35
and that the consent judgment resolved once and for all, all issues raised by
the Commission as a result of the Company's prior activities. The Company and
the persons named in the formal order of investigation were not required to pay
any fines or required to disgorge any monies previously received by it in
connection with its securities.
On February 27, 1989, the Pennsylvania Securities Commission issued a cease
and desist order against the Company and Christopher D. Michaels, Jeffrey S.
Kramer, Stanley J. Mohr, and William Michaels prohibiting them from violating
Section 201 of the Pennsylvania Securities Act of 1972 relating to the sale of
unregistered "penny stocks."
As a result of the foregoing regulatory and judicial actions, the Company
may not be able to utilize the exemptions from registration available under
Regulation A and Rule 701 promulgated under the '33 Act and may not be able to
rely upon certain private placement exemptions afforded by applicable state blue
sky laws in connection with the offer and sale of securities in a transaction
which qualifies as exempt from qualification under the '33 Act. In such cases,
the Company would be required to register/qualify the transaction under said
blue sky laws, which would likely increase the cost of, and extend the time for
completing, any private placement of securities.
On November 4, 1996, the Company filed a complaint (the "Action") in Nye
County, Nevada against Marlowe Harvey, Maran Holdings Inc., Calais Resources
Inc., and Argus Resources, Inc. (the "Harvey Entities"). The complaint in the
Action alleges, amongst other things, that the Harvey Entities breached their
obligations under various agreements (including the October 20, 1995 amendment
to the Joint Venture Agreement discussed in further detail in the Section of
this Prospectus entitled "DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY -- The
Nevada Property"). The Action originally sought to require the Harvey Entities
to specifically perform their obligations to convey a 1% interest in the joint
venture Nevada Property to the officers of the Company (namely Messrs. Michaels
and Kramer) and a 52% interest in the outstanding and issued stock in Argus
Resources, Inc. The Action also seeks damages of approximately $4,000,000
resulting from the actions or inactions of the defendants.
During April 1997 the Company caused its counsel, Parcel, Mauro, Hultin and
Spaanstra, P.C., to file a First Amendment to the Complaint on its behalf.
Counsel for the Harvey Entities filed their Answer and Counterclaims in the
Lawsuit during July 1997. In their Answer, they generally deny the allegations
of the First Amended Complaint and raise various affirmative defenses. In their
Counterclaims, the Harvey entities are seeking an injunction preventing the
Company from conducting activities related to the Manhattan Project pending
resolution of the issues in the Lawsuit and compensatory and punitive damages
and other financial relief based on breach of contract and other causes of
action.
In July 1997, the Harvey Entities moved for a Preliminary Injunction
against the Company preventing it from conducting further activities at the
Manhattan Project without their consent, from issuing press releases describing
certain real property as being wholly owned by the Company, and from using the
same as security for loans. A two-hour meeting on the Motion has been set for
September 4, 1997. Issuance of the preliminary Injunction will be vigorously
opposed by the Company.
Regardless of the outcome of the Lawsuit, it is unknown at the present time
whether the Harvey Entities have the ability to transfer the required 52%
interest in Argus Resources, Inc. as required under the Amended Joint Venture
Agreement, whether the Harvey Entities have substantive defenses which would
prevent the Company from obtaining specific performance, or whether the
remaining shareholders of Argus Resources, Inc. have approved and/or ratified
the Amended Joint Venture Agreement at any time. If the Company is successful in
obtaining specific performance of the agreements alleged in the Action, it will
effectively continue to own or control an undivided 100% interest in the Nevada
Property.
To date the complaint has been served on all defendants. In January 1997,
the parties held an initial joint case management conference. The parties have
voluntarily exchanged documents pursuant to local court rules. The Company has
recently amended its complaint to eliminate its request for specific performance
of the various agreements and to seek from the Court a judicial determination
that the Harvey Entities have breached such agreements and that the Harvey
Entities have failed to earn any interest in the Nevada Property.
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<PAGE> 36
USE OF PROCEEDS
The gross proceeds from the sale of the Common Stock by the Company will
range from a minimum of $1,500,000 to a maximum of $9,000,000. The Company
expects the proceeds derived from the sale of the Common Stock to be expended as
follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
SUBSCRIPTIONS SUBSCRIPTIONS
------------- -------------
<S> <C> <C>
Subscriptions(1)................................. $ 1,500,000 $ 9,000,000
Sales and Underwriting Commissions(2)............ 180,000 1,080,000
Legal and Accounting Fees........................ 45,000 120,000
NET PROCEEDS TO COMPANY.......................... 1,275,000 7,800,000
========== ==========
Acquisition and Development of Brazilian Timber
Properties(3).................................. $ 500,000 $ 3,800,000
Expansion of Mine, Exploration and Development of
Nevada Property, and Mill Expansion(4)......... 400,000 1,500,000
Exploration Activities on Indonesian
Concessions(5)................................. 225,000 1,500,000
General and Administrative Expenses(6)........... 150,000 1,000,000
========== ==========
</TABLE>
- ---------------
(1) A minimum of $1,000,000 of shares and a maximum of $9,000,000 of shares of
Common Stock will be sold at a price of $ per share.
(2) The Company has allocated up to $1,080,000 from the sale of the Common Stock
for sales and underwriting commissions. The Company may enter into
Underwriting Agreements with broker-dealers who are members in good standing
with the National Association of Securities Dealers, Inc. Under the terms of
these agreements, the Company will pay up to ten percent in sales
commissions and an additional two percent for "due diligence" fees and
expenses.
(3) Up to 750,000 hectares of timber properties and a sawmill facility are under
the control and/or management of the Company's subsidiary, Equatorial
Resources, Ltd. The Company has budgeted $350,000 in improvements to the
sawmill facility in San Miguel do Guama with the balance of the funds
allocated towards the cost of extracting harvested timber from Terranorte
and others, the costs of employing crews to extract timber from the jungle
and transport it to barges, the cost of additional equipment for harvesting
operations, other timber operating costs, reforestation expenses, and
general or administrative expenses including the costs of maintaining a
regional office in Belem, Para, Brazil.
(4) The Company anticipates expending up to $1,500,000 to expand mining
operations on the Nevada Property consistent with the Nevada Business Plan
as more fully described in the Section of the Prospectus entitled
"DESCRIPTION OF COMPANY'S BUSINESS AND PROPERTY." Such expansions would
include extending the existing decline to the White Caps Mine at the
565-foot level, rehabilitation and mining old workings in the White Caps
Mine, drifting and mining a new area near a drill hole which was intercepted
by the decline formed during the 1993 drilling program, rehabilitation of
the White Caps Shaft, and mining the 565-foot level, 670-foot level,
800-foot level, 910-foot level, 1120-foot level, 1200-foot level, and
1300-foot level of the White Caps Mine. If only the minimum number of
Subscriptions are raised pursuant to this Offering, the Company will
continue with its present course of business and use revenues derived from
ongoing operations to finance and execute the above-described expansion. The
Company has also been engaged in discussions with the owner of the mill, New
Concept Mining, Inc., concerning the acquisition of up to a fifty percent
interest in the mill currently adjacent to the Nevada Property. To date, no
definitive agreement has been reached. The Company anticipates that if such
an agreement is reached, the Company intends to expend up to $250,000 in
consideration of acquiring up to a fifty percent interest in the mill. In
the alternative, the Company will utilize such amount to help finance the
construction of its own mill on the Nevada Property.
(5) The Company anticipates that up to $1,500,000 will be expended on data
collection, reconnaissance surveying, reporting, field work, sampling, data
processing, laboratory analyses, prospect evaluation,
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<PAGE> 37
mineralization mapping, additional acquisitions, and exploration drilling
activities. All of these activities will be undertaken subject to the advice
and independent consulting services provided to the Company by Behre Dolbear
& Company, Inc. ("Behre Dolbear"), pursuant to a Consulting Services
Agreement dated October 7, 1996, and more particularly described elsewhere
in this Prospectus. The actual work on the Indonesian Property will be
performed by Five Engineering Consultants, Bandung, Indonesia, under the
supervision of Behre Dolbear.
(6) The Company currently expends approximately $100,000 per month in general
and administrative expenses. These expenses include salaries of all
employees (including its executive officers and directors), rent, health
insurance, travel and entertainment expenses, postage and courier and stock
transfer expenses. It is anticipated that once exploration and development
occurs on the Properties, general and administrative expenses may be paid
from such operations. To the extent that the Company does not utilize all
funds allocated for general and administrative expenses, such excess will be
retained by the Company as additional working capital.
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<PAGE> 38
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's Bylaws authorize the creation of the offices of President,
Treasurer (Chief Financial Officer), one or more Vice Presidents, Secretary, and
one or more Assistant Secretaries and Assistant Treasurers as the Board of
Directors deems proper. The Bylaws also provide for not less than three
directors and not more than seven directors who shall hold office until the
following annual meeting of the shareholders. The Bylaws further provide that
the number of directors may be increased by the affirmative vote of the Board of
Directors or a majority in interest of the shareholders at an annual or special
meeting.
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- -----------------------------------------------
<S> <C> <C>
Christopher D. Michaels 54 President and Chairman of the Board
Jeffrey S. Kramer 43 Senior Vice President, Chief Financial Officer,
Chief Operating Officer, Secretary-Treasurer,
and Director
Stanley J. Mohr 61 Vice President of Shareholder Relations and
Director
Edna Pollock 60 Director
Joseph Rude III, M.D. 52 Director
William Michaels 79 Vice President of Client Relations
Ignatius Z. Theodorou 55 President and Director of Equatorial Resources,
Ltd.
</TABLE>
CHRISTOPHER D. MICHAELS cofounded the Company in June 1986. Since then he
has served as President, Chief Executive Officer, and Chairman of the Board and
is entitled to retain his positions with the Company until the next annual
meeting of the Company's shareholders. Mr. Michaels is also a director, vice
president and chairman of the Board of Equatorial Resources, Ltd. and the
chairman and a director of Kalimantan Resources, Ltd., subsidiaries of the
Company. Mr. Michaels received a bachelor of arts degree from Alfred University
located in New York. After graduation, he accepted a post with the United States
government overseas in the Peace Corps. Since 1980, Mr. Michaels has acted in
sales and management positions in corporations whose primary business consists
of mining and minerals. Mr. Michaels has extensive background and experience in
international relations and has spent considerable time at the Company's
Bolivian mine site (closed in 1992) as well as on the Nevada Property. Mr.
Michaels is a party and is subject to the permanent injunction more particularly
described in the Section of the Prospectus entitled "LEGAL MATTERS, AUDITORS,
AND PENDING LEGAL PROCEEDINGS." Mr. Michaels has also been and is subject to a
cease and desist order issued by the Pennsylvania Securities Commission issued
February 27, 1989 prohibiting the Company, Mr. Michaels and other executive
officers from violating Section 201 of the Pennsylvania Securities Act of 1972
relating to the sale of unregistered "penny stocks."
JEFFREY S. KRAMER, Senior Vice President, Chief Financial Officer, Chief
Operating Officer, Secretary-Treasurer and Director, has held these positions
since 1989 and is entitled to retain these positions with the Company until the
next annual meeting of the Company's shareholders. Mr. Kramer is also a
director, vice president and the secretary-treasurer of Equatorial Resources,
Ltd. and a director and the secretary-treasurer of Kalimantan Resources, Ltd. He
has held management positions with Continental Cafes. As Chief Financial
Officer, Mr. Kramer's responsibilities include business affairs, contract
administration, public relations and broker and shareholder relations. Mr.
Kramer was also responsible for management oversight of the Nevada Property
operations since 1995 and was management's liason in negotiating the Company's
settlement with the Securities and Exchange Commission more particularly
described in the Section of this Prospectus entitled "LEGAL MATTERS, AUDITORS
AND LEGAL PROCEEDINGS." Mr. Kramer is a party and is subject to the regulatory
proceedings described in the Section of this Prospectus entitled "LEGAL MATTERS,
AUDITORS AND LEGAL PROCEEDINGS" and the action taken by the Pennsylvania
Securities Commission detailed above with respect to Mr. Michaels.
STANLEY J. MOHR, has been Vice President Client Relations with Nevada
Manhattan since 1986. Mr. Mohr became a Director in 1992 and is entitled to
retain his current positions with the Company until the next annual meeting of
the Company's shareholders. He is also a director of Kalimantan Resources, Ltd.
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<PAGE> 39
Mr. Mohr has been employed as a marketing executive with several mining and
mineral related companies and has gained extensive experience in many phases of
operations in the mining industry. Mr. Mohr held a real estate license issued by
the state of California from 1976 to 1984. Mr. Mohr was a party and is subject
to the regulatory proceedings more particularly described in the Section of the
Prospectus entitled "LEGAL MATTERS, AUDITORS, AND LEGAL PROCEEDINGS."
EDNA POLLOCK was elected to the Board of Directors on April 3, 1995 and is
entitled to retain her position as director until the next annual meeting of the
Company's shareholders. Ms. Pollock is a court reporter in North Carolina and
has been a shareholder of record since 1989. She has been an active member of
the Shareholders' Advisory Committee for several years representing shareholders
at Director's meetings. Ms. Pollock is a graduate of Columbia University, New
York, New York, having received her bachelor of arts degree in Journalism. She
spent twenty-eight years as a freelance reporter for both the federal and state
courts in North Carolina and acted in her official capacity as a court reporter
at numerous depositions, arbitrations, hearings, and conventions.
DR. JOE RUDE' III was elected to the Board of Directors on April 3, 1995
and is entitled to retain his position as a director until the next annual
meeting of the Company's shareholders. Dr. Rude' is a radiologist and has been
practicing his medical specialty since 1977 in Georgia. Dr. Rude' has been a
shareholder of record since 1989 and has been an active member of the
Shareholders' Advisory Committee for several years representing shareholders at
Director's meetings. Since 1995, Dr. Rude' has been a diagnostic radiologist at
Quantum Radiology, Atlanta, Georgia. From 1977 to 1995, he was associated with
Cobb Radiology Associates, Austell, Georgia, which merged with Quantum Radiology
in 1995. Dr. Rude' is a graduate of the University of Texas, Austin, Texas,
where he received his bachelor of arts degree in 1966. In 1970, he was awarded a
medical degree from the University of Texas Southwestern Medical School, Dallas,
Texas. Dr. Rude' is board certified in radiology and served in the United States
Air Force as a flight medical officer from 1971 to 1973.
WILLIAM MICHAELS, Vice President of Client Relations, has served in such
capacity or in other capacities since the Company's inception. Mr. Michaels is
the father of Christopher D. Michaels, the Company's President and Chairman of
the Board. Mr. Michaels is a party and is subject to the regulatory proceedings
more particularly described in the Section of the Prospectus entitled "LEGAL
MATTERS, AUDITORS AND PENDING LEGAL PROCEEDINGS."
IGNATIUS Z. THEODOROU, President and Director of Equatorial Resources, Ltd.
has served in such capacities since the formation of the Company's
Brazilian-based subsidiary. Mr. Theodorou is the remaining shareholder of
Equatorial Resources, owning twenty percent (20%) of such company. Mr. Theodorou
was born in Greece but has spent a substantial portion of the last thirty-seven
(37) years in the United States. Mr. Theodorou holds dual citizenship (Greek and
U.S.) and is currently managing the Company's operations in Brazil. His
employment experience has included consulting arrangements with Dames & Moore
Consulting Company, employment as Managing Director of the Liberian-owned
shipping company Crest Lines Inc., and founder and chief executive officers of
the timber companies known as Madira Intex, S.A. International Imports and
United Amazonian Resources, Limited.
SIGNIFICANT EMPLOYEES AND CONSULTANTS
The Company has entered into employment agreements dated January 1, 1995,
with Christopher D. Michaels and Jeffery S. Kramer relating to their respective
positions as executive officers and directors of the Company. Under the terms
and conditions of these employment agreements, both Mr. Michaels and Mr. Kramer
are required to devote substantially all of their business time and effort
during normal business hours to the Company through December 31, 1997. As
compensation for the services rendered and to be rendered to the Company, Mr.
Michaels is entitled to receive annual salaries equal to One Hundred Forty-Eight
Thousand Seven Hundred Twenty-Seven Dollars ($148,727) per annum which Mr.
Kramer is entitled to a salary of One Hundred Thirty-Seven Thousand Two Hundred
Twelve Dollars ($137,212) per annum. Both the salaries of Mr. Michaels and Mr.
Kramer are to be reviewed on each anniversary date of the Agreement by the board
of directors for the purposes of either increasing or decreasing such base
salary. The Board, however, may not reduce the base salary of either Mr.
Michaels or Mr. Kramer by more than twenty percent (20%) of the base salary for
the immediately preceding year. In addition, both Mr. Michaels and
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<PAGE> 40
Mr. Kramer have each received 900,000 shares of the Company's Common Stock as
part of their compensation under the terms of their employment agreements.
In addition to the base salaries and stock options, both Mr. Michaels and
Mr. Kramer are entitled to receive reimbursement on a monthly basis for all
reasonable expenses incurred in connection with the performance of their duties
under the employment agreement. Mr. Michaels and Mr. Kramer are also entitled to
certain fringe benefits (including but not limited to paid vacation and
participation in medical insurance plans and employee benefit plans) which now
are or may thereafter become available to all executive officers of the Company
and such other benefits (if any) as may be authorized from time to time by the
board of directors of the Company. The amount of such yearly fringe benefits is
approximately $6,500 and $7,700 for Mr. Michaels and Mr. Kramer respectively.
The employment agreements also authorize these officers to receive a "merit
bonus" ranging between twenty-five percent (25%) and seventy-five percent (75%)
of such officer's base salary in the event the Company experiences operating
cash flow for a fiscal year equal to not less than One Million Dollars
($1,000,000). Specifically, if the Company's operating cash flow for any fiscal
year ranges between One Million Dollars ($1,000,000) and Two Million Dollars
($2,000,000), both Mr. Michaels and Mr. Kramer will be entitled to a "merit
bonus" equal to twenty-five percent (25%) of his base salary; if the operating
cash flow is between Two Million Dollars ($2,000,000) and Three Million Dollars
($3,000,000) for any fiscal year, the "merit bonus" will be equal to fifty
percent (50%) of such officer's base pay; and if the Company's operating cash
flow is over Three Million Dollars ($3,000,000) or more during any fiscal year,
during the term of the Agreement, such officer's "merit bonus" will be equal to
seventy-five percent (75%) of such officer's base salary. In the event of
termination of the employment agreement by the Company for cause or by such
officer without cause, the "merit bonus" is not required to be paid. In the
event of termination for any other reason, the "merit bonus" will be prorated
for the fiscal year in which termination occurs.
The employment agreements with Messrs. Michaels and Kramer contain a
covenant prohibiting such officer from engaging directly or indirectly as a
principal partner or director or officer of any business competitive with the
Company. However, such officer may hold up to a five percent (5%) equity
interest in any entity engaged in a business competitive with the Company
without violating such covenant.
The agreements contain provisions for termination in the event of such
officer's permanent disability, death, or for cause. In addition, the agreements
provide for severance compensation equal to such officer's highest monthly base
salary times thirty-six. Both Mr. Michaels and Mr. Kramer also possess an option
to acquire up to twenty-five percent (25%) of the number of then outstanding
shares of the Company's capital stock at a price of five cents per share in the
event of an occurrence of a "Change in Control." For the purposes of such
employment agreements, the term "Change in Control" shall be deemed to have
occurred if the Company sells substantially all of its assets to a single
purchaser or to a group of associated purchasers in a single transaction or
series of related transactions; shares of the Company's outstanding capital
stock constituting more than twenty percent (20%) of the voting power of the
Company's outstanding capital stock are sold, exchanged, or otherwise disposed
of in one transaction or in a series of related transactions; or the Company is
a party to a merger or consolidation in which the Company is not the surviving
entity or the Company's shareholders receive shares of capital stock of the new
or continuing corporation constituting less than eighty percent (80%) of the
voting power of the new or continuing corporation.
The Company has engaged the services of Arthur J. Mendenhall to act as
project geologist for the Nevada Property. His duties include acting as the
on-site representative of the Company and to provide geological exploration and
mining grade control of the Nevada Property on a daily basis.
Mr. Mendenhall is an experienced mining geologist. He received his bachelor
of science degree in 1971 and his master of science degree in geology from Utah
State University, Logan, Utah. Mr. Mendenhall's work experience includes roles
supervising and monitoring the work of senior geologists in the coring and
sampling of ore; working as senior geologist in the sampling and mapping of
tertiary volcanic rock formations in gold exploration projects; collecting
cuttings and core samples for geochemical analyses; drafting drill hole cross
sections; and supervised drilling operations for bentonite and iron ore. Mr.
Mendenhall has completed the Occupational & Safety Hazard Agency ("OSHA")
forty-hour hazardous waste site training course and OSHA'S refresher course, and
has attended other geological seminars and courses relevant to mining. Mr.
Mendenhall is a registered geologist in the Commonwealth of Pennsylvania and a
member of the Geological Society of America.
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<PAGE> 41
AGREEMENT WITH GOLD KING MINES CORPORATION
On April 1, 1995, the Company entered into an Agreement with Gold King
Mines Corporation ("Gold King"), Denver, Colorado. Under the terms of this
Agreement, Gold King has agreed to provide the services of William R. Wilson on
a consulting basis at the rate of $400 per day. The initial term of the
consulting agreement was through December 31, 1995, and extended for one-year
periods upon mutual agreement between Gold King and the Company. Gold King and
the Company have extended this consulting agreement for two years.
Mr. Wilson has provided various services to the Company including the
preparation of the Business Plan. Mr. Wilson possesses a professional degree in
metallurgical engineering from the Colorado School of Mines, Golden, Colorado,
and has been awarded a Master's in Business Administration from the University
of Southern California, Los Angeles, California. In his more than thirty years
of experience, Mr. Wilson has, for the past fifteen years served in various
seniority executive capacities with engineering, construction, and consulting
firms, many of such capacities as president or the chief executive officer of
mining companies operating in the United States and internationally. Mr. Wilson
is the past chairman of the Colorado Mining Association. Gold King is a
subsidiary of Sheridan Reserve Corporation, a publicly-traded resource company
based in Toronto, Canada.
Mr. Wilson's primary responsibility to the Company has been and will be to
act as project manager for the Nevada Property and to act as the Company's
representative to Harrison Western Mining & Construction Company, the mining
contractor for the Nevada Property. Mr. Wilson will also provide technical and
managerial consulting to the Company on the Indonesian Property.
AGREEMENT WITH BEHRE DOLBEAR & COMPANY, INC.
The Company entered into a Consulting Services Agreement (the "Consulting
Agreement") with Behre Dolbear & Company, Inc. ("Behre Dolbear"), an
internationally recognized mining consulting firm. Under the terms of the
Consulting Agreement, Behre Dolbear will be responsible for providing
independent technical advisory services relating to the Indonesian Property.
Such services initially require Behre Dolbear to advise and validate the
exploration program contemplated by the Company, and would include related
technical input for other aspects of project development. The term of the
Consulting Agreement is for six months or upon satisfactory completion of the
consulting services contemplated prior to such expiration date. The Company has
agreed to pay Behre Dolbear the hourly rate of $137.50 up to a maximum of $1,100
per diem for the services contemplated under the Consulting Agreement and has
committed to utilize Behre Dolbear a minimum of two days per month. Unused days
will accrue under the Consulting Agreement but will be forfeited if not utilized
prior to the expiration of the term of the agreement. The Company must also
reimburse Behre Dolbear for any travel, reasonable and necessary lodging
expenses (including meals), telegram, cable, telex charges; a 2.5% "flat" labor
charge in lieu of actual telephone charges; printing, copies, reproduction, and
fax charges; postage, courier, express, and freight charges; use of personal
automobiles; royalties on computer software; professional liability insurance
(assessed on a 1.5% flat fee basis); clerical fees at the rate of $35 per hour
and other costs and expenses incurred by Behre Dolbear and/or its personnel in
performing the services contemplated by the Consulting Agreement.
AGREEMENT WITH BRITISH FAR EAST HOLDINGS LTD.
On April 30, 1997, the Company entered into a financial and management
services agreement with British Far East Holdings Ltd. ("BFE"). Under this
agreement, BFE has agreed to provide the personal services of Arthur Lipper III
to the Company for a period of thirty-six months to assist the Company with
respect to financial and business matters. The Company has agreed to pay BFE
$5,000 per month for the first three days of service and $1,000 per diem for
each additional day of service rendered by Mr. Lipper under the contract. The
agreement also grants to BFE warrants to purchase up to 100,000 shares of the
Company's Common Stock at one hundred twenty percent (120%) of the April 30,
1997 market price of $5.75 per share (subject to adjustment for certain events)
vesting at the rate of thirty-three and one-third percent (33 1/3%) per year
after the first twelve months of service. In addition to the services provided
under the contract, Mr. Lipper has also tentatively agreed to join the Company's
Board of Directors subject to his completion of due dilegence of the Company's
operations.
36
<PAGE> 42
AGREEMENT WITH ECO-RATING INTERNATIONAL
In order to better assure compliance with applicable Brazilian
environmental laws and regulations, the Company has entered into an agreement
with Eco-Rating International, Zurich, Switzerland ("Eco-Rating"). Under the
terms of the agreement, Eco-Rating has agreed to develop an "eco-efficiency
model" designed to establish environmental management guidelines for the
Company's operations in Brazil. It is the objective of the Company to establish
a reputation as a leader in the timber industry in environmentally-related
issues and to develop its properties in a manner best designed to properly
reclaim any areas harvested pursuant to its concessions.
SHAREHOLDERS' ADVISORY COMMITTEE
In 1989, the Company formed a Shareholder Advisory Committee (the "Advisory
Committee") comprised of up to 12 outside shareholders. The purpose of the
Advisory Committee is to participate in directors' meetings and compensation
meetings, as well as planning meetings related to all aspects of corporate
development. Members are selected annually from a group of shareholders who
respond to Company inquiries regarding interest in participating on the Advisory
Committee. Membership is rotated annually. One of the primary purposes of this
Committee is to provide independent, shareholder participation in critical
decisions relating to overall corporate strategy.
EXECUTIVE COMPENSATION
The table set forth below identifies the compensation paid to the Company's
executive officers for the last three completed fiscal years (i.e. fiscal years
ending May 31, 1995; May 31, 1996; and May 31, 1997):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------- -----------------------
------------------------------------------------ RESTRICTED SECURITIES ALL
NAME AND OTHER STOCK UNDERLYING LTIP OTHER
PRINCIPAL ANNUAL AWARD(S) OPTIONAL/ PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) ($) SARS(#) ($) ($)
- ----------------------- ---- --------- -------- ------------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher Michaels,
President.............. 1997 $251,299 -- $ 6,264 -- 10,000(2) -- --
and Chairman of the
Board................ 1996 $100,449 -- $6,316.00 $225,000(3) 10,000 -- --
1995 $148,727 -- $5,712.00 -- 10,000 -- --
-- -- 10,000 -- --
1997 $224,397 -- $ 8,080 -- $ 10,000(4)
----
Jeffrey Kramer, Senior
Vice 1996 $117,791 -- $7,658.00 $225,000(5) 10,000 -- --
President and
Director............. 1995 $137,212 -- $6,564.00 -- 10,000 -- --
-- -- 10,000 -- --
</TABLE>
- ---------------
(1) The Company incurs the annual cost of health insurance for Messrs. Michaels
and Kramer and their respective dependents.
(2) The Company has granted stock options to all members of its board of
directors in the amount of 10,000 shares per full year of service as an
active member of the board. These options may be exercised at $1.00 per
share of Common Stock. Options may not be exercised after the expiration of
10 years from the date of the grant and are nontransferable other than by
inheritance. As of the date of this Prospectus, the Company has granted
options aggregating 110,000 shares to Mr. Michaels and 80,000 shares to Mr.
Kramer.
(3) The Company granted Messrs. Michaels and Kramer the option to purchase
900,000 shares of Common Stock each at an average price of $1.50 per share.
These options were exercised during the year ended May 31, 1996, at which
time the Company's board of directors agreed to issue these shares for
services rendered. The Company has valued these restricted securities to be
worth twenty-five cents ($.25) per share.
(4) See Footnote 3.
(5) See Footnote 3.
37
<PAGE> 43
OPTIONS AND STOCK APPRECIATION RIGHTS
The table set forth below provides certain information concerning
individual grants of stock options and stock appreciation rights (whether
granted in connection with stock options or as "freestanding" rights made during
the last fiscal year of the Company ending May 31, 1997) to each of the named
executive officers noted below:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES OR BASE EXPIRATION
NAME GRANTED(4) IN FISCAL YEAR PRICE($/SH) DATE
(A) (B) (C) (D) (E)
- ---------------------------------------------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
Christopher D. Michaels....................... 110,000 10% $ 1.00 May 31, '06
Jeffrey S. Kramer............................. 80,000 14% $ 1.00 May 31, '06
Stanley Mohr.................................. 50,000 25% $ 1.00 May 31, '06
Edna Pollock.................................. 20,000 100% $ 1.00 May 31, '06
Joe Rude' III................................. 20,000 100% $ 1.00 May 31, '06
Lloyd S. Pantell, Esq.(4)..................... 100,000 100% $ 4.00 May 31, '06
</TABLE>
- ---------------
(1) The Company has granted stock options to all members of its board of
directors pursuant to Stock Option Agreements executed at various times.
Under the terms of these agreements, each director has been granted options
to purchase 10,000 shares of Common Stock per full year of service. The
exercise price for such options is $1.00 per share. The years in which stock
options were initially granted to each respective board member are as
follows: Christopher Michaels, 1986; Jeffrey Kramer, 1989; Stanley Mohr,
1993; Edna Pollock, 1996; and Joe Rude' III, 1996. In 1996, the Stock Option
Agreements relating to Messrs. Michaels, Kramer and Mohr were extended so
that they may be exercised through May 31, 2006. The remaining may not be
exercised after the expiration of ten (10) years from the date of grant and
are nontransferable other than by inheritance.
(2) See Footnote 1.
(3) See Footnote 1.
(4) Mr. Pantell is an attorney who is a principal in Lloyd S. Pantell, APLC who
has performed substantial legal services to the Company in connection with
this Offering.
LIMITATIONS ON DIRECTOR AND OFFICER LIABILITY
The Company's Bylaws do not contain a provision entitling any director or
executive officer to indemnification against liability under the Securities Act
of 1933 (the " '33 Act"). Sections 78.751 et seq. of the Nevada Revised Statutes
allow a company to indemnify its officers, directors, employees, and agents from
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, except under certain
circumstances. Indemnification may only occur if a determination has been made
that the officer, director, employee, or agent acted in good faith and in a
manner which such person believed to be in the best interests of the company. A
determination may be made by the shareholders, by a majority of the directors
who were not parties to the action, suit, or proceeding confirmed by opinion of
independent legal counsel; or by opinion of independent legal counsel in the
event a quorum of directors who were not a party to such action, suit, or
proceeding does not exist. Provided the terms and conditions of these provisions
under Nevada law are met, officers, directors, employees, and agents of the
Company may be indemnified against any cost, loss, or expense arising out of any
liability under the '33 Act. Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy and is, therefore, unenforceable.
38
<PAGE> 44
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF
SECURITIES UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTION/SARS
ON AT MAY 31, 1997 AT MAY 31, 1997
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
- ---------------------------------------------- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Christopher D. Michaels....................... 0 0 110,000 $550,000
Jeffrey S. Kramer............................. 0 0 80,000 $400,000
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company is a timber and mining company, with corporate offices in
Calabasas, California, and with interest(s) in certain timber or mining
properties located in the (1) state of Para, Brazil (the "Brazilian Timber
Properties"); (2) Manhattan Mining District, Nye County, Nevada, (the "Nevada
Property"); (3) Indonesian Gold Belt, Kalimantan, Indonesia (the "Indonesian
Gold Concessions"); (4) Kutai District of East Kalimantan, Indonesia (the
"Indonesian Coal Concessions"); and (5) on the island of Sumatra, Indonesia. The
terms and conditions of these acquisitions and the risks and contingencies
associated with such ownership interests are more particularly described in the
Section of the Prospectus entitled "DESCRIPTION OF COMPANY'S BUSINESS AND
PROPERTY" AND "RISKS FACTORS."
COMPARISON OF RESULTS OF OPERATIONS -- YEAR ENDED MAY 31, 1997
COMPARED TO YEAR ENDED MAY 31, 1996
Net loss for the year ended May 31, 1997 was $3,536,009 as compared to
$1,325,094 for the year ended May 31, 1996. The principal increases in expenses
during the year ended May 31, 1997 were attributed to expenses in Brazil
(approximately $145,000), office salaries (approximately $145,000), travel
(approximately $215,000), stock for services to employees ($240,000), consulting
fees ($115,000), legal fees ($175,000), discount on options ($150,000), warrant
expenses ($1,200,000) and a general increase in other expenses attributable to
the Company's increased activities from the previous year. During the year ended
May 31, 1997, the Company invested $2,600,000 in Common Stock towards the
purchase of certain contractual rights to the seven (7) gold mining concessions
comprising the Indonesian Gold Concessions, $227,000 towards certain exploration
activities relating to the Silobat Property (one of the Indonesian Gold
Concessions), $1,670,000 ($700,000 in Common Stock) towards the acquisition of
and improvements to the infrastructure relating to the Brazilian Timber
Properties, and $2,350,000 ($250,000 in Common Stock) in development activities
on the Nevada Property.
YEAR ENDED MAY 31, 1996 COMPARED TO YEAR ENDED MAY 31, 1995
During the year ended May 31, 1996, the Company reported an operating loss
of $1,325,094 as compared to an operating loss of $698,103 for the year ended
May 31, 1995. The difference between these two periods was principally due to
the issuance of stock to officers for services rendered of $485,000. There was
an increase of $233,981 in cash and cash equivalents for the year ended May 31,
1996 as compared to a decrease in cash and cash equivalents of $78,613 for the
previous fiscal year. The improvement in the availability of cash and cash
equivalents to the Company was the result of the sale of $1,255,325 in stock
offered and sold through
39
<PAGE> 45
private placements. By contrast, the Company sold $726,013 in stock through
private placements for the year ended May 31, 1995.
YEAR ENDED MAY 31, 1995 COMPARED TO YEAR ENDED MAY 31, 1994
The Company incurred a net loss of $698,103 in fiscal 1995 compared to a
net loss of $572,140 during fiscal 1994. The principal reason for the increased
loss was due to an increase in salaries of approximately $150,000. The Company
used $703,043 cash in operating activities in 1995 compared to $749,057 in 1994.
Investment in property and equipment was similar each year: $59,466 in 1995
compared to $116,777 in 1994. Proceeds from issuance of stock amounted to
$726,013 in 1995 compared to $975,469 in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital position as of May 31, 1997 was a deficit of
approximately $762,000. Almost since inception, the Company has experienced
pressure on its working capital position due to operating losses and the need to
continually invest in exploration activities on the Nevada Property and, more
recently, the Silobat Property, the remainder of the Indonesian Concessions, and
the Brazilian Concessions.
To raise funds in the past, the Company has relied upon private placements
of its equity securities. Over the past three years, the Company has raised
approximately $5,000,000 pursuant to three such private placements and notes
payable to stockholders. The Brazilian operations represent an immediate
opportunity for the Company to generate significant cash flows for the first
time. The Company believes that with the anticipated increase in daily
production at its Brazilian operations to 140 cubic meters per day, much of its
continued operations in Brazil, Indonesia, and on the Nevada Property will be
funded by the cash flow generated on the Jonasa Concessions. The Company has
also recently concluded a privately-negotiated placement of approximately Three
Million Five Hundred Thousand Dollars ($3,500,000) of 8% Senior Convertible
Debentures within certain investments. This private placement, together with the
cash flow anticipated from the Company's operations in Brazil, should satisfy
the Company's immediate need for the significant amounts of capital for its
overseas acquisitions and operations in both Indonesia and Brazil.
EXPENDITURES FOR BRAZILIAN OPERATIONS
The Company has budgeted up to $3,415,200 for its Brazilian operations.
This amount is projected to be expended as follows:
- Improvements to sawmill facility -- $350,000
- Timber harvesting operations -- $1,565,200
- Additional property acquisitions $1,500,000
EXPENDITURES FOR NEVADA FOR FURTHER DEVELOPMENT
A total of $1,500,000 has been budgeted for expenditure on the Nevada Property
as follows:
- Complete access to the White Cap Mine -- $800,000
- Continue exploration/development of open pit mining targets -- $200,000
- Acquire up to a 50% interest in the New Concepts Mining, Inc.,
mill -- $500,000
40
<PAGE> 46
EXPENDITURE FOR INDONESIA FOR FURTHER DEVELOPMENT
A total of $1,500,000 has been budgeted for expenditure on the Indonesian
Concessions as follows:
- Preliminary drill program for Silobat -- $100,000
- Expanded drill program for Silobat -- $300,000
- Drill program for three coal properties -- $500,000
- Reconnaissance/sampling program for other gold properties -- $600,000
CONTINGENCIES REGARDING NEVADA PROPERTY
Management has anticipated various contingencies regarding the Nevada
Property in addition to following the Nevada Business Plan. Included are plans
to develop open pit mining prospects on the existing property controlled by the
Company. Mining would be conducted by the current mining contractor and the ore
would be milled at the New Concepts Mill. Efforts will continue in order to
acquire an interest in adjoining properties adjacent to the Nevada Property and
an interest in the New Concepts Mining, Inc., mill either through joint venture
arrangements or through purchase. The Company cannot quantify the costs of these
efforts but the efforts are limited to funds available from sources described in
various parts of this offering.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of May 31, 1997,
regarding the record and beneficial ownership of the Common Stock and Preferred
Stock with respect to: (i) any individual or group of affiliated individuals or
persons owning, of record or beneficially, five percent (5%) or more of the
outstanding shares of the Common Stock or the Preferred Stock; (ii) the amount
of shares of Common Stock or Preferred Stock owned by each executive officer and
director of the Company; and (iii) the number of shares of Common Stock and/or
Preferred Stock owned, of record or beneficially, by the directors of the
Company as a group. Except as otherwise indicated, the Company believes that the
beneficial owners listed below, based upon information provided by such owners,
have sole voting and investment power with respect to such shares.
PRINCIPAL SHAREHOLDERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNER PERCENT OF CLASS
- -------------- ------------------------------- ------------------- ----------------
<S> <C> <C> <C>
Common Christopher D. Michaels 1,294,510(2) 8.66%
876 Ballina Court
Newbury Park, California 91320
Common Jeffrey S. Kramer 1,180,000(3) 7.89%
6053 Paseo Canyon Drive
Malibu, California 90265
Common Joseph C. Rude' III, M.D. 1,284,150(4) 8.59%
3065 River N. Pkwy.
Atlanta, Georgia 30328
Common David Weissberg, M.D. 1,109,900 7.43%
29 Blair Drive
Huntington, New York 11743
Common All Officers and 4,042,160(5) 27.04%
Directors as a Group
6 persons)
</TABLE>
- ---------------
(1) In addition to the 12,273,565 shares of Common Stock outstanding as of May
31, 1997, the percentages noted in this column assume the conversion of
228,319 shares of Preferred Stock into 2,283,190 shares of Common Stock, and
the issuance of 390,000 shares of Common Stock pursuant to various options
41
<PAGE> 47
primarily to existing management which may be issued in whole or in part
within 60 days of the date of this Prospectus.
(2) Includes options to purchase up to 110,000 shares of Common Stock which may
be exercised in whole or in part within 60 days of the date of this
Registration Statement.
(3) Includes options to purchase up to 80,000 shares of Common Stock which may
be exercised in whole or in part within 60 days of the date of this
Registration Statement.
(4) Includes shares owned by Carolyn Rude and Cobb Radiology (an affiliate of
Dr. Rude) as well options to purchase up to 20,000 shares of Common Stock
which may be exercised in whole or in part within 60 days of the date of
this Registration Statement.
(5) Includes options to purchase up to 280,000 shares of Common Stock by all
Directors or Officers as a group which may be exercised in whole or in part
within 60 days of the date of this Prospectus.
SELLING SHAREHOLDERS
None of the following Selling Shareholders have held any position, office
or been a party to a material relationship with the Company, any predecessor in
interest, or affiliates within the past three years.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF SHARES SHARES BENEFICIALLY
OFFERING BEING OFFERED OWNED AFTER OFFERING
---------------------- ---------------- --------------------
NAME NUMBER PERCENT(1) MIN. MAX. NUMBER PERCENT
- --------------------------------- --------- ---------- ---- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Silenus Limited
c/o Betuvo AG,
Baoerostrase 73
Postfach 6302
Zug, Switzerland 42,244(2) .28% 0 700,000(3) 700,000 4.69%
Mary Park Properties
3 Tora Mezion Street
Jerusalem, Israel 98,431(4) .66% 0 98,431 98,431 .66%
UFH Endowment, Ltd.
c/o CH Financial Services
160 Central Park South
Suite 3212
New York, NY 123,040(4) .82% 0 123,040 123,040 .82%
Austat Anstalt Schaan
7440 Fuerstentium
Liechtenstein,
Landstrassa 163 123,040(4) .82% 0 123,040 123,040 .82%
Mendel Group, Inc.
17 West 17 Street
8th Floor
New York, New York 10011 25,838(4) .17% 0 25,838 25,838 .17%
Irv Reneisson
660 Newtown/Yardley Road
Newtown, Pennsylvania 18940 100,000 .67% 0 100,000 100,000 .67%
Harrison Western
Construction Company
1208 Quail Street
Lakewood, Colorado 80215 100,000 .67% 0 100,000 100,000 .67%
</TABLE>
- ---------------
(1) Except where otherwise described in these footnotes, the percentages noted
in this column represent the ratio that a shareholder's beneficial ownership
bears to the total number of shares outstanding and issued
42
<PAGE> 48
as of May 31, 1997 12,273,565, the conversion of all Preferred Stock issued and
outstanding as of May 31, 1997, into the Common Stock on a ten-to-one basis
(2,283,190 shares of Common Stock) plus the number of stock options issued and
outstanding as of February 28, 1997 380,000.
(2) Pursuant to the terms and conditions of the April 14, 1997 Subscription
Agreement and related documents, Silenus redeemed $200,000 in Debentures on
July 25, 1997 and received 42,244 shares of Common Stock.
(3) The Subscription Agreement requires the Company to register shares of Common
Stock to account for the conversion of the 8% Senior Secured Convertible
Debentures and the exercise of warrants to purchase Common Stock. To date,
only $2,000,000 in Debentures have been issued. 700,000 shares of Common
Stock are hereby being registered to assure that there are a sufficient
number of shares of Common Stock registered to account for the conversion of
all remaining Debentures and the exercise of all 62,500 warrants.
(4) Assumes the conversion of all Debentures at $5.10 per share (based upon 75%
of the "bid" price of $6.825 as of July 16, 1997), plus the exercise of all
warrants to purchase Common Stock issued in conjunction with the Debentures.
AGREEMENTS TO ISSUE DEBENTURES
On April 14, 1997, the Company entered into a Subscription Agreement with
Silenus Limited ("Silenus") in a negotiated private placement. This transaction
was made in reliance upon the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. As a result, the Company issued $2,000,000
of 8% Senior Secured Convertible Debentures due March 31, 2000 (the
"Debentures") and granted to Silenus a warrant to purchase 62,500 shares of the
Company's Common Stock (the "Warrant").
The Debentures may be converted into shares of Common Stock at any time
commencing June 2, 1997 through August 16, 1997 at a price equal to the lesser
of: seventy-five percent (75%) of the closing bid price of the Common Stock on
April 16, 1997 (i.e. 75% X $8.00, or $6.00 per share); seventy-five percent
(75%) of the closing bid price of the Common Stock on the day prior to the
funding of any subsequent funding ("tranche"); or seventy-five percent (75%) of
the average closing bid price for the five trading days immediately preceding
the actual date of conversion of the Debentures. If conversion is made after
August 16, 1997, the conversion price will be seventy-two and one-half percent
(72.5%) of the above-referenced valuation standards.
The Company is required to use its "best efforts" to cause the Registration
Statement of which this Prospectus is a part to become effective prior to August
16, 1997. If the Registration Statement does not become effective by August 16,
1997, the Company is required to pay liquidated damages to Silenus equal to two
percent (2%) of the Debentures for the first thirty (30) days and three percent
(3%) per month thereafter until the Registration Statement becomes effective.
Provided Silenus and the Company fund at least two tranches of $2,000,000
each, Silenus will be entitled to a right of first refusal for one year to
participate in all or any part of any equity securities (i.e., stock or
securities convertible into equity) subsequently issued or proposed to be issued
by the Company. In addition, the Company will be prohibited from issuing any of
its securities at a discount (other than in connection with any merger,
acquisition, or certain benefit plans) for a period of ninety days following the
funding of the last tranche. The Company may notify Silenus that a funding is
requested at any time after the effective date of the Registration Statement of
which this Prospectus is a part until the funding of the last tranche. In such
event, should Silenus elect not to fund the tranche so requested, the Company
may issue its securities at a discount to a third party, provided a public
distribution of the securities sold to such third party is not made until at the
earlier of: ninety days following the effective date of the Company's
Registration Statement on Form 10 or the date on which at least seventy-five
percent (75%) of the Debentures are converted.
Until Silenus has converted at least seventy-five percent (75%) of the
Debentures, a deed of trust on the Nevada Property and the pledge of 1,000,000
shares of Common Stock will secure the Debentures.
43
<PAGE> 49
The Company has also issued to Silenus a Warrant to purchase 62,500 shares
of Common Stock. The Warrant may be exercised at any time up to and through
April 16, 2002 at the price of $8.00 per share, the closing bid price as of
April 15, 1997. The exercise price is subject to adjustment to account for
payments of dividends, stock splits, reverse stock splits, and similar events.
Funding of each subsequent tranche will likewise entitle Silenus to purchase an
additional 62,500 shares of Common Stock at $8.00 per share (subject to
adjustments noted above).
In order to provide for the issuance of all shares of Common Stock, which
may be issued pursuant to the Subscription Agreement and the Warrants, the
Company agreed to register up to 1,500,000 shares of Common Stock pursuant to
this Prospectus.
OUTSTANDING WARRANTS
The Company has issued warrants to purchase Common Stock to a number of
persons and entities. The following chart summarizes such issuances and details
the terms of each parties warrants:
OUTSTANDING WARRANTS
<TABLE>
<CAPTION>
EXERCISE ISSUANCE EXPIRATION
NAME AMOUNT PRICE DATE DATE
- ----------------------------------------- ------- -------- -------------- --------------
<S> <C> <C> <C> <C>
Holston, John 100,000 $ 1.50 Oct. 8, 1996 Apr. 7, 1998
Weissberg, David 125,000 $ 2.50 Nov. 26, 1996 Nov. 25, 1998
Renneisen, Irv 125,000 $ 2.50 Nov. 26, 1996 Nov. 25, 1998
Silenus Limited 62,500 $ 8.00 April 17, 1997 April 16, 2002
British Far East Holdings, Ltd. 100,000 $ 6.90 April 30, 1999 N/A
Magerman, Alan 350,000 $ 4.06 June 2, 1997 June 1, 2002
Austat Anstalt Schaan 25,000 $ 6.75 July 15, 1997 July 16, 2002
Mary Park Properties 20,000 $ 6.75 July 15, 1997 July 16, 2002
UFH Endowment, Ltd. 25,000 $ 6.75 July 15, 1997 July 16, 2002
Mendel Group, Inc. 5,250 $ 6.75 July 15, 1997 July 16, 2002
</TABLE>
Several of the warrant holders listed above were granted registration
rights on the underlying Common Stock. As a result the Company is registering
such shares pursuant to this Offering. Specifically, Silenus Limited, Austat
Anstalt Schaan, Mary Park Properties, UFH Endowment, Ltd. and the Mendel Group,
Inc. were granted such rights. See "SELLING STOCKHOLDERS."
DESCRIPTION OF SECURITIES BEING OFFERED
The following description of the capital stock of the Company and certain
provisions of the Company's Amended Articles of Incorporation and Certificate of
Determination of Preferences of Series A Preferred Stock is a summary and is
qualified in its entirety by the provisions of those documents which have been
filed as exhibits to the Company's Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The issued and outstanding shares of Common Stock, including the shares
being offered hereby, are validly issued, fully paid and nonassessable. Subject
to the rights of holders of Preferred Stock, the holders of outstanding shares
of the Common Stock are entitled to receive dividends out of assets legally
available therefor at such time and at such amounts as the board of directors
may, from time to time, determine. See "Dividend Policy." The shares of Common
Stock are neither redeemable nor convertible and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution, or winding up of the Company, the holders of the
Common Stock are entitled to receive, pro rata, the assets of the Company which
are legally available for distribution after payment of all debts and other
liabilities and subject to the rights of any holders of the Preferred Stock then
outstanding.
44
<PAGE> 50
Before declaring any dividends, the board of directors may set apart out of any
funds of the Company available for dividends such sum or sums as they may, from
time to time, deem in their discretion to be proper working capital or as a
reserve fund to meet contingencies or for equalizing dividends or for such other
purposes as the directors shall deem conducive to the interests of the Company.
Each outstanding share of the Common Stock is entitled to one vote on all
matters submitted to a vote of stockholders if there is no cumulative voting in
the election of directors.
PREFERRED STOCK
The Company's Amended Articles of Incorporation and its Certificate of
Determination of Preferences of Series A Preferred Stock authorized the Company
to issue up to 250,000 shares of the Preferred Stock. The holders of the
Preferred Stock are entitled to receive dividends at the rate of eight percent
per annum of the original issue price per share out of any funds legally viable
therefor payable on each January 1, April 1, July 1, and October 1 after the
issuance of the Preferred Stock. Dividends on the Preferred Stock are cumulative
so that if the full dividends in respect of any preference dividend is not paid,
the deficiency will be fully paid or declared and set apart for such shares
(without interest) before any dividend or other distribution is paid on or
declared or set apart for any other class or series of the Common Stock or
preferred shares of the Company. The Company enjoys the right to pay any
dividend on the Preferred Stock in cash or through the issuance of additional
shares of Preferred Stock or Common Stock having an issue price equal to the
amount of the dividend or through a combination of cash and stock. In the event
of any liquidation, dissolution, or winding up of the Company, either
voluntarily or involuntarily, the holders of the Preferred Stock will be
entitled to receive prior and in preference to any distribution of any of the
assets or surplus funds of the Company to the holders of the Common Stock or any
other class of preferred shares of the Company an amount equal to $10 per share
plus a further amount equal to any dividends declared but unpaid on such shares.
In the event of any consolidation or merger of the Company, or a sale of all or
substantially all of the assets of the Company, or a series of related
instructions in which more than fifty percent of the voting power of the Company
is disposed of, holders of the Preferred Stock will not be entitled to treat
such event as a liquidation, dissolution, or winding up of the Company The
Company has and intends to implement the right granted to each holder of the
Preferred Stock to convert each such share into 10 shares of fully priced and
nonaccessible shares of the Common Stock as of the date of this Prospectus.
DIVIDEND POLICY
The Company has established a policy of not paying dividends on the Common
Stock and anticipates that this policy shall remain in effect until further
notice. To date, the Company has not paid any dividends in cash or in stock on
the Preferred Stock. Management of the Company is currently planning and
arranging for payment of all cumulative dividends on the Preferred Stock through
the issuance of shares of Common Stock after giving effect to the conversion of
Preferred stock to Common Stock on a ten-for-one basis.
DILUTION
The net tangible book value of the Company at May 31, 1997, was
approximately fifty-two cents ($.52) per share. After taking into consideration
the conversion rights of the shareholders holding Preferred Stock as of May 31,
1997 (but exclusive of any dividends paid in stock), the total number of shares
of Common Stock outstanding as of May 31, 1997, the conversion by Silenus
Limited of all Debentures at an effective conversion price of $ per share
and assuming all shares of the Company's Common stock are sold pursuant to this
Offering, the net tangible book value of the Common Stock immediately after the
Offering (after deducting $ for Organization and Offering Expenses)
will be approximately per share of Common Stock. Investors who
subscribe to shares of the Common Stock under circumstances whereby all shares
of Common Stock are sold pursuant to this Offering will therefore realize an
immediate dilution of
45
<PAGE> 51
Dollars Cents ($ ) per share of Common Stock. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Offering price per share........................................ $
Net tangible book value before Offering(1)...................... $
Increase attributable to new Investors.......................... $
Pro forma net tangible book value after Offering................ $
-----
Dilution to new Investors(2).................................... $
-----
</TABLE>
- ---------------
(1) Determined by dividing the tangible net worth of the Company at May 31, 1997
by the number of shares outstanding as of that date (after taking into
consideration the conversion rights of Preferred Shareholders).
(2) The difference between the Subscription price of the Common Stock and the
net tangible book value per share of Common Stock after the Offering,
assuming all shares are sold pursuant to the Offering.
By contrast, the net tangible book value of the Common Stock immediately
after the Offering (after deducting $ in Organization and Offering
Expenses) will be approximately ($ ) per share of Common Stock.
Investors who subscribe to Common Stock under these circumstances will therefore
realize an immediate dilution of ($ ) per share of Common Stock.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Offering price per share........................................ $
Net tangible book value before Offering(3)...................... $
Increase attributable to new Investors.......................... $
Pro forma net tangible book value after Offering................ $
-----
Dilution to new Investors(4).................................... $
-----
</TABLE>
- ---------------
(3) See Footnote 2 above.
(4) The difference between the Subscription price of the Common Stock and the
net tangible book value per share of Common Stock after the Offering,
assuming only shares are sold pursuant to the Offering.
The Offering price for the Common Stock offered pursuant to this Offering
must be compared to the prices paid by and options granted to certain of the
Company's executive officers and the Selling Shareholders. In the case of all
options to purchase Common Stock, each recipient has the right to purchase
shares for a period of ten (10) years from the date of the grant as described in
further detail in the section of this Prospectus entitled
"MANAGEMENT -- Executive Compensation" and "MANAGEMENT -- Options and Stock
Appreciation Rights." In the case of the sale of Common Stock, Messrs. Michaels
and Kramer have paid, on the average, $2.53 and $2.03 per share, respectively,
while the Selling Shareholders have paid between $ and $ per share for the
Common Stock.
REGISTRATION RIGHTS
The Company has entered into agreements with various shareholders (the
"Selling Shareholders") to attempt to effect registration of their shares of
Common Stock. The Company has obtained registration of all persons who are
Selling Shareholders pursuant to Form SB-2 filed in connection with this
Offering. The Selling Shareholders and their relation to the Company are more
particularly described in Form SB-2 and in the section of the Prospectus
entitled "PRINCIPAL AND SELLING SHAREHOLDERS".
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and the Preferred
Stock is US Stock Transfer Corporation, Glendale, California.
46
<PAGE> 52
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 17, 1997 the Company entered into Subscription Agreements with,
Mary Park Properties, UFH Endowment Fund, Ltd., Austat Anstalt Schaan, and the
Mendel Group (the "Investor Group") in a negotiated private placement. This
transaction was made in reliance upon the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933. As a result, the Company issued
$1,505,000 of 8% Senior Convertible Debentures due July 1, 1000 (the "July
Debentures") and granted to the Investor Group warrants to purchase an aggregate
of 75,250 shares of the Company's Common Stock (the "July Warrants").
The July Debentures may be converted into shares of Common Stock at any
time commencing July 18, 1997 through July 1, 2000 at a price equal to
Seventy-five percent (75%) of the Market Price (as defined below) of the Common
Stock for all conversions for which notice is received after the date hereof.
For purposes of this Section 4, the "Market Price" shall be the lesser of (a)
the closing bid price of the Common Stock on the day prior to closing; or (b)
the average closing bid price of the Common Stock for the five (5) New York
Stock Exchange Trading days immediately preceding each conversion date, in each
case as reported by the National Association of Securities Dealers Automated
Quoting System, or as reported by the American Stock Exchange of the Common
Stock shall then be listed in trading upon such exchange.
The July Debentures bear interest at a coupon rate of 8% per annum. Such
interest is payable quarterly on the last calendar day of June, September,
December and March of each year. Interest may be paid in either cash or Common
Stock and will continue to accrue until payment in full of the principal amount
of the July Debentures has been made or duly provided for.
The Company is required to use its "best efforts" to cause the Registration
Statement of which this Prospectus is a part to become effective prior to
November 14, 1997. If the Registration Statement does not become effective by
November 14, 1997, the Company is required to pay liquidated damages to the
Investor Group equal to two percent (2%) of the Debentures for the first thirty
days and three percent (3%) per month thereafter until the Registration
Statement becomes effective.
The Company has also issued to the Investor Group warrants to purchase
75,250 shares of Common Stock. The warrant may be exercised at any time up to
and through July 16, 2002 at the price of $6.75 per share. The exercise price is
subject to adjustment to account for payments of dividends, stock splits,
reverse stock splits, and similar events.
In order to provide for the issuance of all shares of Common Stock which
may be issued pursuant to the Subscription Agreement and Warrants, the Company
agreed to register approximately 370,000 shares of Common Stock pursuant to this
Prospectus.
LEGAL MATTERS AND AUDITORS
COUNSEL
Lloyd S. Pantell, APLC has acted as Special Counsel. As such Special
Counsel has assisted the Company in the preparation of this Prospectus and the
registration statement. As required by applicable federal and state securities
laws, Special Counsel has rendered an opinion to the effect that, when issued,
the Common Stock shall be duly and validly issued in accordance with applicable
law.
As partial compensation for services rendered, the Company has granted Mr.
Pantell 100,000 stock options with a strike price of $4.00 per share.
AUDITORS
The Company has retained Jackson and Rhodes, P.C., Dallas, Texas, to serve
as Company's accountants for fiscal year 1997. The financial statements
accompanying this Prospectus have been audited by such firm.
47
<PAGE> 53
DEFINITIONS
The terms noted below shall, when used in this Prospectus, have the
following meanings ascribed to them:
"Accredited Investor" shall mean any Investor who meets one or more of the
categories defined by Rule 501(a) of Regulation D and who also is excluded from
the number of purchasers for the purposes of California Corporations Code
Section 25102(f)(1).
"Affiliate" shall mean (i) any person who directly or indirectly controls
or is controlled by or under a common control with, a person or entity; (ii) a
person owning or controlling ten percent (10%) or more of the outstanding voting
securities of the entity to which said definition relates; and (iii) any officer
or director of such entity. "Brazilian Timber Properties" shall mean the three
(3) timber properties on which the Company's subsidiary, Equatorial Resources,
Ltd. holds certain licensing and/or ownership rights more particularly described
in this Prospectus.
"Company" shall mean Nevada Manhattan Mining, Inc., a Nevada corporation.
"Debentures" shall mean the 8% Senior Secured Convertible Debentures
pursuant to the terms and conditions, the Subscription Agreements dated April
14, 1997 and July 15, 1997.
"Deed of Trust" shall mean the encumbrance currently affecting the Nevada
Property and created in favor of Anthony C. Selig & Associates, Dixie
Exploration, and Anthony C. Selig by virtue of the Nevada Property Agreement.
"Indonesian Concessions" shall mean the exploration prospects located on
the Indonesian portion of the island of Borneo known as Kalimantan and on the
island of Sumatra, Indonesia and more particularly described in this Prospectus.
"Investors" shall mean such persons and/or any authorized and qualified
successors who consider an investment in the Company as described in the
Prospectus and who submit completed and executed subscription documents to the
Company.
"Net Proceeds" shall mean those proceeds after deduction of Organization
and Offering Expenses which shall be applied in furtherance of the Company's
business plan in accordance with this Offering.
"Nevada Business Plan" shall mean the report prepared by William R. Wilson
dated as of July 1995 and entitled "Nevada Manhattan Mining, Inc., Manhattan
Mine Project Review and Business Plan."
"Nevada Property" shall mean the 28 patented and 65 unpatented mining
claims comprising approximately 1,800 acres and located in Nye County, Nevada
near the town of Manhattan as more particularly described in this Prospectus.
"Nevada Property Agreement" shall mean the Mining Agreement dated April 4,
1987 by and among the Company and Anthony C. Selig, Anthony C. Selig &
Associates, and Dixie Exploration as amended by subsequent agreements.
"Offering" shall mean the offer of the Common Stock pursuant to the terms
and conditions specified in the Prospectus.
"Offering Commitment Date" shall mean the date on which Subscriptions to at
least One Million Five Hundred Thousand Dollars ($1,500,000) are accepted by the
Company. The Offering Commitment Date is presently scheduled for December 31,
1997.
"Offering Termination Date" shall mean the date on which the Company shall
issue, if at all, at least $1,500,000 in shares of Common Stock pursuant to the
Offering. At present, such Date is set for December 31, 1997. In no event shall
the Offering Termination Date extend beyond March 31, 1998.
"Organization and Offering Expenses" shall mean all costs and expenses
incurred on behalf of the Company for professional fees (legal and accounting),
printing expenses, regulatory compliance, and all other costs associated with
the offer and sale of Common Stock. The amount of One Hundred Twenty Thousand
Dollars ($120,000) has been allocated for such expenses.
48
<PAGE> 54
"Properties" shall mean the Nevada Property and the Indonesian Property.
"Prospectus" shall mean the offering materials dated , 1997
describing the terms and conditions of the Offering.
"Registration Statement" shall mean Form BD and all amendments thereto
filed with the Securities and Exchange Commission and relating to the offer and
sale of Common Stock pursuant to this Offering.
"Special Counsel" shall mean Lloyd S. Pantell, APLC, a professional law
corporation.
"Subscription" shall mean the number of shares of Common Stock which a
prospective Investor agrees to purchase in the Company or the purchase price for
such purchase of shares as the context requires.
"Transfer Agent" shall mean U.S. Stock Transfer Corporation which shall be
authorized to accept Subscriptions, deposit Subscription funds into the Bank,
instruct the Bank to invest Subscriptions prior to the Offering Termination
Date, and to issue the Common Stock, all in accordance with this Offering.
"Underwriting Agreement" shall mean the agreement entered into between the
Company and broker-dealers who are members in good standing with the National
Association of Securities Dealers, Inc. and who agree to use their "best
efforts" to effect sales of the Common Stock pursuant to this Offering.
FURTHER INFORMATION
The Company is currently a reporting company within the meaning of Section
12(g) of the Securities Exchange Act of 1934.
The Company has applied for listing on the American Stock Exchange. If
approved for listing, certain reports and information not necessarily contained
in this Prospectus will be available for inspection through the American Stock
Exchange, 86 Trinity Place, New York, New York 10006-1881.
The Company has applied for listing on the Philadelphia Stock Exchange. If
approved for listing, certain reports and information not necessarily contained
in this Prospectus will be available for inspection through the Philadelphia
Stock Exchange, 1900 Market Street, Philadelphia, PA 19103-3584.
The Company has and intends to continue to furnish its shareholders annual
reports containing financial statements examined by an independent accounting
firm and quarterly reports for the first three fiscal quarters of each fiscal
year containing interim unaudited financial information.
This registration statement and all the Company's subsequent filings will
be filed through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR")
system and are, or will be, publicly available through the Commissions Web site
at http://www.sec.gov.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the Common Stock
offered pursuant to this Offering. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules accompanying the Registration Statement. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits and schedules accompanying the
Registration Statement. Copies of the Registration Statement and such exhibits
and schedules may be inspected, without charge, at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such material can also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N. W.,
Washington, D. C. 20549.
Until , 1997, all dealers effecting transactions in the Common
Stock registered pursuant to the Registration Statement, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
Subscriptions.
49
<PAGE> 55
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets at May 31, 1997 and 1996.................................. F-3
Consolidated Statements of Operations
For the Years Ended May 31, 1997, 1996 and 1995..................................... F-4
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended May 31, 1997, 1996 and 1995..................................... F-5
Consolidated Statements of Cash Flows
For the Years Ended May 31, 1997, 1996 and 1995..................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Nevada Manhattan Mining Incorporated
We have audited the accompanying consolidated balance sheets of Nevada
Manhattan Mining Incorporated and subsidiaries as of May 31, 1997 and 1996, and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended May
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Nevada Manhattan Mining Incorporated and subsidiaries as of May 31, 1997 and
1996, and the results of its operations and its cash flows for each of the years
in the three-year period ended May 31, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note 11, the Company has discovered, subsequent to May 31,
1996, that its mining properties have been overstated by the capitalization of a
portion of certain indirect salaries since 1992. Accordingly, the accompanying
financial statements for the years ended May 31, 1996 and 1995 have been
restated to correct the error.
JACKSON & RHODES P.C.
Dallas, Texas
July 28, 1997
F-2
<PAGE> 57
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- ------------
(RESTATED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 559,510 $ 233,981
Accounts receivable.............................................. 58,161 --
Prepaid expenses................................................. 622,710 --
----------- ------------
Total current assets..................................... 1,240,381 233,981
----------- ------------
Property and equipment (Note 2):
Mining properties:
Domestic...................................................... 5,830,091 3,472,428
Indonesia..................................................... 2,826,782 --
Brazilian timber Concession...................................... 3,296,729 --
Furniture and fixtures........................................... 431,840 63,842
Less accumulated depreciation................................. (82,998) (59,067)
----------- ------------
12,302,444 3,477,203
----------- ------------
$13,542,825 $ 3,711,184
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 544,738 $ 88,226
Accrued liabilities.............................................. 441,535 181,162
Notes payable to stockholders.................................... 712,321 136,751
Current portion of long-term debt (Note 3)....................... 303,818 44,388
----------- ------------
Total current liabilities................................ 2,002,412 450,527
Convertible debentures (Note 4).................................... 1,333,333 --
Long-term debt (Note 3)............................................ 2,669,427 115,723
----------- ------------
Total liabilities........................................ 6,005,172 566,250
----------- ------------
Commitments and contingencies (Note 5)............................. -- --
Stockholders' equity (Note 6):
Common stock to be issued........................................ 108 --
Preferred stock, $1 par, 250,000 shares authorized, 228,319 and
132,510 issued at May 31, 1997 and 1996....................... 228,319 132,510
Common stock, $.01 par; 50,000,000 shares authorized; 12,273,565
and 8,353,881 shares issued at May 31, 1997 and 1996.......... 122,736 83,539
Additional paid-in capital....................................... 23,022,574 15,079,460
Accumulated deficit.............................................. (15,836,084) (12,150,575)
----------- ------------
Total stockholders' equity.................................... 7,537,653 3,144,934
----------- ------------
$13,542,825 $ 3,711,184
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 58
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Revenues............................................. $ 287,178 $ -- $ --
Cost of sales........................................ 261,089 -- --
----------- ----------- ----------
Gross profit....................................... 26,089 -- --
Expenses:
General and administrative......................... (3,562,098) (1,325,094) (698,103)
----------- ----------- ----------
Net loss............................................. (3,536,009) (1,325,094) (698,103)
Cumulative preferred dividends....................... (149,500) (10,600) --
----------- ----------- ----------
Net loss attributable to common shareholders......... $(3,685,509) $(1,335,694) $ (698,103)
=========== =========== ==========
Net loss per common share............................ $ (0.34) $ (0.18) $ (0.14)
=========== =========== ==========
Weighted average shares outstanding.................. 10,684,176 7,428,081 5,021,801
=========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 59
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
STOCK SUBSCRIPTIONS ------------------ --------------------- PAID-IN ACCUMULATED
TO BE ISSUED RECEIVABLE SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------------ ------------- ------- -------- ---------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance May 31, 1994
(Restated)........ $ -- $ -- -- $ -- 3,964,701 $ 39,647 $11,602,364 $(10,116,778)
Shares to be issued
to officers....... 495,000 -- -- -- -- -- -- --
Shares issued for
cash.............. 131,500 (50,500) -- -- 647,213 6,472 638,541 --
Shares issued in
settlement of
claims............ -- -- -- -- 32,500 325 32,175 --
Shares issued as
conversion of
debt.............. 605,827 -- 14,067 141 32,692 --
Net loss
(Restated)........ -- -- -- -- -- -- -- (698,103)
---------- -------- ------- -------- ---------- -------- ----------- ------------
Balance May 31,
1995.............. 1,232,327 (50,500) -- -- 4,658,481 46,585 12,305,772 (10,814,881)
Issuance of
stock -- previously
purchased......... (1,232,327) -- 13,150 13,150 554,400 5,544 1,213,633 --
Cash received from
stock
subscriptions..... -- 50,500 -- -- -- -- -- --
Shares issued for
cash.............. -- -- 119,360 119,360 1,001,000 10,010 1,075,455 --
Shares issued for
services.......... -- -- -- -- 1,940,000 19,400 465,600 --
Shares issued in
connection with
shareholder
loan.............. -- -- -- -- 200,000 2,000 19,000 --
Preferred
dividend.......... -- -- -- -- -- -- -- (10,600)
Net loss
(Restated)........ -- -- -- -- -- -- -- (1,325,094)
---------- -------- ------- -------- ---------- -------- ----------- ------------
Balance, May 31,
1996.............. -- -- 132,510 132,510 8,353,881 83,539 15,079,460 (12,150,575)
Shares issued for
property.......... 108 -- -- -- 689,200 6,892 3,293,000 --
Shares issued for
accounts
payable........... -- -- -- -- 100,000 1,000 249,000 --
Shares issued for
cash.............. -- -- 96,409 96,409 1,917,351 19,174 1,888,477 --
Shares issued for
services.......... -- -- -- -- 120,000 1,200 238,800 --
Shares issued for
conversion of
debt.............. -- -- -- -- 1,087,133 10,871 399,755 --
Conversion of
preferred stock... -- -- (600) (600) 6,000 60 540 --
Warrants issued with
debentures........ -- -- -- -- -- -- 666,667
Other warrants
issued............ 1,206,875
Preferred
dividend.......... -- -- -- -- -- -- -- (149,500)
Net loss............ -- -- -- -- -- -- -- (3,536,009)
---------- -------- ------- -------- ---------- -------- ----------- ------------
Balance, May 31,
1997.............. $ 108 $ -- 228,319 $228,319 12,273,565 $122,736 $23,022,574 $(15,836,084)
========== ======== ======= ======== ========== ======== =========== ============
<CAPTION>
TOTAL
-----------
<S> <C>
Balance May 31, 1994
(Restated)........ $ 1,525,233
Shares to be issued
to officers....... 495,000
Shares issued for
cash.............. 726,013
Shares issued in
settlement of
claims............ 32,500
Shares issued as
conversion of
debt.............. 638,660
Net loss
(Restated)........ (698,103)
-----------
Balance May 31,
1995.............. 2,719,303
Issuance of
stock -- previously
purchased......... --
Cash received from
stock
subscriptions..... 50,500
Shares issued for
cash.............. 1,204,825
Shares issued for
services.......... 485,000
Shares issued in
connection with
shareholder
loan.............. 21,000
Preferred
dividend.......... (10,600)
Net loss
(Restated)........ (1,325,094)
-----------
Balance, May 31,
1996.............. 3,144,934
Shares issued for
property.......... 3,300,000
Shares issued for
accounts
payable........... 250,000
Shares issued for
cash.............. 2,004,060
Shares issued for
services.......... 240,000
Shares issued for
conversion of
debt.............. 410,626
Conversion of
preferred stock... --
Warrants issued with
debentures........ 666,667
Other warrants
issued............ 1,206,875
Preferred
dividend.......... (149,500)
Net loss............ (3,536,009)
-----------
Balance, May 31,
1997.............. $ 7,537,653
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 60
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ---------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(3,536,009) $(1,325,094) $(698,103)
Adjustments to reconcile net loss to net cash used
in operating activities:
Common stock issued for services................ 240,000 485,000 --
Warrants issued for services.................... 1,206,875 -- --
Settlement of claim with debt................... -- -- 32,500
Depreciation.................................... 23,931 6,200 9,150
Accounts receivable............................. (58,161) 1,846 (1,846)
Prepaid expenses................................ (622,710) 2,545 --
Accounts payable and accrued liabilities........ 298,074 (149,364) (44,744)
----------- ----------- ---------
Net cash used in operating activities...... (2,448,000) (978,867) (703,043)
----------- ----------- ---------
Cash flows from investing activities:
Purchase of property and equipment................. (2,102,443) (60,893) (59,466)
----------- ----------- ---------
Cash flows from financing activities:
Additions to convertible debentures................ 2,000,000 -- --
Payments on long-term debt......................... (114,284) (46,153) (42,117)
Proceeds from notes payable to stockholders........ 986,196 64,569 --
Proceeds from issuance of stock and stock to be
issued.......................................... 2,004,060 1,255,325 726,013
----------- ----------- ---------
Net cash provided by financing
activities............................... 4,875,972 1,273,741 683,896
----------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 325,529 233,981 (78,613)
Cash and cash equivalents at beginning of period..... 233,981 -- 78,613
----------- ----------- ---------
Cash and cash equivalents at end of period........... $ 559,510 $ 233,981 $ --
=========== =========== =========
Supplemental cash flow information:
Cash paid during the year for interest............. $ -- $ 9,647 $ 12,701
=========== =========== =========
</TABLE>
NON-CASH TRANSACTIONS:
During 1995, the Company issued stock for conversion of notes payable
and shares to settle claims (Note 6). During 1996, the Company issued
200,000 shares of common stock, valued at $21,000 in connection with a loan
from a shareholder. Also, during 1996, the Company assumed $77,067 in debt
in connection with acquiring an additional interest in the mine (Note 2).
During 1997, the Company issued 589,200 shares of common stock in
connection with the Indonesian mining property acquisitions, 100,000 shares
for domestic mining services and 100,000 shares for a Brazilian timber
concession (Note 2). In addition, the Company issued 120,000 shares to
employees for services and 1,087,133 shares for conversion of $410,626 in
debt. The Company also issued warrants in connection with a debenture and
issued other warrants (see Notes 4 and 6). The Company also assumed
$375,000 in debt in connection with acquiring an additional interest in the
mine (Note 2) and assumed a $3,000,000 liability in Brazil (Note 2). The
Company also accrued $149,500 and $10,600 in preferred dividends during
1997 and 1996, respectively.
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 61
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Nevada Manhattan Mining Incorporated was organized under the Laws of the
State of Nevada on June 10, 1985, to acquire, explore, develop, finance and sell
mining and timber rights and properties. The Company has to date acquired
properties and begun exploration and development. During the year ended May 31,
1997, the Company formed an 80%-owned subsidiary, Equitorial Resources (Brazil)
Ltda. ("Equatorial") (Note 2) and a wholly-owned subsidiary, Kalimantan
Resources (Note 2).
Preparation of the Company's 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.
Basis of Presentation
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company is
reporting a net loss of $3,536,009, $1,335,694 and $698,103 for the years ended
May 31, 1997, 1996 and 1995 and net cash resources were used in operating
activities for each year.
The following is a summary of managements' plan to raise capital and
generate additional operating funds. Management has reached an agreement to have
gold ore milled adjacent to its Nevada property by a third party, reducing
capital requirements of the Company. The Company has constructed a 1400 foot
decline underground access to enhance exploration and facilitate the extraction
of gold ore. The Company has negotiated an agreement with Harrison Western
Mining and Construction Company to begin production. The Company has acquired
and commenced the exploration and development of its mineral holdings in
Indonesia and has commenced harvesting and milling operations on its Brazilian
timber properties. The Company's Brazilian operations represent an immediate
opportunity for the Company to generate significant cash flows for the first
time and have begun to realize revenues. The Company believes that with the
anticipated increase in daily production at its Brazilian operations, much of
its continued operations in Brazil, Indonesia, and on the Nevada Property will
be funded by the cash flow generated from the Brazilian concessions. Prior to
May 31, 1997, the Company concluded a privately-negotiated placement of
$2,000,000 of 8% Senior Convertible Debentures. Subsequent to may 31, 1997,
management raised an additional $1.5 million under the same conditions.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.
Property and Equipment
Mining properties acquisition, exploration and development costs are
capitalized as incurred and will be amortized on the units-of-production method
based on economically recoverable mineral reserves, limited to proven and
probable reserves. Indirect costs are expenses as incurred. The Company assesses
impairment of mineral properties on an area-by-area basis which aggregates
contiguous areas. Estimated site restoration and closure costs in which the
Company has reclamation responsibilities are charged against operating earnings
on the units-of-production method over the expected economic life of the mines.
Other property and equipment are carried at cost. Depreciation of other
property and equipment is provided using the straight-line method over the seven
year estimated useful lives of the related assets.
F-7
<PAGE> 62
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Maintenance and repairs are charged to operations as incurred and expenditures
for major improvements are capitalized. Gains and losses from retirement or
replacement of property and equipment are included in operations.
Income Taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) which
requires the use of the asset and liability method of computing deferred income
taxes. The objective of the asset and liability method is to establish deferred
tax assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled.
Net Loss Per Common Share
Per share amounts have been computed on the weighted average number of
common shares outstanding for each period. All share and per share amounts have
been restated to retroactively reflect the reverse stock split explained in Note
6. Convertible preferred shares are considered antidilutive since conversion
would decrease loss per share.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Prepaid Expenses
Prepaid expenses at May 31, 1997 represents advances made to log extraction
companies in Brazil to induce timber production.
2. PROPERTIES AND EQUIPMENT
Brazil
The Company has acquired various rights to up to approximately 750,000
hectares (1,900,000 acres) of timber properties located in the state of Para,
Brazil. In addition, the Company has entered into an agreement to acquire and is
currently operating a sawmill facility located near the town of San Miguel do
Guama. To date, $1,400,000 has been provided by the Company for initial start-up
of its operations in Brazil. The Company began harvesting trees in April 1997
and has commenced sales during the year ended May 31, 1997.
The Jonasa Concessions. On November 11, 1996, the Company, through
Equatorial, entered into a letter agreement with Madeira Intex, S.A, ("Madeira")
whereby Madeira agreed to assign its rights in and to a Joint Venture Agreement
which Madeira had entered into in 1984 with Companhia Agropecuaria do Rio Jabuti
("Jonasa"). The Joint Venture Agreement required Jonasa to assign to Madeira the
exclusive rights to extract and market all lumber licensed by the appropriate
Brazilian authorities for export. All the various agreements were integrated
into an Agreement to Jointly Develop Timber Properties. Under this agreement,
Jonasa has granted to Equatorial the properties comprising the Jonasa
Concessions. In consideration of this grant, Equatorial has agreed to pay to
Jonasa 50% of the net proceeds received on the sale of all timber and related
products produced and sold pursuant to the agreement.
F-8
<PAGE> 63
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
2. PROPERTIES AND EQUIPMENT (CONTINUED)
Bernardes Concessions. On May 30, 1997, Equatorial entered into an
Agreement to Harvest Timber and Develop Timber Properties with Terranorte S.A.
("Terranorte"). Terranorte granted to Equatorial the exclusive right to either
harvest the timber or to purchase certain species of logs extracted by
Terranorte located on approximately 490,000 hectares of virgin timber property
located near the town of Moju, Para, Brazil. In June 1997, Equatorial began
harvesting operations employing its own crews and purchasing harvested logs from
Terranorte.
San Miguel Sawmill. On May 30, 1997, Equatorial and Jonasa Madeiras
Limitada ("Jonasa Madeiras") entered into an Agreement to Acquire Sawmill. Under
the terms of the agreement, Jonasa Madeiras agreed to convey all right, title,
and interest in and to the sawmill facility, all equipment relating to the
sawmill facility, and 246 hectares of adjacent real property, all of which is
located near the town of San Miguel do Guama, Para, Brazil. At present,
Equatorial has expended the sum of approximately $335,000 to improvements to the
sawmill and anticipates that an additional $350,000 in improvements will be made
over the next several months.
In addition to the cash capital requirements for the property, the Company
has issued 100,000 shares in February 1997 and is required to pay $3,000,000 to
the seller in December 1998. The Company has valued the 100,000 shares at
$700,000 based upon the $10 market price of the Company's common shares at the
time, discounted 30% for the restricted nature of and the thin market for the
shares. The non-interest bearing $3,000,000 debt has been discounted at 10% and
is included in long-term debt.
Domestic
The Company previously owned a 24.5% undivided interest in a mining
property in the Manhattan Mining District, Nye County, Nevada. The property
consists of 28 patented (fee) and 65 unpatented mine claims which include the
Whitecaps Mine, Union Mine, Consolidated Mine, Earl Mine, Bath Mine and other
assorted mines and claims which cover approximately 1,200 acres. Under
contractual understandings reached during October 1995, the Company increased
its interest to 50% and assumed an additional $77,067 in debt (Note 3) in
connection therewith. Because the related joint venture never really operated,
the Company has not used joint venture accounting for its mining operation in
Nevada. Instead, the Company has simply paid all the costs of the mine and
recorded its proportionate share of the debt to the property owner.
In March 1997, the Company entered into a Sale and Purchase Agreement with
the former owners of the Mine. Under the terms of this latest agreement, the
former owners agreed to sell to the Company 100% of their interests in the
Nevada Note, the Deed of Trust, and the Nevada Property for $375,000, payable as
follows: $100,000 in March 1997 and the balance plus all accrued and unpaid
interest (calculated at the rate of 5.25%) on or before February 6, 1999. The
Company paid the first installment of $100,000 in March 1997 and paid the
balance in June 1997. The agreement also acknowledges that the Company is the
only person or entity legally entitled to conduct mineral operations on the
Nevada Property. The Company is also required to pay all U.S. Bureau of Land
Management annual maintenance fees associated with the claims comprising the
Nevada Property.
Management of the Company is active in the supervision of work taking
place, plus future planning of all aspects of operations. The operating permits
for the Manhattan Gold Mine were issued to the Company by the State of Nevada
during April 1996. The Company has negotiated an agreement with Harrison Western
Mining and Construction Company for the beginning of production in July 1996.
The work was begun in July 1996 and included placement of mine shops and support
facilities; mining in the existing workings of the mine and extension of the
existing decline from its end location of 1,200 linear feet from the surface to
the White Caps Level. Underground flooding and caving of the existing decline
required an alternate access way
F-9
<PAGE> 64
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
2. PROPERTIES AND EQUIPMENT (CONTINUED)
and a new decline was driven from approximately 800 feet on the existing
decline. The Company has identified 1,500 tons to be mined by open pit methods
at 0.206 ounces per ton of gold of proven and probable reserves in the
Litigation Hill area. The Company is presently reviewing its business plans to
determine future work to be done at the mine.
Indonesia
The Company has made certain acquisitions in Indonesia during the year
ended May 31, 1997:
On August 19, 1996, the Company entered into an agreement to acquire a 51%
interest in a metals/minerals mining property in Kalimantan, Indonesia (Sopang
Gold Concession). Consideration for the purchase consisted of 400,000 shares of
common stock due upon the signing of the agreement (of which 10,800 are unissued
as of May 31, 1997) and an additional 4,000,000 shares to be released only if an
independent valuation of the property exceeds $12,000,000. The Company issued
unrestricted shares and has valued the 400,000 shares at $1,200,000 based upon
the $3 market price of the Company's common shares at the time.
The Sopang Gold Concession ("Sopang") consists of 16,480 hectares and is
held under Indonesian title as a KP, a form of Indonesian citizen ownership with
a joint venture agreement. The concession is located in southeast Kalimantan.
Because of the lack of major infrastructure in the area, initial work will be
limited to surface trenching and geochemical sampling. Field work at Sopang was
initiated in the first quarter of calendar 1997 with more extensive exploration
including airborne geophysical surveys and drilling to be initiated later in
1997.
The West Kalimantan Gold Project ("West Kalimantan") is 75 kilometers south
of the Sarawak region of Malaysia and contains 62 hectares with the intent to
expand to at least 2,000 hectares. The Project is held under a KPPE title, a
form of Indonesian citizen ownership in joint venture with the Company. Access
to the property is by road and motorized canoe for initial field work and
helicopter support for advanced exploration activities. Infrastructure is
limited but the proximity to the west coast of Kalimantan and low relief terrain
indicates no unusual development problems will be encountered. Following a
survey and additional ground sampling, key core drill targets were identified
and drilling will start during the latter part of calendar 1997. Further
property acquisition is an integral part of the development program at West
Kalimantan. Exploration has commenced in the first quarter of 1997.
The Cepa Coal Project ("Cepa") in East Kalimantan covers an area of
approximately 286,000 hectares and is held in three concessions as Contracts of
Work ("COW's"). Initial work on the property will include reasonable expansion
of ownership to include promising additional property containing similar coal.
Surface sampling, shallow drilling for coal characterization and general market
surveys began in the first quarter of 1997. The Silobat and Cepa projects,
collectively, were acquired in January 1997 for 200,000 common shares issued
upon signing of the agreement and an additional 3,800,000 shares to be released
only if an independent valuation of the property exceeds $40,000,000. The
Company has valued the 200,000 shares at $1,400,000 based upon the $10 market
price of the Company's common shares at the time, discounted 30% for the
restricted nature of and the thin market for the shares.
The Company owns the interests it acquired with the 600,000 shares issued
as explained above. The Company has contractually acquired the rights to obtain
controlling interests in five additional gold concessions in Indonesia. The
Company is currently reviewing these properties to determine an applicable
acquisition structure.
F-10
<PAGE> 65
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
2. PROPERTIES AND EQUIPMENT (CONTINUED)
The Company has retained the firm of Behre Dolbear & Co. to provide
review and third party validation with respect to its Indonesian
operations.
The Company has not identified any reserves at the Indonesia
properties defined as proven or probable.
3. LONG-TERM DEBT AND NOTES PAYABLE
Notes payable to stockholders accrue interest at rates from 9 percent to 12
percent, are due on demand and are guaranteed by certain Company officers.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
MAY 31,
-----------------------
1997 1996
---------- --------
<S> <C> <C>
Obligation to a stockholder as a result of a Lawsuit
settlement, interest imputed at 9%, payable $1,000 per
month until April 2001................................... $ 48,110 $ 50,770
Note payable to an individual at $2,000 per month,
including interest at 9%................................. 53,406 --
$3,000,000 non-interest bearing payable to an officer of
the Company's Brazilian subsidiary, discounted at 10%,
payable in December 1998................................. 2,596,729 --
10% note payable to an individual under terms of a joint
venture agreement, paid in June 1977. See Note 2......... 275,000 109,341
---------- --------
2,973,245 160,111
Current portion............................................ 303,818 44,388
---------- --------
Long-term debt............................................. $2,669,427 $115,723
========== ========
</TABLE>
Maturities of long-term debt principal are as follows for the years ending
May 31 (not reduced by $403,271 discount on the $3,000,000 note above):
<TABLE>
<S> <C>
1998................................................... $ 303,818
1999................................................... 3,030,654
2000................................................... 23,992
2001................................................... 15,533
2002................................................... 4,802
</TABLE>
The Company has capitalized $54,332, $26,693, and $34,242 of interest into
the mining properties during the years ended May 31, 1997, 1996 and 1995,
respectively.
The obligation to a stockholder resulted from a lawsuit in 1991. The suit
alleged that the Company failed to deliver free-trading stock, thereby resulting
in alleged liability. The lawsuit was finally settled in 1994 for $89,050,
payable, without interest, at $1,000 per month.
4. CONVERTIBLE DEBENTURES
On April 14, 1997, and July 7, 1997, the Company entered into Subscription
Agreements related to two negotiated private placements. These transactions were
made in reliance upon the exemption from registration afforded by Section 4(2)
of the Securities Act of 1933. As a result, the Company issued an aggregate of
$3,500,000 of 8% Senior Secured Convertible Debentures due March 31, 2000 and
July 1, 2000 for the
F-11
<PAGE> 66
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
4. CONVERTIBLE DEBENTURES (CONTINUED)
April 14 ($2,000,000) and July 7 ($1,500,000) offerings, respectively (the
"Debentures") and granted to the purchasers warrants to purchase 62,500 shares
of the Company's Common Stock (the "Warrants").
The Debentures may be converted into shares of Common Stock at any time
commencing June 2, 1997 at a price equal to the lesser of seventy-five percent
(75%) of the closing bid price of the Common Stock on the closing date (i.e. 75%
X $8.00, or $6.00 per share); seventy-five percent (75%) of the closing bid
price of the Common Stock on the day prior to the funding of any subsequent
funding ("tranche"); or seventy-five percent (75%) of the average closing bid
price for the five trading days immediately preceding the actual date of
conversion of the Debentures. With respect to the April 1997 funding, if
conversion is made after August 16, 1997, the discount will be seventy-two and
one-half percent (72.5%) of the above-referenced valuation standards. The
Company has recorded financing charges for the differences between the
conversion price and the fair market value of the stock at the date of each
funding ($666,667 for the year ended May 31,1997). The discount will be
amortized over the life of the debentures.
The Company is required to use its "best efforts" to cause the Registration
Statement with the Securities and Exchange Commission to become effective. If
the Registration Statement does not become effective within 120 days of each
respective funding, the Company is required to pay liquidated damages equal to
two percent (2%) of the Debentures for the first thirty days and three percent
(3%) per month thereafter until the Registration Statement becomes effective.
With regard to the April 1997 funding, until at least seventy-five percent
(75%) of the Debentures are converted, a deed of trust on the Nevada Property
and a pledge of 1,000,000 shares of Common Stock will secure the Debentures. No
such security is given on the Debentures issued in July 1997.
The Company has issued warrants to the Subscribers of the April 14 and July
7 offerings. Regarding the Subscribers of the April 14 offering, the Company has
granted 62,500 warrants with an exercise price of $8 per share and an expiration
date of April 16, 2002. Regarding Subscribers of the July 17, 1997 offering, the
Company has granted 75,250 warrants with an exercise price of $6.75 per share
and an expiration date of July 16, 2002. The exercise price is subject to
adjustment to account for payments of dividends, stock splits, reverse stock
splits, and similar events.
5. COMMITMENTS AND CONTINGENCIES
Lease
The Company leases office space under terms of an operating lease expiring
on February 28, 1998. Future minimum lease payments for the years ending May 31,
1998 are $33,525. Rent expense amounted to $27,181, $20,726 and $20,394 for the
years ended May 31, 1997, 1996 and 1995.
Securities and Exchange Commission
During May 1989, the Company received notice that the Securities and
Exchange Commission ("Commission") had commenced an investigation into the
Company's business activities. In 1993, the Board of Directors of the Company
determined that the entry of a proposed consent judgment and the termination of
the investigation was in the best interest of the Company and received
confirmation that the investigation had been completed.
F-12
<PAGE> 67
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
On March 19, 1994, the Company received the following "Stipulation
Regarding Resolution of Outstanding Issues" from the Commission closing out the
investigation and all related issues:
"Whereas the disposition of funds analysis conducted pursuant to the
Judgment of Permanent Injunction and Other Relief against Defendant Nevada
Manhattan Mining Incorporated entered on August 3, 1993 has revealed no
ill-gotten gains received by any defendant, the undersigned parties hereby
stipulate that all outstanding issues in this action have been resolved,
including disgorgement, and that the judgment entered against the
defendants are final."
While the Company believes that it was in the best interests of the Company
and its stockholders to enter the consent judgment, the entry of the judgment
may impose certain burdens on the Company with respect to its future activities.
The more significant of such burdens are as follows:
(i) The Company may not be able to utilize the exemptions from
registration available under Regulation A and Rule 701 under the 1933 Act.
(ii) The Company may not be able to rely on the private placement
exemptions provided in various state securities laws in connection with the
offer and sale of securities in a transaction which qualifies as an exempt
sale of securities under the 1933 Securities Act.
In such case, the Company would be required to qualify the transaction
under the state securities laws, which may not be available. This qualification
would increase the cost of, and extend the time for completing, such private
placement of securities.
Other Contingencies
In January 1995, a group of stockholders and creditors asserted a claim in
regards to a January 1988 settlement agreement. The Company has not been
formally served or any legal process initiated by the stockholders and creditors
in asserting this claim. Management does not believe the ultimate outcome of
this contingency will have a material effect on financial position or results of
operations.
During May 1997, the Company agreed to pay two shareholders an aggregate of
3% of the "net profits" of the Company's timber-related activities.
During November 1997 the Company filed a lawsuit in Nevada against its
former joint venturer partners in the Nevada mine ("the Harvey Entities"). The
complaint originally alleged, among other things, that the Harvey Entities
breached their obligations under various agreements. The action as amended seeks
damages of approximately $4,000,000 resulting from the actions and inactions of
the defendants. In a counterclaim, the defendants are seeking an injunction
preventing the Company from conducting activities related to the mine and
punitive damages and other financial relief based on breach of contract and
other causes of action. The Company subsequently amended its complaint, seeking
a judicial determination that the Joint Venture Agreement was null and void and
a determination that the Harvey Entities have forfeited all interest in the
Nevada property. If the Company is successful in obtaining the declaratory
relief requested in the action, it will effectively continue to own or control
an undivided 100% interest in the Nevada property. The Company believes that it
will obtain the declaratory relief requested in the action.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
F-13
<PAGE> 68
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and notes and accounts payable
approximate carrying value due to the short-term maturity of the instruments.
Significant Concentrations of Credit Risk
At certain times, the Company's cash deposits are in excess of the
federally insured limit on bank accounts. The Company has not experienced losses
related to its cash.
6. STOCKHOLDERS' EQUITY
Reverse Split
In February 1995, the Company's stockholders approved a one-for-ten reverse
split of the Company's common stock. The stated par value per share was not
changed. All share and per share amounts herein have been retroactively restated
to reflect the reverse split.
Other Stock Transactions
The Company sold 647,213 shares of common stock and 13,150 shares of Series
A Preferred Stock in separate private placements during the year ended May 31,
1995. The preferred stock had not been formally issued as of May 31, 1995, but
was issued during the year ended May 31, 1996. The Company raised $776,513 in
the private placements of which $50,500 was still receivable at May 31, 1995 and
has been reflected as an offsetting amount in stockholders' equity at that date.
During the year ended May 31, 1995, the Company also agreed to issue 14,067
shares of common stock in exchange for conversion of $638,660 of notes payable
to certain individuals.
During the year ended May 31, 1995, the Company also agreed to issue 32,500
shares of common stock to certain individuals to settle certain claims made by
the individuals. The $32,500 value of the shares was charged to general and
administrative expense. The shares were valued at $1 per share, the price at
which the Company was issuing its shares in a private placement at the time.
During 1988, two Company officers loaned 495,000 (post-reverse split)
common shares to the Company as treasury stock in return for the Company's
promise to return the shares when common shares became available as a result of
a reverse split or an increase in authorized shares. The shares were reissued to
the officers in November 1995. The Company has accounted for the shares, valued
at the market price of the shares when they were loaned to the Company, as a
long-term obligation in the financial statements until the year ended May 31,
1995, when the reverse split occurred and the shares became available for
issuance. At that time, the obligation was considered as common stock to be
issued and included in stockholders' equity. The shares were valued at $1 per
share, the price at which the Company was issuing its shares in a private
placement at the time.
During the year ended May 31, 1996, the Company issued 140,000 common
shares to certain employees for services rendered. The shares were valued at
$.25 per share ($35,000), the price at which the Company was issuing its shares
in a private placement at the time.
In connection with their employment contracts, the Company also granted two
officers the right to purchase 900,000 common shares each at an average price of
$1.50 per share. The officers exercised these
F-14
<PAGE> 69
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
6. STOCKHOLDERS' EQUITY (CONTINUED)
options during the year ended May 31, 1996 and the Company's board of Directors
then agreed to give the officers the shares for services rendered. These shares
have been valued at $.25 per share ($450,000) in the accompanying financial
statements.
During the year ended May 31, 1997, the Company issued 120,000 common
shares to certain employees for services rendered. The Company has valued the
shares at $240,000 based upon the $2 market price of the Company's common shares
at the time.
Warrants
As of July 28, 1997, the Company had warrants outstanding for the purchase
of an aggregate of 937,750 shares at a weighted average exercise price of $4.15.
During the year ended May 31, 1997, warrants were issued for an aggregate of
412,500 shares. In accordance with APB Opinion No. 25, the Company expensed
$1,206,875 in connection with these warrants.
Preferred Stock
The preferred stock has a $1 par value, a $10 liquidation preference and an
8 percent cumulative dividend payable in cash or kind. Each share is convertible
to ten common shares for a period of thirty months.
7. INCOME TAXES
The Company has recorded no income tax benefit, nor has deferred taxes in
any year due to a net operating loss carryforward amounting to approximately
$13,500,000 at May 31, 1997, which will expire, if not utilized, from 2002 to
2011.
There are no significant temporary differences between the Company's tax
and financial bases.
Following is a reconciliation between income tax provision (credit) and the
amount that would result from applying the U. S. statutory rate to pretax income
(loss):
<TABLE>
<CAPTION>
MAY 31,
-------------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Income tax credit at statutory
rate.......................... $(1,202,000) $(450,000) $(237,000)
Lack of taxable income in
carryback period.............. 1,202,000 450,000 237,000
----------- --------- ---------
Income tax provision (credit)... $ -- $ -- $ --
=========== ========= =========
</TABLE>
Following are the components of the Company's deferred tax asset resulting
from the Company's net operating loss carryforward at each period:
<TABLE>
<CAPTION>
MAY 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax asset........... $ 4,590,000 $ 3,388,000 $ 2,937,000
Valuation allowance.......... (4,590,000) (3,388,000) (2,937,000)
=========== =========== ===========
Net deferred tax asset....... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
F-15
<PAGE> 70
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
8. GEOGRAPHIC AND SEGMENT INFORMATION
Geographic Information
The Company's operations during the two years ended May 31, 1996 were
entirely gold mining operations in the United States. Beginning in the year
ended May 31, 1997, the Company began operating in Indonesia (mining) and Brazil
(timber). Financial data by segments and geographic area as of and for the year
ended May 31, 1997 were as follows:
<TABLE>
<CAPTION>
OPERATING IDENTIFIABLE
SALES LOSS ASSETS
--------- ----------- ------------
<S> <C> <C> <C>
United States.............. $ -- $(3,223,388) $ 6,555,563
Indonesia.................. -- (91,383) 2,826,782
Brazil..................... 287,178 (221,238) 4,160,480
--------- ----------- -----------
Total............ $ 287,178 $(3,536,009) $ 13,542,825
========= =========== ===========
</TABLE>
Segment Information
<TABLE>
<CAPTION>
TIMBER MINING TOTAL
---------- ---------- -----------
<S> <C> <C> <C>
Sales....................... $ 287,178 -- $ 287,178
========== ========== ===========
Operating loss.............. (221,238) (202,604) $ (423,842)
General corporate
expenses.................. -- (3,112,167)
---------- ---------- -----------
Net loss.................... $ (221,238) $ (202,604) $(3,536,009)
========== ========== ===========
Identifiable assets......... $4,160,480 $8,950,656 $13,111,136
Corporate assets............ -- -- 431,689
---------- ---------- -----------
Total assets................ $4,160,480 $8,950,656 $13,542,825
========== ========== ===========
Capital expenditures........ $ 313,055 $1,789,388 $ 2,102,443
========== ========== ===========
Depreciation................ $ 5,500 $ 18,431 $ 23,931
========== ========== ===========
</TABLE>
Operating income represents sales less operating expenses for each segment
and excludes income and expenses of a general corporate nature. Identifiable
assets by segment are those assets that are used in the Company's operations
within that industry but exclude investments in other industry segments. General
corporate assets consist principally of corporate cash.
One customer accounted for approximately 20% of the Company's sales for the
year ended May 31, 1997.
9. STOCK OPTIONS
The Company has granted stock options to all members of the Board of
Directors in the amount of 10,000 shares per full year of service as an active
member of the Board of Directors. The exercise price of options granted is $1.00
per share of common stock. Options may not be exercised after expiration of ten
(10) years from the date of grant and are non-transferable other than by will or
inheritance. These options are the only compensation received for service as
Director.
F-16
<PAGE> 71
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
9. STOCK OPTIONS (CONTINUED)
The following table sets forth information regarding options for the
periods ended:
<TABLE>
<CAPTION>
MAY 31,
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Outstanding at beginning of
period........................... 240,000 190,000 160,000
Granted............................ 50,000 50,000 30,000
-------- -------- --------
Outstanding at end of period....... 290,000 240,000 190,000
======== ======== ========
</TABLE>
During 1997, the Company also granted its chief legal counsel an option to
acquire 100,000 common shares at $4 per share.
SFAS 123
In October 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123 defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. Under the fair value based
method, compensation cost is measured at the grant date based on the value of
the award. However, SFAS 123 also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the intrinsic value based method, compensation cost is the
excess, if any, of the quoted market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock.
Entities electing to remain with the accounting in Opinion 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting had been applied. The pro forma disclosure
requirements are effective for financial statements for fiscal years beginning
after December 15, 1995. The Company has elected to measure compensation cost,
including options issued, under Opinion 25. The Company charged $150,000 to
expense for the year ended May 31, 1997 under Opinion 25. No compensation cost
was considered under either Opinion 25 or SFAS 123 for the year ended May 31,
1996, since the option price for the restricted shares approximated the value of
the restricted stock and the options were considered to have a nominal fair
value.
Pro forma disclosures as required by SFAS 123 for the fiscal year ended May
31, 1997 are as follows:
<TABLE>
<S> <C>
Pro forma net loss.............................. $(3,584,859)
-----------
Pro forma net loss per share.................... $ (.34)
-----------
</TABLE>
The fair value of the awards was estimated at the grant date using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1997: risk-free interest rate of 6.63%; volatility factor of
44%; and an expected life of the awards of one year. The weighted average fair
value of stock options for the year ended May 31, 1997 was $2.16.
10. ACCOUNTING DEVELOPMENTS
SFAS 128
In February 1997, FASB issued SFAS 128, "Earnings per Share." SFAS 128
requires all companies to present "basic" earnings per share ("EPS") and, for
companies with a complex capital structure, "diluted" EPS. Basic EPS is computed
by dividing net income available for common shareholders by the weighted-average
number of common shares outstanding during the period. Diluted EPS is computed
by dividing income (adjusted for preferred stock dividends and any potential
income or loss from convertible securities)
F-17
<PAGE> 72
NEVADA MANHATTAN MINING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1997 AND 1996
10. ACCOUNTING DEVELOPMENTS (CONTINUED)
by the weighted-average number of common shares outstanding during the period
plus the number of additional common shares that would have been outstanding if
any dilutive potential common stock had been issued. Certain disclosures
regarding the computation are also required by the statement. SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. The statement is not allowed to be applied early; however, pro forma EPS
amounts computed under SFAS 128 prior to its adoption may be presented in notes
to the financial statements. After adopting SFAS 128, companies must restate all
prior-period EPS information presented. Pro forma basic net loss per share each
year is equal to the net loss per share reported in the accompanying statement
of operations. Diluted net loss per share is not applicable since the Company
has losses in each year and increasing the shares outstanding would decrease
loss per share.
11. RESTATEMENT
Subsequent to May 31, 1996, the Company discovered that its mining
properties have been overstated by the capitalization of a portion of certain
indirect salaries since 1992. Accordingly, the accompanying financial statements
have been restated to correct the error. The effect of the correction was to
decrease domestic mining properties and increase accumulated deficit at May 31,
1996, by $488,619 and increase net loss by $126,588 and $87,030 for the years
ended May 31, 1996 and 1995, respectively.
12. SUBSEQUENT EVENTS
In June 1997, the Company agreed to issue 65,000 common shares to retire
$325,000 of accounts payable to the Company's mining subcontractor at the
Manhattan Mine.
In June 1997 the Company issued an additional $1,500,000 in convertible
debentures as explained in Note 4.
In June 1997 the Company issued warrants to purchase 350,000 shares at
$4.06 per share (the market price at the time) to a consultant.
Subsequent to May 31, 1997, the Company has realized approximately $40,000
in gold sales from the Nevada Mine.
F-18
<PAGE> 73
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Summary of the Offering................ 1
Risk Factors........................... 3
Terms of the Offering.................. 13
Plan of Distribution................... 14
Description of Company's Business and
Property............................. 15
Legal Proceedings...................... 29
Use of Proceeds........................ 31
Management............................. 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 39
Principal and Selling Shareholders..... 41
Description of Securities Being
Offered.............................. 45
Certain Relationships and Related
Transactions......................... 47
Legal Matters and Auditors............. 48
Definitions............................ 48
Further Information.................... 49
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
======================================================
======================================================
LOGO
SHARES
NEVADA MANHATTAN MINING, INC.
MINING DEVELOPMENT EXPLORATION
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 1997
======================================================
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws do not contain a provision entitling any director or
executive officer to indemnification against liability under the Securities Act
of 1933 (the " '33 Act"). Sections 78.751 et seq. of the Nevada Revised Statutes
allow a company to indemnify its officers, directors, employees, and agents from
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, except under certain
circumstances. Indemnification may only occur if a determination has been made
that the officer, director, employee, or agent acted in good faith and in a
manner which such person believed to be in the best interests of the company. A
determination made be made by the shareholders; by a majority of the directors
who were not parties to the action, suit, or proceeding confirmed by opinion of
independent legal counsel; or by opinion of independent legal counsel in the
event a quorum of directors who were not a party to such action, suit, or
proceeding does not exist. Provided the terms and conditions of these provisions
under Nevada law are met, officers, directors, employees, and agents of the
Company may be indemnified against any cost, loss, or expense arising out of any
liability under the '33 Act. Insofar as indemnification for liabilities arising
under the '33 Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification for violations of the
'33 Act is against public policy and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the registration fee and the Amex fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
Registration fee.................................................. $ 8,888
Amex fee.......................................................... $ 50,000
Philadelphia Stock Exchange fee................................... $ 7,500
Printing and engraving............................................ $ 60,000
Translation Services.............................................. $ 3,000
Legal fees and expenses........................................... $ 70,000
Accounting fees and expenses...................................... $ 50,000
Blue sky fees and expenses........................................ $ 10,000
Transfer agent fees............................................... $ 2,500
Miscellaneous..................................................... $ 5,000
-------
Total................................................... $ 266,888
=======
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
From the period June 1, 1994, through May 31, 1997, the Company offered and
sold 4,119,964 shares of its Common Stock and 228,319 shares of Preferred Stock.
From the period June 1, 1994 through May 31, 1995, the Company offered and sold
647,213 shares of its Common Stock (after adjustment for the reverse split which
occurred in February 1995) at $1.00 per share in a private placement in reliance
upon Section 492). The Company believes that it met all of the requirements
contained in Section 4(2).
Sales of shares were made only to the class of persons meeting the
suitability requirements within the Offering. The Company reviewed subscription
documents which it required all prospective purchasers to complete.
From the period June 1, 1995 through May 31, 1996, the Company offered and
sold 119,360 shares of Preferred Stock for $1,193,600 and 1,555,400 shares of
its Common Stock for $1,555,400. The Company
II-1
<PAGE> 75
believed that it met all of the requirements contained in Section 4(2). Sales of
shares were made only to the class of persons meeting the suitability
requirements contained within the Offering. The Company reviewed subscription
documents which it required all prospective purchasers to complete.
From the period from June 1, 1996 through May 31, 1997, the Company offered
and sold 1,917,351 shares of Common Stock for $1,917,351 and 108,959 shares of
Preferred Stock for $1,089,590. Sales of shares were made only to the class of
persons meeting the suitability requirements contained within the Offering. The
Company reviewed subscription documents which it required all prospective
purchasers to complete.
Sales of both the Common Stock and the Preferred Stock were effected
through the executive officers of the Company to existing shareholders. No
underwriters were employed in connection with the offer and sale of the
aforementioned securities. Thus no underwriting discounts or commissions were
paid.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------------ ----------------------------------------------------------------------
<S> <C>
3.(i) Articles of Incorporation of Epic Enterprises, Ltd., Filed June 10,
1985*
3.(ii) Certificate of Amendment to Articles of Incorporation of Epic
Enterprises, Ltd., Filed September 11, 1987*
3.(iii) Certificate of Amendment to Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed October 26, 1987*
3.(iv) Certificate of Amendment of Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed August 31, 1995*
3.(v) Certificate of Determination of Preferences of Series A Preferred
Stock of Nevada Manhattan Mining Incorporated Filed October 25, 1995*
3.(vi) Bylaws of Epic Enterprises, Ltd.*
3.(vii) Memorandum and Articles of Association of Equatorial Resources, Ltd.+
3.(viii) Memorandum and Articles of Association of Kalimantan Resources, Ltd.+
4.(i) Pages 1, 3, 4, and 5 of the Bylaws of Epic Enterprises, Ltd.*
4.(ii) Pages 1 through 9 of Certificate of Determination of Preferences of
Series A Preferred Stock of Nevada Manhattan Mining Incorporated Filed
October 25, 1995*
4.(iii) Stock Options Issued to Directors+
4.(iv) Subscription Agreement dated April 14, 1997 with Silenus Limited**
4.(v) Warrant to Purchase Common Stock**
4.(vi) Deed of Trust in favor of Silenus Limited**
4.(vii) Form of Debenture**
4.(viii) Subscription Agreements dated July 15, 1997
4.(ix) Warrants to Purchase Common Stock
4.(x) Form of Debenture
5 Opinion on Legality*
10.(i) Mining Agreement Dated April 4, 1987*
10.(ii) Amendment to Mining Agreement Dated December 9, 1987*
10.(iii) Manhattan Mining Property Agreement Dated March 2, 1989*
10.(iv) Corporation Quitclaim Deed Filed March 9, 1989*
10.(v) Deed of Trust and Assignment of Rents Recorded March 9, 1989*
10.(vi) Joint Venture Agreement Dated June 1993*
10.(vii) Letter Agreement Dated August 10, 1995*
10.(viii) Amendment to Joint Venture Agreement Dated October 20, 1995*
10.(ix) Contract Between Nevada Manhattan Mining, Inc, and Harrison Western
Construction Corp.*
10.(x) Principles of Agreement Dated August 19, 1996, as amended***
</TABLE>
II-2
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------------ ----------------------------------------------------------------------
<S> <C>
10.(xi) Employment Agreement Dated January 1, 1995 with Christopher D.
Michaels*
10.(xii) Employment Agreement Dated January 1, 1995 with Jeffrey Kramer*
10.(xiii) Consulting Agreement with Gold King Mines Corporation Dated April 1,
1995*
10.(xiv) Consulting Services Agreement Dated October 7, 1996 with Behre Dolbear
& Company, Inc.*
10.(xv) Letter Agreement Dated March 25, 1996 with David Weissberg, M.D.*
10.(xvi) Letter Agreement Dated May 13, 1996 with David Weissberg, M.D.*
10.(xvii) Letter Agreement Dated September 25, 1996 with Mr. John Holsten*
10.(xviii) Letter Agreement dated April 23, 1997 with British Far East Holdings
Ltd.**
10.(xix) Addendum Agreement to Principles of Agreement+
10.(xx) Acquisition Agreement by and between Sinkamas Agunbg Ltd. and
Kalimantan Resources, Ltd. dated January 26, 1997+
10.(xxi) Acquisition Agreement for Gold and Coal Concessions by and between
Kalimas Jaya Ltd. and Kalimantan Resources, Ltd.+
10.(xxii) November 11, 1996 letter Agreement with Maderia Intex, S.A.
International Exports+
10.(xxiii) Proposal for Sale and Purchase and Authorization for Exploration of
Timber+
10.(xxiv) Eco-Rating Standard Agreement dated December 17, 1996+
10.(xxv) Sale and Purchase Agreement dated February 6, 1997+
10.(xxvi) Agreement to Jointly Develop Timber Properties dated May 30, 1997
10.(xxvii) Agreement to Acquire Sawmill dated May 30, 1997
10.(xxviii) Agreement to Harvest Timber and Develop Harvest Properties
10.(xxix) Addendum to Contract for Extraction of Timber and Development of
Timber Properties
21 Subsidiaries of Small Business Issuer+
23.(i) Consent of Jackson & Rhodes P.C.**
23.(ii) Consent of William R. Wilson**
23.(iii) Consent of Behre Dolbear & Company, Inc.**
27 Financial Data Schedule
99(i) Business Plan Dated July 1995*
99(ii) Business Plan Dated January 1997+
</TABLE>
- ---------------
* Filed with Registration Statement on Form SB-2 on December 6, 1996
(Registration No. 333-17423).
** Filed with Registration Statement on Form SB-2 on May 28, 1997
(Registration Number 333-27923)
*** Principles of Agreement in original form filed with Registration Statement
on Form SB-2 on December 6, 1996. Amendment to this document is filed
comtemporarily herewith.
+ Incorporated by reference to the Company's Registration Statement on Form
10 filed April 3, 1997 (Registration No. 001-12867).
(B) FINANCIAL STATEMENT SCHEDULES.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually
II-3
<PAGE> 77
or in the aggregate, represent a fundamental change in the information
set forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (1)(i) and
(1)(ii) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the Company pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in the Prospectus or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 78
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to the
registration statement to be signed on its behalf by the undersigned, in the
City of Calabasas, State of California on July 31, 1997.
NEVADA MANHATTAN MINING
INCORPORATED
By /s/ CHRISTOPHER D. MICHAELS
------------------------------------
Christopher D. Michaels
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------
<S> <C> <C>
/s/ CHRISTOPHER D. MICHAELS President, Director and July 31, 1997
- --------------------------------------------- Chief Executive Officer
CHRISTOPHER D. MICHAELS
/s/ JEFFREY S. KRAMER Senior Vice President July 31, 1997
- --------------------------------------------- Chief Financial Officer
JEFFREY S. KRAMER
/s/ NEIL SHARDA Controller July 31, 1997
- ---------------------------------------------
NEIL SHARDA
/s/ STANLEY J. MOHR Director July 31, 1997
- ---------------------------------------------
STANLEY J. MOHR
/s/ JOSEPH RUDE III, M.D. Director July 31, 1997
- ---------------------------------------------
JOSEPH RUDE III, M.D.
/s/ EDNA POLLOCK Director July 31, 1997
- ---------------------------------------------
EDNA POLLOCK
</TABLE>
II-5
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------------ ---------------------------------------------------------------------- ------------
<S> <C> <C>
3.(i) Articles of Incorporation of Epic Enterprises, Ltd., Filed June 10,
1985*.................................................................
3.(ii) Certificate of Amendment to Articles of Incorporation of Epic
Enterprises, Ltd., Filed September 11, 1987*..........................
3.(iii) Certificate of Amendment to Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed October 26, 1987*.................
3.(iv) Certificate of Amendment of Articles of Incorporation of Nevada
Manhattan Mining Incorporated Filed August 31, 1995*..................
3.(v) Certificate of Determination of Preferences of Series A Preferred
Stock of Nevada Manhattan Mining Incorporated Filed October 25,
1995*.................................................................
3.(vi) Bylaws of Epic Enterprises, Ltd.*.....................................
3.(vii) Memorandum and Articles of Association of Equatorial Resources,
Ltd.+.................................................................
3.(viii) Memorandum and Articles of Association of Kalimantan Resources,
Ltd.+.................................................................
4.(i) Pages 1, 3, 4, and 5 of the Bylaws of Epic Enterprises, Ltd.*.........
4.(ii) Pages 1 through 9 of Certificate of Determination of Preferences of
Series A Preferred Stock of Nevada Manhattan Mining Incorporated Filed
October 25, 1995*.....................................................
4.(iii) Stock Options Issued to Directors+....................................
4.(iv) Subscription Agreement dated April 14, 1997 with Silenus Limited**....
4.(v) Warrant to Purchase Common Stock**....................................
4.(vi) Deed of Trust in favor of Silenus Limited**...........................
4.(vii) Form of Debenture**...................................................
4.(viii) Subscription Agreement dated July 15, 1997............................
4.(ix) Warrants to Purchase Common Stock.....................................
4.(x) Form of Debenture.....................................................
5 Opinion on Legality...................................................
10.(i) Mining Agreement Dated April 4, 1987*.................................
10.(ii) Amendment to Mining Agreement Dated December 9, 1987*.................
10.(iii) Manhattan Mining Property Agreement Dated March 2, 1989*..............
10.(iv) Corporation Quitclaim Deed Filed March 9, 1989*.......................
10.(v) Deed of Trust and Assignment of Rents Recorded March 9, 1989*.........
10.(vi) Joint Venture Agreement Dated June 1993*..............................
10.(vii) Letter Agreement Dated August 10, 1995*...............................
10.(viii) Amendment to Joint Venture Agreement Dated October 20, 1995*..........
10.(ix) Contract Between Nevada Manhattan Mining, Inc. and Harrison Western
Construction Corp.*...................................................
10.(x) Principles of Agreement Dated August 19, 1996, as amended***..........
10.(xi) Employment Agreement Dated January 1, 1995 with Christopher D.
Michaels*.............................................................
10.(xii) Employment Agreement Dated January 1, 1995 with Jeffrey Kramer*.......
10.(xiii) Consulting Agreement with Gold King Mines Corporation Dated April 1,
1995*.................................................................
10.(xiv) Consulting Services Agreement Dated October 7, 1996 with Behre Dolbear
& Company, Inc. *.....................................................
10.(xv) Letter Agreement Dated March 25, 1996 with David Weissberg, M.D.*.....
10.(xvi) Letter Agreement Dated May 13, 1996 with David Weissberg, M.D. *......
10.(xvii) Letter Agreement Dated September 25, 1996 with Mr. John Holsten*......
10.(xviii) Letter Agreement dated April 23, 1997 with British Far East Holding
Ltd.**................................................................
10.(xix) Addendum Agreement to Principles of Agreement+........................
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------------ ---------------------------------------------------------------------- ------------
<S> <C> <C>
10.(xx) Acquisition Agreement by and between Sinkamas Agunbg Ltd. and
Kalimantan Resources, Ltd. dated January 26, 1997+....................
10.(xxi) Acquisition Agreement for Gold and Coal Concessions by and between
Kalimas Jaya Ltd. and Kalimantan Resources, Ltd.+.....................
10.(xxii) November 11, 1996 letter Agreement with Maderia Intex, S.A.
International Exports+................................................
10.(xxiii) Proposal for Sale and Purchase and Authorization for Exploration of
Timber+...............................................................
10.(xxiv) Eco-Rating Standard Agreement dated December 17, 1996+................
10.(xxv) Sale and Purchase Agreement dated February 6, 1997+...................
10.(xxvi) Agreement to Jointly Develop Timber Properties dated May 30, 1997.....
10.(xxvii) Agreement to Acquire Sawmill dated May 30, 1997.......................
10.(xxviii) Agreement to Harvest Timber and Develop Harvest Properties............
10.(xxix) Addendum to Contract for Extraction of Timber and Development of
Timber Properties.....................................................
21 Subsidiaries of Small Business Issuer+................................
23.(i) Consent of Jackson & Rhodes P.C.** ...................................
23.(ii) Consent of William R. Wilson**........................................
23.(iii) Consent of Behre Dolbear & Company, Inc.**............................
27 Financial Data Schedule...............................................
99(i) Business Plan Dated July 1995*........................................
99(ii) Business Plan Dated January 1997+.....................................
</TABLE>
- ---------------
* Filed with Registration Statement on Form SB-2 on December 6, 1996
(Registration No. 333-17423).
** Filed with Registration Statement on Form SB-2 on May 28, 1997
(Registration Number 333-27923).
*** Principles of Agreement in original form filed with Registration Statement
on Form SB-2 on December 6, 1996. Amendment to this document is filed
contemporarily herewith.
+ Incorporated by reference to the Company's Registration Statement on Form
10 filed April 3, 1997 (Registration No. 001-12867)'
<PAGE> 1
EXHIBIT 4.(viii)
SUBSCRIPTION AGREEMENT
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR CONVERTIBLE DEBENTURES
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER SUCH LAWS, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE
SECURITIES BEING OFFERED BY THE ISSUER ARE SECURITIES AS THAT TERM HAS BEEN
DEFINED IN THE ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ACT IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) THEREOF
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER. FURTHER, THESE SECURITIES MAY ONLY
BE SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION OR QUALIFICATION IN THE
VARIOUS STATES, AND MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER IN
SUCH JURISDICTIONS.
This Agreement has been executed by the undersigned in connection with the
private placement of Eight Percent (8%) Senior Convertible Debentures and
Common Stock Purchase Warrants (hereinafter referred to as the "Securities") of
Nevada Manhattan Mining Incorporated, 5038 North Parkway Calabasas, Suite 100,
Calabasas, California 91302, a corporation organized under the laws of Nevada
(hereinafter referred to as the "Issuer").
The undersigned, a corporation organized under the laws of the British Virgin
Islands, (hereinafter referred to as the "Purchaser") hereby represents and
warrants to, and agrees with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
a) The undersigned hereby subscribes for and agrees to purchase
$400,000.00 aggregate principal amount of the Issuer's 8%
Convertible Debentures convertible into shares of the Issuer's
common stock ("Common Stock") in the form attached as Schedule "A"
hereto (the "Debentures") for a total consideration, including all
fees and commissions, of $400,000.00 (the "Purchase Price") under
the terms and conditions specified in Paragraph 10 hereof.
b) Form of Payment. Purchaser shall pay such portion of the Purchase
Price required to purchase the Debentures being purchased by
delivering good funds by wire transfer in United States Dollars into
an escrow account (The "Escrow Account") as follows:
1
<PAGE> 2
Bank of New York
Rt. 10
Parsippany, New Jersey 07054
ABA No. 021000018
Account Name: Alan R. Ackerman, Esq., Attorney Trust Account
Account No.: 6104763934
2. General Understanding
Purchaser understands that the Securities have not been registered under
the Act, and, accordingly, that the Issuer must be satisfied that the
offer and sale of the Securities to the Purchaser will satisfy the
requirements of Section 4(2) under the Act. Purchaser and Issuer intend
that the representations, declarations, and warranties set out in this
Agreement will be relied upon in determining Purchaser's suitability as
a purchaser of the Securities.
3. Purchaser Representations and Covenants
Purchaser represents, warrants, and acknowledges to the Issuer as
follows:
a) The Securities are being acquired for the account of Purchaser
and its affiliates for investment, with no present intention of
distributing or selling any portion thereof, and will not be
transferred by Purchaser in violation of the Act. No one other
than Purchaser has any interest in or any right to aquire the
Securities.
b) The Securities have not been registered under the Act or
qualified under any state securities law in reliance on an
exemption from registration and qualification for private
offerings. Purchaser is purchasing the Securities without being
furnished any offering literature or prospectus other than the
SEC Filings (as defined in Section 3(k) below).
c) Purchaser is an "accredited investor" under Rule 501(a)(3) of
Regualtion D under the Act and will sign the Accredited
Investor Declaration, substantially in the form of Schedule "C",
attached hereto, contemporaneously with the execution of this
Agreement.
d) No representations or warranties have been made to Purchaseer
by the Issuer or any agent of the Issuer other than those set
forth in this Agreement.
e) Purchaser has investigated the acquisition of the Securities to
the extent it deems necessary or desirable and the Issuer has
provided it with any assistance it has requested in connection
therewith.
2
<PAGE> 3
f) The address set forth below is the true and correct address of
Purchaser's principal business office.
g) Purchaser has full power and authority to make the
representations referred to herein, to purchase the Securities,
and to execute and deliver this Agreement.
h) If Purchaser is not located in the United States, Purchaser has
satisfied himself as to the full observance of the laws of the
Purchaser's jurisdiction in connection with the offer and sale
of the Securities or any use of this Agreement, including (i)
the legal requirements of the Purchaser's jurisdiction for the
purchase of Securities; (ii) any foreign exchange restrictions
applicable to such purchase; (iii) any governmental or other
consents that may need to be obtained; and (iv) the income tax
and other tax consequences, if any, which may be material to the
purchase, holding, redemption, exchange, sale or transfer of the
Securities. Purchaser's purchase and payment for, and
Purchaser's continued beneficial ownership of the Securities
will not violate any applicable securities or other laws of
Purchaser's jurisdiction.
i) Purchaser is aware that this is a private offering and that no
United States federal, state or other agency has made any
finding or determination as to the fairness of the investment
nor made any recommendation or endorsement of the Securities.
j) Purchaser acknowledges and represents that Purchaser has had
access to information concerning the Issuer and its
subsidiaries, its management, its current and proposed business
and other details of the investment believed by Purchaser to be
sufficient to enable Purchaser to make an informed investment
decision regarding Purchaser's acquisition of the Securities.
Purchaser has had an opportunity to ask questions of, and
receive answers from, and obtain additional information from
representatives of the Issuer concerning (i) the business and
financial condition of the Issuer; (ii) the current and proposed
business of the Issuer, and (iii) the terms of this Agreement
and the purchase of the Securities, all to the extent such
information is available or could be acquired without
unreasonable effort or expense.
k) Purchaser represents that Purchaser or its representative has
received copies of the Form 10 Registration Statement under the
Securities Exchange Act of 1934 filed by the Issuer on April 3,
1997 and will receive all amendments thereto (collectively "SEC
Filings").
l) Purchaser represents that all data or information requested by
Purchaser from the Issuer or any of its officers or affiliates
concerning the Issuer has been furnished to Purchaser.
3
<PAGE> 4
m) Purchaser represents and warrants to the Issuer that (i)
Purchaser is able to bear the economic risk of an investment
in the Securities; (ii) Purchaser has adequate means of
providing for Purchaser's current needs and contingencies; (iii)
Purchaser is purchasing the Securities for investment with the
intention of holding the Securities for an indefinite period
and is able to afford to hold the Securities for an indefinite
period; (iv) Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the
Securities; (v) Purchaser can afford a complete loss of
Purchaser's investment in the Securities; and (vi) Purchaser is
willing to accept the foregoing investment risks.
n) Purchaser represents and warrants to the Issuer that
Purchaser's acquisition of the Securities is not a transaction
(or any element of a series of transactions) that is part of a
plan or scheme to evade the registration provisions of the Act.
o) Purchaser understands that there is currently no trading market
for the Securities and that none is expected to arise. Purchaser
further acknowledges that although there currently exists a
trading market for the Issuer's Common Stock, such market may
not exist or be accessible in sufficient volume at such time as
the Securities are converted into Common Stock.
Purchaser covenants to the Issuer that:
excluding the SEC Filings, Purchaser has not distributed, and
will not distribute any materials, and has not divulged, and
will not divulge, the contents thereof to anyone other than such
legal or financial advisors as Purchaser has deemed necessary
for purposes of evaluating an investment in the Securities and
no one (except such advisors) has used such materials, and
Purchaser has not made, and will not make, any copies thereof.
4. Issuer Representations and Covenants.
In order to induce Purchaser to enter into this Agreement, the Issuer
represents and warrants to the Purchaser as follows:
a) The Securities, when issued and delivered pursuant hereto, and
the Common Stock issuable upon conversion and/or exercise
thereof, when issued and delivered upon such conversion and/or
exercise thereof, will be duly and validly authorized and under
federal or state law issued, fully paid and nonassessable and
will not subject the Purchaser thereof to any liability
solely by reason of being such Purchaser.
b) The Issuer has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder and, when accepted by the
4
<PAGE> 5
Issuer, this Agreement will have been duly authorized by all
necessary actions of the directors and (if necessary) the
shareholders of Issuer, validly executed and delivered on behalf of
the Issuer and be a legally binding obligation of the Issuer,
enforceable in accordance with its terms.
c) The execution and delivery of this Agreement and the sale of the
Securities pursuant hereto and the issuance of the Common Stock
issuable upon conversion and/or exercise thereof of such Securities,
and the transaction contemplated by this Agreement do not and will
not conflict with or result in a breach by the Issuer of any of the
terms or provisions of, or constitute a default under, the Articles
of Incorporation or Bylaws of the Issuer or any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Issuer is a party or by which it or any of its property or
assets are bound or any existing applicable law, rule or regulation
or any applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental
body having jurisdiction over the Issuer or any of its properties or
assets.
d) There are no facts or circumstances existing, and there has been no
event, which has had or which reasonably could be expected to have
in the future a material adverse effect with respect to the
financial condition, business affairs or prospects of the Issuer
other than as disclosed in the SEC Filings provided to Purchaser.
e) Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly qualified
and in good standing as a foreign corporation in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the Issuer. The Issuer has not registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") but filed a registration statement on
Form 10 under the Exchange Act on April 3, 1997, and the Common
Stock is traded on the Electronic Bulletin Board maintained by the
National Association of Securities Dealers, Inc. under the symbol
NVMH.
f) The Purchaser shall, upon the purchase of the Securities and at
Closing, receive an opinion letter from the Issuer's counsel to the
effect that (i) the Issuer is duly incorporated and validly
existing; (ii) this Agreement, the issuance of the securities, the
issuance of Common Stock upon conversion and/or exercise thereof and
the other transactions contemplated by this Agreement have been
approved and duly authorized by all required corporate action; (iii)
the Securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; and (iv) the Issuer has
reserved from its authorized but unissued shares of Common Stock a
sufficient number of shares to permit full conversion and/or
exercise thereof at the then applicable conversion and/or exercise
rate for all outstanding Securities.
5
<PAGE> 6
5. Covenants of the Issuer.
For so long as any Securities held by Purchaser remain outstanding, the
Issuer covenants and agrees with the Purchaser that:
a) Issuer will undertake its best efforts to maintain the listing
of its Common Stock on the Electronic Bulletin Board, the NASDAQ
SmallCap Stock Market or the American Stock Exchange;
b) Except as expressly set forth in Section 7 below, and only until
the Registration Statement (as hereinafter defined) has been
declared effective, Issuer will not issue stop transfer
instructions to its transfer agent in regard to the Securities
or the Common Stock issuable upon conversion and/or exercise
thereof of the Securities;
c) The SEC Filings and any amendments thereto (i) do and will
conform in all material respects to the rules and regulations of
the Commission with respect thereto; (ii) do not and will not
contain an untrue statement of a material fact or omit to state
any material fact required to make the statements contained
therein not misleading;
d) Issuer will reserve from its authorized shares of Common Stock
sufficient shares to permit conversion and/or exercise thereof
in full of all outstanding Securities;
e) The conversion and/or exercise right of the Purchaser set forth
herein shall be limited such that in no instance shall the
maximum number of shares of Common Stock into which the
Purchaser may convert these Securities exceed, at any one time,
an amount equal to the remainder of (i) 4.99% of the then
issued and outstanding shares of Common Stock of the Issuer
following such conversion and/or exercise thereof, minus (ii)
the number of shares of Common Stock of the Issuer then held by
the Purchaser. Notwithstanding anything contained herein to the
contrary, in the event the Purchaser's stock holdings exceed
4.99% of the then issued and outstanding shares, it shall
immediately comply with all SEC filing and notification
requirements;
f) Neither the SEC Filings nor the Registration Statement (as
hereinafter defined) nor any amendments thereto, when declared
effective will contain a misstatement of material fact or will
omit a material fact necessary to make the statements contained
therein not misleading; and
g) The President and the Senior Vice President of the Issuer will
confirm the warranties, representations and covenants contained
in this Agreement at Closing.
6
<PAGE> 7
The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees, of one-half of one percent, which may be incurred by
the Purchaser in collecting any amount due or exercising the conversion
and/or exercise rights under these Securities.
6. Registration Rights: Liquidated Damages.
The Purchaser will be entitled to registration rights in respect of the
shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants (the terms of which are set forth below) as
follows: (1) The Issuer shall prepare and file, within 30 days of the
initial Closing Date, an amendment to its registration statement under
the Act on Form SB-2 (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "Commission") on December 6,
1996, covering the resale of the shares of Common Stock issuable upon
conversion of the Debentures. The Issuer shall use its best efforts to
cause the Registration Statement to be declared effective by the
Commission no later than 120 days following the initial Closing Date and
shall promptly deliver to Purchaser copies of all amendments to such
Registration Statement and correspondence with the Commission with
respect thereto. The Issuer shall maintain the effectiveness of the
Registration Statement until all of the Common Stock issuable or issued
upon conversion or exercise of the Securities has been sold. The Issuer
shall pay all expenses of registration (other than underwriting fees and
discounts in respect of shares of Common Stock offered and sold under
such Registration Statement by the Purchaser, if any). (2) If the
Registration Statement is not declared effective by the Commission
during the 120-day period mentioned above, the Company shall pay in cash
or free trading common stock valued at Market Price, as hereinafter
defined, to the Purchaser, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) per month commencing 90 and ending
120 days after the initial Closing of the outstanding principal amount
of the Debentures, in the event that the Registration Statement is not
declared effective by the Commission within 90 days of the initial
Closing Date and three percent (3%) from 120 days after the Closing
Date until the Registration Statement is declared effective.
7. Transfer Agent Instructions, Book-Entry System, Liquidated Damages.
Each conversion of the Debentures and/or exercise of the Warrants will
be effected through a "book-entry" mechanism. Pursuant to this
book-entry mechanism, (1) immediately following each Closing, the Escrow
Agent will wire payment of the net offering proceeds to the Issuer and
the Issuer will instruct the Issuer's transfer agent to register the
Debentures in the name of the Purchaser on a Debenture Register to be
maintained by such transfer agent for the benefit of the Issuer and the
Purchaser; (2) the transfer agent will establish a set of book-entry
procedures to record transfers and conversions of the Debentures; and
(3) the Issuer will irrevocably instruct the transfer agent to issue
shares of Common Stock, bearing such legend as may be required by law,
to the Purchaser upon the valid exercise of the conversion privilege and
the fulfillment of other requirements of the transfer agent, including
but not limited to the effectiveness of the Registration Statement and
the delivery of an
7
<PAGE> 8
opinion of the Company's counsel (which the Company shall promptly
supply) as to the issuance of such shares of Common Stock. If the
Company willfully fails to deliver shares of Common Stock without
restrictive legends or stop-transfer orders within four (4) New York
Stock Exchange Trading Days of delivery or a notice of conversion
following the effectiveness of the Registration Statement, or fails to
deliver legend certificates if requested prior thereto, liquidated
damages will accrue in an amount equal to $1,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered up to 10 days, and $2,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered in excess of 10 days. Such amounts will accrue
and be payable to the Purchaser by the Issuer upon demand notices of
conversion shall be submitted by facsimile transmission and shall be
deemed to have been received on the date transmitted.
8. Indemnification.
Each of the Issuer and the Purchaser agrees to indemnify and to hold
the other harmless from and against any and all losses, damages,
liabilities, costs and expenses which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made in this Agreement. Each of
the Issuer and the Purchaser agrees that the Escrow Agent shall be
relieved of any liability arising out of acting as escrow agent and
each also hereby agrees to indemnify the Escrow Agent against expenses
including attorneys' fees, judgments, fines and amounts paid in
settlement incurred by the Escrow Agent as a result of any threatened,
pending or completed action, suit or proceeding of every nature by
reason of the fact that it served as escrow agent.
9. Notices.
All notices, requests, demands and other communications provided for
herein (collectively "Notices") shall be in writing. All Notices shall
be sent by hand delivery, U.S. mail with return receipt requested,
overnight courier, or facsimile with all delivery charges prepaid.
All notices will be effective when received by the addressee as
indicated by the return receipt, the receipt of the courier service, or
on the facsimile. All notices to the Purchaser and/or the Issuer shall
be delivered to the Escrow Agent (who may also act as counsel to
Purchaser) at the address indicated below:
Escrow Agent:
Alan R. Ackerman, Esq.
1719A Rt. 10 East
Parsippany, NJ 07054
Telephone: (201) 898-1177
Facsimile: (201) 898-1230
8
<PAGE> 9
Facsimile: (201) 898-1230
The Escrow Agent shall be entitled to a fee of 1/2 of one percent for
subsequent tranches which shall close.
10. Closing Date.
This Agreement shall be effective from the date of execution by the
Purchaser. Each Closing shall be effected through delivery of funds and
certificates to the Escrow Agent. The Closing Date, which shall be so
designated by a "Closing Certificate" from the Escrow Agent, shall be
deemed to be that date upon which the Escrow Agent shall have the
Securities available for delivery to the Purchaser and the Purchaser's
funds in the Escrow Agent's account available for delivery to the
Issuer.
11. Origination Fee.
Issuer will pay from Escrow (and execute appropriate instructions with
respect thereto) an origination fee of ten percent (10%) of the gross
proceeds of the closing. Issuer will issue Warrants having a five (5)
year term and having an Exercise Price set at the Conversion Price
applicable to the Debenture being purchased at Closing. The number of
Warrants issued will be 5,000 warrants per $100,000 principal amount of
the Debentures.
12. Conditions to the Issuer's Obligation to Sell.
Issuer shall have the right to reject any subsequent Agreement which is
tendered to the Issuer hereunder for any securities offered after the
initial purchase of $1,700,000 of the Debentures. Any tender for the
initial $1,700,000 of the Debentures may only be rejected if the Issuer
reasonably believes any representations and warranties of such Purchaser
contained herein to be untrue, and in such event Issuer shall promptly
provide Purchaser written notice of such rejection and the reason
therefor and shall provide reasonable opportunity for a response to such
stated reason. Purchaser understands that Issuer's obligation to sell
the Securities is conditioned upon:
(i) The receipt and acceptance by Issuer of this Agreement for all of
the Securities evidenced by execution of this Agreement by the
Issuer or Issuer's duly authorized agent. In the absence of a
written acknowledgement of this Agreement by the Issuer, the
delivery of Securities to the designated Escrow Agent and/or the
transfer of funds to the Issuer shall be deemed to be
constructive acceptance of this Agreement.
(ii) Delivery to the Escrow Agent by Purchaser of good funds as payment
in full of the Purchase Price of the securities subscribed for and
all fees and commission hereunder.
9
<PAGE> 10
13. Conditions to Purchaser's Obligation to Purchaser.
Issuer understands that Purchaser's obligation to purchase the
Securities is conditioned upon delivery of (i) the opinion of counsel
specified in Section 4(f) herein; (ii) the Securities as described
herein; and (iii) such documents, certificates and other evidence of
the Issuer's compliance with necessary corporate and statutory
formalities as Purchaser shall reasonably require. Each Closing is
conditioned upon (a) the execution and delivery of, and performance
under, appropriate documentation (including but not limited to an
executed Agreement, form of debenture, warrants, and book-entry transfer
agreement), all in form and substance mutually acceptable to the parties
and containing representations, warranties and agreements customary for
transactions of this type; (b) the truth and accuracy of each of the
representations and warranties contained herein, both when made and as
of each Closing Date; (c) satisfactory completion of due diligence by
Purchaser; (d) the absence of any material adverse change in the
business, condition (financial or otherwise), earnings or prospects of
the Issuer; and (e) the availability of a valid exemption under the Act
regarding the offering and sale of the Securities and shares of Common
Stock issuable on the conversion or exercise thereof.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Additionally, all signatories hereby
consent to the State of New York as the jurisdictional situs of all
disputes.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereof
with respect to the subject matter hereof and supersedes any and all
prior contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended
only by a writing executed by all parties hereto. This Agreement may be
executed in counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
16. Announcements.
No public announcement concerning the events and transactions
contemplated by this Agreement shall be made by Issuer without the prior
approval of Purchaser, which approval shall not be unreasonably
withheld.
Full Name and Address of Purchaser for Registration Purposes:
NAME: Mary Park Properties
ADDRESS: 3 Tora Mezion Street, Jerusalem, Israel
10
<PAGE> 11
Tel. No. (973) 335-4343
Fax No. (973) 225-2234
Contact No. Alan Zazoff, LLC
17. Delivery Instructions: (If different from Registration Name)
NAME: Zazoff Associates, LLC
ADDRESS: 160 Littleton Road, Parsippany, New Jersey 07054
Tel. No. (973) 335-4343
Fax No. (973) 225-2234
Contact Name: Alan Zazoff
Special Instructions: In each closing, Purchaser will receive debentures
representing One Hundred Percent (100%) of its
subscription in denominations of $100,000 each. Each
Debenture will specify a First Conversion Date of the
later of the date of effective registration, or
forty-five (45) days from the Closing Date.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written below. This Agreement must be accepted by the Issuer no later than
5:00 p.m. Eastern Time, on the third United States business day after the date
of execution by the Purchaser or it shall be deemed to be null and void.
Dated this day of July, 1997.
Purchaser Name: Mary Park Properties
BY: /s/ CHAIM MALOWICKI
---------------------------------
Official signatory of Purchaser
Name (Printed:) MARY PARK PROPERTIES
3 Tora Mezion St
Jerusalem Isreal
Title:
President CHAIM MALOWICKI
---------------------------
11
<PAGE> 12
Israel
- ------------------------------------
Accepted this 1st day of July, 1997
A MANHATTAN MINING INCORPORATED
By: /s/ [SIG]
--------------------------------
Official Signatory of Issuer
I have full authority to bind Nevada Manhattan Mining Incorporated JSK ( )
Name (Printed): JEFFREY S. KRAMER
--------------------
Jeffrey S. Kramer
Title:
C.O.O.
- ------------------------------------
12
<PAGE> 13
SUBSCRIPTION AGREEMENT
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR CONVERTIBLE DEBENTURES
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER SUCH LAWS, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE
SECURITIES BEING OFFERED BY THE ISSUER ARE SECURITIES AS THAT TERM HAS BEEN
DEFINED IN THE ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ACT IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) THEREOF
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER. FURTHER, THESE SECURITIES MAY ONLY
BE SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION OR QUALIFICATION IN THE
VARIOUS STATES, AND MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER IN
SUCH JURISDICTIONS.
This Agreement has been executed by the undersigned in connection with the
private placement of Eight Percent (8%) Senior Convertible Debentures and
Common Stock Purchase Warrants (hereinafter referred to as the "Securities") of
Nevada Manhattan Mining Incorporated, 5038 North Parkway Calabasas, Suite 100,
Calabasas, California 91302, a corporation organized under the laws of Nevada
(hereinafter referred to as the "Issuer").
The undersigned, a corporation organized under the laws of the County of
Leitchenstein, (hereinafter referred to as the "Purchaser") hereby represents
and warrants to, and agrees with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
a) The undersigned hereby subscribes for and agrees to purchase
$500,000.00 aggregate principal amount of the Issuer's 8%
Convertible Debentures convertible into shares of the Issuer's
common stock ("Common Stock") in the form attached as Schedule "A"
hereto (the "Debentures") for a total consideration, including all
fees and commissions, of $500,000.00 (the "Purchase Price") under
the terms and conditions specified in Paragraph 10 hereof.
b) Form of Payment. Purchaser shall pay such portion of the Purchase
Price required to purchase the Debentures being purchased by
delivering good funds by wire transfer in United States Dollars into
an escrow account (The "Escrow Account") as follows:
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<PAGE> 14
Bank of New York
Rt. 10
Parsippany, New Jersey 07054
ABA No. 021000018
Account Name: Alan R. Ackerman, Esq., Attorney Trust Account
Account No.: 6104763934
2. General Understanding
Purchaser understands that the Securities have not been registered under
the Act, and, accordingly, that the Issuer must be satisfied that the
offer and sale of the Securities to the Purchaser will satisfy the
requirements of Section 4(2) under the Act. Purchaser and Issuer intend
that the representations, declarations, and warranties set out in this
Agreement will be relied upon in determining Purchaser's suitability as
a purchaser of the Securities.
3. Purchaser Representations and Covenants
Purchaser represents, warrants, and acknowledges to the Issuer as
follows:
a) The Securities are being acquired for the account of Purchaser
and its affiliates for investment, with no present intention of
distributing or selling any portion thereof, and will not be
transferred by Purchaser in violation of the Act. No one other
than Purchaser has any interest in or any right to aquire the
Securities.
b) The Securities have not been registered under the Act or
qualified under any state securities law in reliance on an
exemption from registration and qualification for private
offerings. Purchaser is purchasing the Securities without being
furnished any offering literature or prospectus other than the
SEC Filings (as defined in Section 3(k) below).
c) Purchaser is an "accredited investor" under Rule 501(a)(3) of
Regualtion D under the Act and will sign the Accredited
Investor Declaration, substantially in the form of Schedule "C",
attached hereto, contemporaneously with the execution of this
Agreement.
d) No representations or warranties have been made to Purchaseer
by the Issuer or any agent of the Issuer other than those set
forth in this Agreement.
e) Purchaser has investigated the acquisition of the Securities to
the extent it deems necessary or desirable and the Issuer has
provided it with any assistance it has requested in connection
therewith.
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<PAGE> 15
f) The address set forth below is the true and correct address of
Purchaser's principal business office.
g) Purchaser has full power and authority to make the
representations referred to herein, to purchase the Securities,
and to execute and deliver this Agreement.
h) If Purchaser is not located in the United States, Purchaser has
satisfied himself as to the full observance of the laws of the
Purchaser's jurisdiction in connection with the offer and sale
of the Securities or any use of this Agreement, including (i)
the legal requirements of the Purchaser's jurisdiction for the
purchase of Securities; (ii) any foreign exchange restrictions
applicable to such purchase; (iii) any governmental or other
consents that may need to be obtained; and (iv) the income tax
and other tax consequences, if any, which may be material to the
purchase, holding, redemption, exchange, sale or transfer of the
Securities. Purchaser's purchase and payment for, and
Purchaser's continued beneficial ownership of the Securities
will not violate any applicable securities or other laws of
Purchaser's jurisdiction.
i) Purchaser is aware that this is a private offering and that no
United States federal, state or other agency has made any
finding or determination as to the fairness of the investment
nor made any recommendation or endorsement of the Securities.
j) Purchaser acknowledges and represents that Purchaser has had
access to information concerning the Issuer and its
subsidiaries, its management, its current and proposed business
and other details of the investment believed by Purchaser to be
sufficient to enable Purchaser to make an informed investment
decision regarding Purchaser's acquisition of the Securities.
Purchaser has had an opportunity to ask questions of, and
receive answers from, and obtain additional information from
representatives of the Issuer concerning (i) the business and
financial condition of the Issuer; (ii) the current and proposed
business of the Issuer, and (iii) the terms of this Agreement
and the purchase of the Securities, all to the extent such
information is available or could be acquired without
unreasonable effort or expense.
k) Purchaser represents that Purchaser or its representative has
received copies of the Form 10 Registration Statement under the
Securities Exchange Act of 1934 filed by the Issuer on April 3,
1997 and will receive all amendments thereto (collectively "SEC
Filings").
l) Purchaser represents that all data or information requested by
Purchaser from the Issuer or any of its officers or affiliates
concerning the Issuer has been furnished to Purchaser.
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<PAGE> 16
m) Purchaser represents and warrants to the Issuer that (i)
Purchaser is able to bear the economic risk of an investment
in the Securities; (ii) Purchaser has adequate means of
providing for Purchaser's current needs and contingencies; (iii)
Purchaser is purchasing the Securities for investment with the
intention of holding the Securities for an indefinite period
and is able to afford to hold the Securities for an indefinite
period; (iv) Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the
Securities; (v) Purchaser can afford a complete loss of
Purchaser's investment in the Securities; and (vi) Purchaser is
willing to accept the foregoing investment risks.
n) Purchaser represents and warrants to the Issuer that
Purchaser's acquisition of the Securities is not a transaction
(or any element of a series of transactions) that is part of a
plan or scheme to evade the registration provisions of the Act.
o) Purchaser understands that there is currently no trading market
for the Securities and that none is expected to arise. Purchaser
further acknowledges that although there currently exists a
trading market for the Issuer's Common Stock, such market may
not exist or be accessible in sufficient volume at such time as
the Securities are converted into Common Stock.
Purchaser covenants to the Issuer that:
excluding the SEC Filings, Purchaser has not distributed, and
will not distribute any materials, and has not divulged, and
will not divulge, the contents thereof to anyone other than such
legal or financial advisors as Purchaser has deemed necessary
for purposes of evaluating an investment in the Securities and
no one (except such advisors) has used such materials, and
Purchaser has not made, and will not make, any copies thereof.
4. Issuer Representations and Covenants.
In order to induce Purchaser to enter into this Agreement, the Issuer
represents and warrants to the Purchaser as follows:
a) The Securities, when issued and delivered pursuant hereto, and
the Common Stock issuable upon conversion and/or exercise
thereof, when issued and delivered upon such conversion and/or
exercise thereof, will be duly and validly authorized and under
federal or state law issued, fully paid and nonassessable and
will not subject the Purchaser thereof to any liability
solely by reason of being such Purchaser.
b) The Issuer has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder and, when accepted by the
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<PAGE> 17
Issuer, this Agreement will have been duly authorized by all
necessary actions of the directors and (if necessary) the
shareholders of Issuer, validly executed and delivered on behalf of
the Issuer and be a legally binding obligation of the Issuer,
enforceable in accordance with its terms.
c) The execution and delivery of this Agreement and the sale of the
Securities pursuant hereto and the issuance of the Common Stock
issuable upon conversion and/or exercise thereof of such Securities,
and the transaction contemplated by this Agreement do not and will
not conflict with or result in a breach by the Issuer of any of the
terms or provisions of, or constitute a default under, the Articles
of Incorporation or Bylaws of the Issuer or any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Issuer is a party or by which it or any of its property or
assets are bound or any existing applicable law, rule or regulation
or any applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental
body having jurisdiction over the Issuer or any of its properties or
assets.
d) There are no facts or circumstances existing, and there has been no
event, which has had or which reasonably could be expected to have
in the future a material adverse effect with respect to the
financial condition, business affairs or prospects of the Issuer
other than as disclosed in the SEC Filings provided to Purchaser.
e) Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly qualified
and in good standing as a foreign corporation in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the Issuer. The Issuer has not registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") but filed a registration statement on
Form 10 under the Exchange Act on April 3, 1997, and the Common
Stock is traded on the Electronic Bulletin Board maintained by the
National Association of Securities Dealers, Inc. under the symbol
NVMH.
f) The Purchaser shall, upon the purchase of the Securities and at
Closing, receive an opinion letter from the Issuer's counsel to the
effect that (i) the Issuer is duly incorporated and validly
existing; (ii) this Agreement, the issuance of the securities, the
issuance of Common Stock upon conversion and/or exercise thereof and
the other transactions contemplated by this Agreement have been
approved and duly authorized by all required corporate action; (iii)
the Securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; and (iv) the Issuer has
reserved from its authorized but unissued shares of Common Stock a
sufficient number of shares to permit full conversion and/or
exercise thereof at the then applicable conversion and/or exercise
rate for all outstanding Securities.
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<PAGE> 18
5. Covenants of the Issuer.
For so long as any Securities held by Purchaser remain outstanding, the
Issuer covenants and agrees with the Purchaser that:
a) Issuer will undertake its best efforts to maintain the listing
of its Common Stock on the Electronic Bulletin Board, the NASDAQ
SmallCap Stock Market or the American Stock Exchange;
b) Except as expressly set forth in Section 7 below, and only until
the Registration Statement (as hereinafter defined) has been
declared effective, Issuer will not issue stop transfer
instructions to its transfer agent in regard to the Securities
or the Common Stock issuable upon conversion and/or exercise
thereof of the Securities;
c) The SEC Filings and any amendments thereto (i) do and will
conform in all material respects to the rules and regulations of
the Commission with respect thereto; (ii) do not and will not
contain an untrue statement of a material fact or omit to state
any material fact required to make the statements contained
therein not misleading;
d) Issuer will reserve from its authorized shares of Common Stock
sufficient shares to permit conversion and/or exercise thereof
in full of all outstanding Securities;
e) The conversion and/or exercise right of the Purchaser set forth
herein shall be limited such that in no instance shall the
maximum number of shares of Common Stock into which the
Purchaser may convert these Securities exceed, at any one time,
an amount equal to the remainder of (i) 4.99% of the then
issued and outstanding shares of Common Stock of the Issuer
following such conversion and/or exercise thereof, minus (ii)
the number of shares of Common Stock of the Issuer then held by
the Purchaser. Notwithstanding anything contained herein to the
contrary, in the event the Purchaser's stock holdings exceed
4.99% of the then issued and outstanding shares, it shall
immediately comply with all SEC filing and notification
requirements;
f) Neither the SEC Filings nor the Registration Statement (as
hereinafter defined) nor any amendments thereto, when declared
effective will contain a misstatement of material fact or will
omit a material fact necessary to make the statements contained
therein not misleading; and
g) The President and the Senior Vice President of the Issuer will
confirm the warranties, representations and covenants contained
in this Agreement at Closing.
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<PAGE> 19
The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees, of one-half of one percent, which may be incurred by
the Purchaser in collecting any amount due or exercising the conversion
and/or exercise rights under these Securities.
6. Registration Rights: Liquidated Damages.
The Purchaser will be entitled to registration rights in respect of the
shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants (the terms of which are set forth below) as
follows: (1) The Issuer shall prepare and file, within 30 days of the
initial Closing Date, an amendment to its registration statement under
the Act on Form SB-2 (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "Commission") on December 6,
1996, covering the resale of the shares of Common Stock issuable upon
conversion of the Debentures. The Issuer shall use its best efforts to
cause the Registration Statement to be declared effective by the
Commission no later than 120 days following the initial Closing Date and
shall promptly deliver to Purchaser copies of all amendments to such
Registration Statement and correspondence with the Commission with
respect thereto. The Issuer shall maintain the effectiveness of the
Registration Statement until all of the Common Stock issuable or issued
upon conversion or exercise of the Securities has been sold. The Issuer
shall pay all expenses of registration (other than underwriting fees and
discounts in respect of shares of Common Stock offered and sold under
such Registration Statement by the Purchaser, if any). (2) If the
Registration Statement is not declared effective by the Commission
during the 120-day period mentioned above, the Company shall pay in cash
or free trading common stock valued at Market Price, as hereinafter
defined, to the Purchaser, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) per month commencing 90 and ending
120 days after the initial Closing of the outstanding principal amount
of the Debentures, in the event that the Registration Statement is not
declared effective by the Commission within 90 days of the initial
Closing Date and three percent (3%) from 120 days after the Closing
Date until the Registration Statement is declared effective.
7. Transfer Agent Instructions, Book-Entry System, Liquidated Damages.
Each conversion of the Debentures and/or exercise of the Warrants will
be effected through a "book-entry" mechanism. Pursuant to this
book-entry mechanism, (1) immediately following each Closing, the Escrow
Agent will wire payment of the net offering proceeds to the Issuer and
the Issuer will instruct the Issuer's transfer agent to register the
Debentures in the name of the Purchaser on a Debenture Register to be
maintained by such transfer agent for the benefit of the Issuer and the
Purchaser; (2) the transfer agent will establish a set of book-entry
procedures to record transfers and conversions of the Debentures; and
(3) the Issuer will irrevocably instruct the transfer agent to issue
shares of Common Stock, bearing such legend as may be required by law,
to the Purchaser upon the valid exercise of the conversion privilege and
the fulfillment of other requirements of the transfer agent, including
but not limited to the effectiveness of the Registration Statement and
the delivery of an
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<PAGE> 20
opinion of the Company's counsel (which the Company shall promptly
supply) as to the issuance of such shares of Common Stock. If the
Company willfully fails to deliver shares of Common Stock without
restrictive legends or stop-transfer orders within four (4) New York
Stock Exchange Trading Days of delivery or a notice of conversion
following the effectiveness of the Registration Statement, or fails to
deliver legend certificates if requested prior thereto, liquidated
damages will accrue in an amount equal to $1,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered up to 10 days, and $2,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered in excess of 10 days. Such amounts will accrue
and be payable to the Purchaser by the Issuer upon demand notices of
conversion shall be submitted by facsimile transmission and shall be
deemed to have been received on the date transmitted.
8. Indemnification.
Each of the Issuer and the Purchaser agrees to indemnify and to hold
the other harmless from and against any and all losses, damages,
liabilities, costs and expenses which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made in this Agreement. Each of
the Issuer and the Purchaser agrees that the Escrow Agent shall be
relieved of any liability arising out of acting as escrow agent and
each also hereby agrees to indemnify the Escrow Agent against expenses
including attorneys' fees, judgments, fines and amounts paid in
settlement incurred by the Escrow Agent as a result of any threatened,
pending or completed action, suit or proceeding of every nature by
reason of the fact that it served as escrow agent.
9. Notices.
All notices, requests, demands and other communications provided for
herein (collectively "Notices") shall be in writing. All Notices shall
be sent by hand delivery, U.S. mail with return receipt requested,
overnight courier, or facsimile with all delivery charges prepaid.
All notices will be effective when received by the addressee as
indicated by the return receipt, the receipt of the courier service, or
on the facsimile. All notices to the Purchaser and/or the Issuer shall
be delivered to the Escrow Agent (who may also act as counsel to
Purchaser) at the address indicated below:
Escrow Agent:
Alan R. Ackerman, Esq.
1719A Rt. 10 East
Parsippany, NJ 07054
Telephone: (201) 898-1177
Facsimile: (201) 898-1230
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<PAGE> 21
Facsimile: (201) 898-1230
The Escrow Agent shall be entitled to a fee of 1/2 of one percent for
subsequent tranches which shall close.
10. Closing Date.
This Agreement shall be effective from the date of execution by the
Purchaser. Each Closing shall be effected through delivery of funds and
certificates to the Escrow Agent. The Closing Date, which shall be so
designated by a "Closing Certificate" from the Escrow Agent, shall be
deemed to be that date upon which the Escrow Agent shall have the
Securities available for delivery to the Purchaser and the Purchaser's
funds in the Escrow Agent's account available for delivery to the
Issuer.
11. Origination Fee.
Issuer will pay from Escrow (and execute appropriate instructions with
respect thereto) an origination fee of ten percent (10%) of the gross
proceeds of the closing. Issuer will issue Warrants having a five (5)
year term and having an Exercise Price set at the Conversion Price
applicable to the Debenture being purchased at Closing. The number of
Warrants issued will be 5,000 warrants per $100,000 principal amount of
the Debentures.
12. Conditions to the Issuer's Obligation to Sell.
Issuer shall have the right to reject any subsequent Agreement which is
tendered to the Issuer hereunder for any securities offered after the
initial purchase of $1,700,000 of the Debentures. Any tender for the
initial $1,700,000 of the Debentures may only be rejected if the Issuer
reasonably believes any representations and warranties of such Purchaser
contained herein to be untrue, and in such event Issuer shall promptly
provide Purchaser written notice of such rejection and the reason
therefor and shall provide reasonable opportunity for a response to such
stated reason. Purchaser understands that Issuer's obligation to sell
the Securities is conditioned upon:
(i) The receipt and acceptance by Issuer of this Agreement for all of
the Securities evidenced by execution of this Agreement by the
Issuer or Issuer's duly authorized agent. In the absence of a
written acknowledgement of this Agreement by the Issuer, the
delivery of Securities to the designated Escrow Agent and/or the
transfer of funds to the Issuer shall be deemed to be
constructive acceptance of this Agreement.
(ii) Delivery to the Escrow Agent by Purchaser of good funds as payment
in full of the Purchase Price of the securities subscribed for and
all fees and commission hereunder.
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<PAGE> 22
13. Conditions to Purchaser's Obligation to Purchaser.
Issuer understands that Purchaser's obligation to purchase the
Securities is conditioned upon delivery of (i) the opinion of counsel
specified in Section 4(f) herein; (ii) the Securities as described
herein; and (iii) such documents, certificates and other evidence of
the Issuer's compliance with necessary corporate and statutory
formalities as Purchaser shall reasonably require. Each Closing is
conditioned upon (a) the execution and delivery of, and performance
under, appropriate documentation (including but not limited to an
executed Agreement, form of debenture, warrants, and book-entry transfer
agreement), all in form and substance mutually acceptable to the parties
and containing representations, warranties and agreements customary for
transactions of this type; (b) the truth and accuracy of each of the
representations and warranties contained herein, both when made and as
of each Closing Date; (c) satisfactory completion of due diligence by
Purchaser; (d) the absence of any material adverse change in the
business, condition (financial or otherwise), earnings or prospects of
the Issuer; and (e) the availability of a valid exemption under the Act
regarding the offering and sale of the Securities and shares of Common
Stock issuable on the conversion or exercise thereof.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Additionally, all signatories hereby
consent to the State of New York as the jurisdictional situs of all
disputes.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereof
with respect to the subject matter hereof and supersedes any and all
prior contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended
only by a writing executed by all parties hereto. This Agreement may be
executed in counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
16. Announcements.
No public announcement concerning the events and transactions
contemplated by this Agreement shall be made by Issuer without the prior
approval of Purchaser, which approval shall not be unreasonably
withheld.
Full Name and Address of Purchaser for Registration Purposes:
NAME: UFH Endowment, Ltd.
ADDRESS:
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<PAGE> 23
Tel. No. (212) 568-8224
Fax No. (212) 586-8244
Contact No. Arie Rabinowitz
17. Delivery Instructions: (If different from Registration Name)
NAME: L.H. Financial Services
ADDRESS: Essex House, 160 Central Park South, Suite 3212, New York, NY
Tel. No. (212) 586-8224
Fax No. (212) 586-8244
Contact Name: Arie Rabinowitz
Special Instructions: In each closing, Purchaser will receive debentures
representing One Hundred Percent (100%) of its
subscription in denominations of $100,000 each. Each
Debenture will specify a First Conversion Date of the
later of the date of effective registration, or
forty-five (45) days from the Closing Date.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written below. This Agreement must be accepted by the Issuer no later than
5:00 p.m. Eastern Time, on the third United States business day after the date
of execution by the Purchaser or it shall be deemed to be null and void.
Dated this day of July, 1997.
Purchaser Name: UFH Endowment, Ltd.
BY: /s/ [SIG]
---------------------------------
Official signatory of Purchaser
Name (Printed:) WERNER LOU
Title:
President Executive Director
---------------------------
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<PAGE> 24
Liechtenstein
- ------------------------------------
Accepted this 1st day of July, 1997
A MANHATTAN MINING INCORPORATED
By: /s/ [SIG]
--------------------------------
Official Signatory of Issuer
I have full authority to bind Nevada Manhattan Mining Incorporated JSK ( )
Name (Printed): JEFFREY S. KRAMER
--------------------
Jeffrey S. Kramer
Title:
C.O.O.
- ------------------------------------
12
<PAGE> 25
SUBSCRIPTION AGREEMENT
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR CONVERTIBLE DEBENTURES
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER SUCH LAWS, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE
SECURITIES BEING OFFERED BY THE ISSUER ARE SECURITIES AS THAT TERM HAS BEEN
DEFINED IN THE ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ACT IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) THEREOF
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER. FURTHER, THESE SECURITIES MAY ONLY
BE SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION OR QUALIFICATION IN THE
VARIOUS STATES, AND MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER IN
SUCH JURISDICTIONS.
This Agreement has been executed by the undersigned in connection with the
private placement of Eight Percent (8%) Senior Convertible Debentures and
Common Stock Purchase Warrants (hereinafter referred to as the "Securities") of
Nevada Manhattan Mining Incorporated, 5038 North Parkway Calabasas, Suite 100,
Calabasas, California 91302, a corporation organized under the laws of Nevada
(hereinafter referred to as the "Issuer").
The undersigned, a corporation organized under the laws of the County of
Leitchenstein, (hereinafter referred to as the "Purchaser") hereby represents
and warrants to, and agrees with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
a) The undersigned hereby subscribes for and agrees to purchase
$500,000.00 aggregate principal amount of the Issuer's 8%
Convertible Debentures convertible into shares of the Issuer's
common stock ("Common Stock") in the form attached as Schedule "A"
hereto (the "Debentures") for a total consideration, including all
fees and commissions, of $500,000.00 (the "Purchase Price") under
the terms and conditions specified in Paragraph 10 hereof.
b) Form of Payment. Purchaser shall pay such portion of the Purchase
Price required to purchase the Debentures being purchased by
delivering good funds by wire transfer in United States Dollars into
an escrow account (The "Escrow Account") as follows:
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<PAGE> 26
Bank of New York
Rt. 10
Parsippany, New Jersey 07054
ABA No. 021000018
Account Name: Alan R. Ackerman, Esq., Attorney Trust Account
Account No.: 6104763934
2. General Understanding
Purchaser understands that the Securities have not been registered under
the Act, and, accordingly, that the Issuer must be satisfied that the
offer and sale of the Securities to the Purchaser will satisfy the
requirements of Section 4(2) under the Act. Purchaser and Issuer intend
that the representations, declarations, and warranties set out in this
Agreement will be relied upon in determining Purchaser's suitability as
a purchaser of the Securities.
3. Purchaser Representations and Covenants
Purchaser represents, warrants, and acknowledges to the Issuer as
follows:
a) The Securities are being acquired for the account of Purchaser
and its affiliates for investment, with no present intention of
distributing or selling any portion thereof, and will not be
transferred by Purchaser in violation of the Act. No one other
than Purchaser has any interest in or any right to aquire the
Securities.
b) The Securities have not been registered under the Act or
qualified under any state securities law in reliance on an
exemption from registration and qualification for private
offerings. Purchaser is purchasing the Securities without being
furnished any offering literature or prospectus other than the
SEC Filings (as defined in Section 3(k) below).
c) Purchaser is an "accredited investor" under Rule 501(a)(3) of
Regualtion D under the Act and will sign the Accredited
Investor Declaration, substantially in the form of Schedule "C",
attached hereto, contemporaneously with the execution of this
Agreement.
d) No representations or warranties have been made to Purchaseer
by the Issuer or any agent of the Issuer other than those set
forth in this Agreement.
e) Purchaser has investigated the acquisition of the Securities to
the extent it deems necessary or desirable and the Issuer has
provided it with any assistance it has requested in connection
therewith.
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<PAGE> 27
f) The address set forth below is the true and correct address of
Purchaser's principal business office.
g) Purchaser has full power and authority to make the
representations referred to herein, to purchase the Securities,
and to execute and deliver this Agreement.
h) If Purchaser is not located in the United States, Purchaser has
satisfied himself as to the full observance of the laws of the
Purchaser's jurisdiction in connection with the offer and sale
of the Securities or any use of this Agreement, including (i)
the legal requirements of the Purchaser's jurisdiction for the
purchase of Securities; (ii) any foreign exchange restrictions
applicable to such purchase; (iii) any governmental or other
consents that may need to be obtained; and (iv) the income tax
and other tax consequences, if any, which may be material to the
purchase, holding, redemption, exchange, sale or transfer of the
Securities. Purchaser's purchase and payment for, and
Purchaser's continued beneficial ownership of the Securities
will not violate any applicable securities or other laws of
Purchaser's jurisdiction.
i) Purchaser is aware that this is a private offering and that no
United States federal, state or other agency has made any
finding or determination as to the fairness of the investment
nor made any recommendation or endorsement of the Securities.
j) Purchaser acknowledges and represents that Purchaser has had
access to information concerning the Issuer and its
subsidiaries, its management, its current and proposed business
and other details of the investment believed by Purchaser to be
sufficient to enable Purchaser to make an informed investment
decision regarding Purchaser's acquisition of the Securities.
Purchaser has had an opportunity to ask questions of, and
receive answers from, and obtain additional information from
representatives of the Issuer concerning (i) the business and
financial condition of the Issuer; (ii) the current and proposed
business of the Issuer, and (iii) the terms of this Agreement
and the purchase of the Securities, all to the extent such
information is available or could be acquired without
unreasonable effort or expense.
k) Purchaser represents that Purchaser or its representative has
received copies of the Form 10 Registration Statement under the
Securities Exchange Act of 1934 filed by the Issuer on April 3,
1997 and will receive all amendments thereto (collectively "SEC
Filings").
l) Purchaser represents that all data or information requested by
Purchaser from the Issuer or any of its officers or affiliates
concerning the Issuer has been furnished to Purchaser.
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<PAGE> 28
m) Purchaser represents and warrants to the Issuer that (i)
Purchaser is able to bear the economic risk of an investment
in the Securities; (ii) Purchaser has adequate means of
providing for Purchaser's current needs and contingencies; (iii)
Purchaser is purchasing the Securities for investment with the
intention of holding the Securities for an indefinite period
and is able to afford to hold the Securities for an indefinite
period; (iv) Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the
Securities; (v) Purchaser can afford a complete loss of
Purchaser's investment in the Securities; and (vi) Purchaser is
willing to accept the foregoing investment risks.
n) Purchaser represents and warrants to the Issuer that
Purchaser's acquisition of the Securities is not a transaction
(or any element of a series of transactions) that is part of a
plan or scheme to evade the registration provisions of the Act.
o) Purchaser understands that there is currently no trading market
for the Securities and that none is expected to arise. Purchaser
further acknowledges that although there currently exists a
trading market for the Issuer's Common Stock, such market may
not exist or be accessible in sufficient volume at such time as
the Securities are converted into Common Stock.
Purchaser covenants to the Issuer that:
excluding the SEC Filings, Purchaser has not distributed, and
will not distribute any materials, and has not divulged, and
will not divulge, the contents thereof to anyone other than such
legal or financial advisors as Purchaser has deemed necessary
for purposes of evaluating an investment in the Securities and
no one (except such advisors) has used such materials, and
Purchaser has not made, and will not make, any copies thereof.
4. Issuer Representations and Covenants.
In order to induce Purchaser to enter into this Agreement, the Issuer
represents and warrants to the Purchaser as follows:
a) The Securities, when issued and delivered pursuant hereto, and
the Common Stock issuable upon conversion and/or exercise
thereof, when issued and delivered upon such conversion and/or
exercise thereof, will be duly and validly authorized and under
federal or state law issued, fully paid and nonassessable and
will not subject the Purchaser thereof to any liability
solely by reason of being such Purchaser.
b) The Issuer has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder and, when accepted by the
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<PAGE> 29
Issuer, this Agreement will have been duly authorized by all
necessary actions of the directors and (if necessary) the
shareholders of Issuer, validly executed and delivered on behalf of
the Issuer and be a legally binding obligation of the Issuer,
enforceable in accordance with its terms.
c) The execution and delivery of this Agreement and the sale of the
Securities pursuant hereto and the issuance of the Common Stock
issuable upon conversion and/or exercise thereof of such Securities,
and the transaction contemplated by this Agreement do not and will
not conflict with or result in a breach by the Issuer of any of the
terms or provisions of, or constitute a default under, the Articles
of Incorporation or Bylaws of the Issuer or any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Issuer is a party or by which it or any of its property or
assets are bound or any existing applicable law, rule or regulation
or any applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental
body having jurisdiction over the Issuer or any of its properties or
assets.
d) There are no facts or circumstances existing, and there has been no
event, which has had or which reasonably could be expected to have
in the future a material adverse effect with respect to the
financial condition, business affairs or prospects of the Issuer
other than as disclosed in the SEC Filings provided to Purchaser.
e) Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly qualified
and in good standing as a foreign corporation in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the Issuer. The Issuer has not registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") but filed a registration statement on
Form 10 under the Exchange Act on April 3, 1997, and the Common
Stock is traded on the Electronic Bulletin Board maintained by the
National Association of Securities Dealers, Inc. under the symbol
NVMH.
f) The Purchaser shall, upon the purchase of the Securities and at
Closing, receive an opinion letter from the Issuer's counsel to the
effect that (i) the Issuer is duly incorporated and validly
existing; (ii) this Agreement, the issuance of the securities, the
issuance of Common Stock upon conversion and/or exercise thereof and
the other transactions contemplated by this Agreement have been
approved and duly authorized by all required corporate action; (iii)
the Securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; and (iv) the Issuer has
reserved from its authorized but unissued shares of Common Stock a
sufficient number of shares to permit full conversion and/or
exercise thereof at the then applicable conversion and/or exercise
rate for all outstanding Securities.
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<PAGE> 30
5. Covenants of the Issuer.
For so long as any Securities held by Purchaser remain outstanding, the
Issuer covenants and agrees with the Purchaser that:
a) Issuer will undertake its best efforts to maintain the listing
of its Common Stock on the Electronic Bulletin Board, the NASDAQ
SmallCap Stock Market or the American Stock Exchange;
b) Except as expressly set forth in Section 7 below, and only until
the Registration Statement (as hereinafter defined) has been
declared effective, Issuer will not issue stop transfer
instructions to its transfer agent in regard to the Securities
or the Common Stock issuable upon conversion and/or exercise
thereof of the Securities;
c) The SEC Filings and any amendments thereto (i) do and will
conform in all material respects to the rules and regulations of
the Commission with respect thereto; (ii) do not and will not
contain an untrue statement of a material fact or omit to state
any material fact required to make the statements contained
therein not misleading;
d) Issuer will reserve from its authorized shares of Common Stock
sufficient shares to permit conversion and/or exercise thereof
in full of all outstanding Securities;
e) The conversion and/or exercise right of the Purchaser set forth
herein shall be limited such that in no instance shall the
maximum number of shares of Common Stock into which the
Purchaser may convert these Securities exceed, at any one time,
an amount equal to the remainder of (i) 4.99% of the then
issued and outstanding shares of Common Stock of the Issuer
following such conversion and/or exercise thereof, minus (ii)
the number of shares of Common Stock of the Issuer then held by
the Purchaser. Notwithstanding anything contained herein to the
contrary, in the event the Purchaser's stock holdings exceed
4.99% of the then issued and outstanding shares, it shall
immediately comply with all SEC filing and notification
requirements;
f) Neither the SEC Filings nor the Registration Statement (as
hereinafter defined) nor any amendments thereto, when declared
effective will contain a misstatement of material fact or will
omit a material fact necessary to make the statements contained
therein not misleading; and
g) The President and the Senior Vice President of the Issuer will
confirm the warranties, representations and covenants contained
in this Agreement at Closing.
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<PAGE> 31
The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees, of one-half of one percent, which may be incurred by
the Purchaser in collecting any amount due or exercising the conversion
and/or exercise rights under these Securities.
6. Registration Rights: Liquidated Damages.
The Purchaser will be entitled to registration rights in respect of the
shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants (the terms of which are set forth below) as
follows: (1) The Issuer shall prepare and file, within 30 days of the
initial Closing Date, an amendment to its registration statement under
the Act on Form SB-2 (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "Commission") on December 6,
1996, covering the resale of the shares of Common Stock issuable upon
conversion of the Debentures. The Issuer shall use its best efforts to
cause the Registration Statement to be declared effective by the
Commission no later than 120 days following the initial Closing Date and
shall promptly deliver to Purchaser copies of all amendments to such
Registration Statement and correspondence with the Commission with
respect thereto. The Issuer shall maintain the effectiveness of the
Registration Statement until all of the Common Stock issuable or issued
upon conversion or exercise of the Securities has been sold. The Issuer
shall pay all expenses of registration (other than underwriting fees and
discounts in respect of shares of Common Stock offered and sold under
such Registration Statement by the Purchaser, if any). (2) If the
Registration Statement is not declared effective by the Commission
during the 120-day period mentioned above, the Company shall pay in cash
or free trading common stock valued at Market Price, as hereinafter
defined, to the Purchaser, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) per month commencing 90 and ending
120 days after the initial Closing of the outstanding principal amount
of the Debentures, in the event that the Registration Statement is not
declared effective by the Commission within 90 days of the initial
Closing Date and three percent (3%) from 120 days after the Closing
Date until the Registration Statement is declared effective.
7. Transfer Agent Instructions, Book-Entry System, Liquidated Damages.
Each conversion of the Debentures and/or exercise of the Warrants will
be effected through a "book-entry" mechanism. Pursuant to this
book-entry mechanism, (1) immediately following each Closing, the Escrow
Agent will wire payment of the net offering proceeds to the Issuer and
the Issuer will instruct the Issuer's transfer agent to register the
Debentures in the name of the Purchaser on a Debenture Register to be
maintained by such transfer agent for the benefit of the Issuer and the
Purchaser; (2) the transfer agent will establish a set of book-entry
procedures to record transfers and conversions of the Debentures; and
(3) the Issuer will irrevocably instruct the transfer agent to issue
shares of Common Stock, bearing such legend as may be required by law,
to the Purchaser upon the valid exercise of the conversion privilege and
the fulfillment of other requirements of the transfer agent, including
but not limited to the effectiveness of the Registration Statement and
the delivery of an
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<PAGE> 32
opinion of the Company's counsel (which the Company shall promptly
supply) as to the issuance of such shares of Common Stock. If the
Company willfully fails to deliver shares of Common Stock without
restrictive legends or stop-transfer orders within four (4) New York
Stock Exchange Trading Days of delivery or a notice of conversion
following the effectiveness of the Registration Statement, or fails to
deliver legend certificates if requested prior thereto, liquidated
damages will accrue in an amount equal to $1,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered up to 10 days, and $2,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered in excess of 10 days. Such amounts will accrue
and be payable to the Purchaser by the Issuer upon demand notices of
conversion shall be submitted by facsimile transmission and shall be
deemed to have been received on the date transmitted.
8. Indemnification.
Each of the Issuer and the Purchaser agrees to indemnify and to hold
the other harmless from and against any and all losses, damages,
liabilities, costs and expenses which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made in this Agreement. Each of
the Issuer and the Purchaser agrees that the Escrow Agent shall be
relieved of any liability arising out of acting as escrow agent and
each also hereby agrees to indemnify the Escrow Agent against expenses
including attorneys' fees, judgments, fines and amounts paid in
settlement incurred by the Escrow Agent as a result of any threatened,
pending or completed action, suit or proceeding of every nature by
reason of the fact that it served as escrow agent.
9. Notices.
All notices, requests, demands and other communications provided for
herein (collectively "Notices") shall be in writing. All Notices shall
be sent by hand delivery, U.S. mail with return receipt requested,
overnight courier, or facsimile with all delivery charges prepaid.
All notices will be effective when received by the addressee as
indicated by the return receipt, the receipt of the courier service, or
on the facsimile. All notices to the Purchaser and/or the Issuer shall
be delivered to the Escrow Agent (who may also act as counsel to
Purchaser) at the address indicated below:
Escrow Agent:
Alan R. Ackerman, Esq.
1719A Rt. 10 East
Parsippany, NJ 07054
Telephone: (201) 898-1177
Facsimile: (201) 898-1230
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<PAGE> 33
Facsimile: (201) 898-1230
The Escrow Agent shall be entitled to a fee of 1/2 of one percent for
subsequent tranches which shall close.
10. Closing Date.
This Agreement shall be effective from the date of execution by the
Purchaser. Each Closing shall be effected through delivery of funds and
certificates to the Escrow Agent. The Closing Date, which shall be so
designated by a "Closing Certificate" from the Escrow Agent, shall be
deemed to be that date upon which the Escrow Agent shall have the
Securities available for delivery to the Purchaser and the Purchaser's
funds in the Escrow Agent's account available for delivery to the
Issuer.
11. Origination Fee.
Issuer will pay from Escrow (and execute appropriate instructions with
respect thereto) an origination fee of ten percent (10%) of the gross
proceeds of the closing. Issuer will issue Warrants having a five (5)
year term and having an Exercise Price set at the Conversion Price
applicable to the Debenture being purchased at Closing. The number of
Warrants issued will be 5,000 warrants per $100,000 principal amount of
the Debentures.
12. Conditions to the Issuer's Obligation to Sell.
Issuer shall have the right to reject any subsequent Agreement which is
tendered to the Issuer hereunder for any securities offered after the
initial purchase of $1,700,000 of the Debentures. Any tender for the
initial $1,700,000 of the Debentures may only be rejected if the Issuer
reasonably believes any representations and warranties of such Purchaser
contained herein to be untrue, and in such event Issuer shall promptly
provide Purchaser written notice of such rejection and the reason
therefor and shall provide reasonable opportunity for a response to such
stated reason. Purchaser understands that Issuer's obligation to sell
the Securities is conditioned upon:
(i) The receipt and acceptance by Issuer of this Agreement for all of
the Securities evidenced by execution of this Agreement by the
Issuer or Issuer's duly authorized agent. In the absence of a
written acknowledgement of this Agreement by the Issuer, the
delivery of Securities to the designated Escrow Agent and/or the
transfer of funds to the Issuer shall be deemed to be
constructive acceptance of this Agreement.
(ii) Delivery to the Escrow Agent by Purchaser of good funds as payment
in full of the Purchase Price of the securities subscribed for and
all fees and commission hereunder.
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<PAGE> 34
13. Conditions to Purchaser's Obligation to Purchaser.
Issuer understands that Purchaser's obligation to purchase the
Securities is conditioned upon delivery of (i) the opinion of counsel
specified in Section 4(f) herein; (ii) the Securities as described
herein; and (iii) such documents, certificates and other evidence of
the Issuer's compliance with necessary corporate and statutory
formalities as Purchaser shall reasonably require. Each Closing is
conditioned upon (a) the execution and delivery of, and performance
under, appropriate documentation (including but not limited to an
executed Agreement, form of debenture, warrants, and book-entry transfer
agreement), all in form and substance mutually acceptable to the parties
and containing representations, warranties and agreements customary for
transactions of this type; (b) the truth and accuracy of each of the
representations and warranties contained herein, both when made and as
of each Closing Date; (c) satisfactory completion of due diligence by
Purchaser; (d) the absence of any material adverse change in the
business, condition (financial or otherwise), earnings or prospects of
the Issuer; and (e) the availability of a valid exemption under the Act
regarding the offering and sale of the Securities and shares of Common
Stock issuable on the conversion or exercise thereof.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Additionally, all signatories hereby
consent to the State of New York as the jurisdictional situs of all
disputes.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereof
with respect to the subject matter hereof and supersedes any and all
prior contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended
only by a writing executed by all parties hereto. This Agreement may be
executed in counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
16. Announcements.
No public announcement concerning the events and transactions
contemplated by this Agreement shall be made by Issuer without the prior
approval of Purchaser, which approval shall not be unreasonably
withheld.
Full Name and Address of Purchaser for Registration Purposes:
NAME: Austat Anstalt Schaan
ADDRESS: 7440 Fuerstentum, Liechtenstein, Landstrasse
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<PAGE> 35
Tel. No. (212) 568-8224
Fax No. (212) 586-8244
Contact No. Arie Rabinowitz
17. Delivery Instructions: (If different from Registration Name)
NAME: L.H. Financial Services
ADDRESS: Essex House, 160 Central Park South, Suite 3212, New York, NY
Tel. No. (212) 586-8224
Fax No. (212) 586-8244
Contact Name: Arie Rabinowitz
Special Instructions: In each closing, Purchaser will receive debentures
representing One Hundred Percent (100%) of its
subscription in denominations of $100,000 each. Each
Debenture will specify a First Conversion Date of the
later of the date of effective registration, or
forty-five (45) days from the Closing Date.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written below. This Agreement must be accepted by the Issuer no later than
5:00 p.m. Eastern Time, on the third United States business day after the date
of execution by the Purchaser or it shall be deemed to be null and void.
Dated this day of July, 1997.
Purchaser Name: Austat Anstalt Schaan
BY: /s/ [SIG]
---------------------------------
Official signatory of Purchaser
Name (Printed:) AUSTAT ANSTALT SCHAAN
7440 FUERSTENTUM
LIECHTENSTEIN, LANDSTRASSE
Title:
President
---------------------------
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<PAGE> 36
Liechtenstein
- ------------------------------------
Accepted this 1st day of July, 1997
A MANHATTAN MINING INCORPORATED
By: /s/ [SIG]
--------------------------------
Official Signatory of Issuer
I have full authority to bind Nevada Manhattan Mining Incorporated JSK ( )
Name (Printed): JEFFREY S. KRAMER
--------------------
Jeffrey S. Kramer
Title:
C.O.O.
- ------------------------------------
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<PAGE> 37
SUBSCRIPTION AGREEMENT
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR CONVERTIBLE DEBENTURES
THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND REGISTERED OR QUALIFIED UNDER SUCH LAWS, OR UNLESS
THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE ISSUER AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE
SECURITIES BEING OFFERED BY THE ISSUER ARE SECURITIES AS THAT TERM HAS BEEN
DEFINED IN THE ACT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ACT IN
RELIANCE UPON THE EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 4(2) THEREOF
AND ARE SUBJECT TO RESTRICTIONS ON TRANSFER. FURTHER, THESE SECURITIES MAY ONLY
BE SOLD PURSUANT TO EXEMPTIONS FROM REGISTRATION OR QUALIFICATION IN THE
VARIOUS STATES, AND MAY BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER IN
SUCH JURISDICTIONS.
This Agreement has been executed by the undersigned in connection with the
private placement of Eight Percent (8%) Senior Convertible Debentures and
Common Stock Purchase Warrants (hereinafter referred to as the "Securities") of
Nevada Manhattan Mining Incorporated, 5038 North Parkway Calabasas, Suite 100,
Calabasas, California 91302, a corporation organized under the laws of Nevada
(hereinafter referred to as the "Issuer").
The undersigned, a corporation organized under the laws of the State of
New York, (hereinafter referred to as the "Purchaser") hereby represents and
warrants to, and agrees with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
a) The undersigned hereby subscribes for and agrees to purchase
$500,000.00 aggregate principal amount of the Issuer's 8%
Convertible Debentures convertible into shares of the Issuer's
common stock ("Common Stock") in the form attached as Schedule "A"
hereto (the "Debentures") for a total consideration, including all
fees and commissions, of $500,000.00 (the "Purchase Price") under
the terms and conditions specified in Paragraph 10 hereof.
b) Form of Payment. Purchaser shall pay such portion of the Purchase
Price required to purchase the Debentures being purchased by
delivering good funds by wire transfer in United States Dollars into
an escrow account (The "Escrow Account") as follows:
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<PAGE> 38
Bank of New York
Rt. 10
Parsippany, New Jersey 07054
ABA No. 021000018
Account Name: Alan R. Ackerman, Esq., Attorney Trust Account
Account No.: 6104763934
2. General Understanding
Purchaser understands that the Securities have not been registered under
the Act, and, accordingly, that the Issuer must be satisfied that the
offer and sale of the Securities to the Purchaser will satisfy the
requirements of Section 4(2) under the Act. Purchaser and Issuer intend
that the representations, declarations, and warranties set out in this
Agreement will be relied upon in determining Purchaser's suitability as
a purchaser of the Securities.
3. Purchaser Representations and Covenants
Purchaser represents, warrants, and acknowledges to the Issuer as
follows:
a) The Securities are being acquired for the account of Purchaser
and its affiliates for investment, with no present intention of
distributing or selling any portion thereof, and will not be
transferred by Purchaser in violation of the Act. No one other
than Purchaser has any interest in or any right to aquire the
Securities.
b) The Securities have not been registered under the Act or
qualified under any state securities law in reliance on an
exemption from registration and qualification for private
offerings. Purchaser is purchasing the Securities without being
furnished any offering literature or prospectus other than the
SEC Filings (as defined in Section 3(k) below).
c) Purchaser is an "accredited investor" under Rule 501(a)(3) of
Regualtion D under the Act and will sign the Accredited
Investor Declaration, substantially in the form of Schedule "C",
attached hereto, contemporaneously with the execution of this
Agreement.
d) No representations or warranties have been made to Purchaseer
by the Issuer or any agent of the Issuer other than those set
forth in this Agreement.
e) Purchaser has investigated the acquisition of the Securities to
the extent it deems necessary or desirable and the Issuer has
provided it with any assistance it has requested in connection
therewith.
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<PAGE> 39
f) The address set forth below is the true and correct address of
Purchaser's principal business office.
g) Purchaser has full power and authority to make the
representations referred to herein, to purchase the Securities,
and to execute and deliver this Agreement.
h) If Purchaser is not located in the United States, Purchaser has
satisfied himself as to the full observance of the laws of the
Purchaser's jurisdiction in connection with the offer and sale
of the Securities or any use of this Agreement, including (i)
the legal requirements of the Purchaser's jurisdiction for the
purchase of Securities; (ii) any foreign exchange restrictions
applicable to such purchase; (iii) any governmental or other
consents that may need to be obtained; and (iv) the income tax
and other tax consequences, if any, which may be material to the
purchase, holding, redemption, exchange, sale or transfer of the
Securities. Purchaser's purchase and payment for, and
Purchaser's continued beneficial ownership of the Securities
will not violate any applicable securities or other laws of
Purchaser's jurisdiction.
i) Purchaser is aware that this is a private offering and that no
United States federal, state or other agency has made any
finding or determination as to the fairness of the investment
nor made any recommendation or endorsement of the Securities.
j) Purchaser acknowledges and represents that Purchaser has had
access to information concerning the Issuer and its
subsidiaries, its management, its current and proposed business
and other details of the investment believed by Purchaser to be
sufficient to enable Purchaser to make an informed investment
decision regarding Purchaser's acquisition of the Securities.
Purchaser has had an opportunity to ask questions of, and
receive answers from, and obtain additional information from
representatives of the Issuer concerning (i) the business and
financial condition of the Issuer; (ii) the current and proposed
business of the Issuer, and (iii) the terms of this Agreement
and the purchase of the Securities, all to the extent such
information is available or could be acquired without
unreasonable effort or expense.
k) Purchaser represents that Purchaser or its representative has
received copies of the Form 10 Registration Statement under the
Securities Exchange Act of 1934 filed by the Issuer on April 3,
1997 and will receive all amendments thereto (collectively "SEC
Filings").
l) Purchaser represents that all data or information requested by
Purchaser from the Issuer or any of its officers or affiliates
concerning the Issuer has been furnished to Purchaser.
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<PAGE> 40
m) Purchaser represents and warrants to the Issuer that (i)
Purchaser is able to bear the economic risk of an investment
in the Securities; (ii) Purchaser has adequate means of
providing for Purchaser's current needs and contingencies; (iii)
Purchaser is purchasing the Securities for investment with the
intention of holding the Securities for an indefinite period
and is able to afford to hold the Securities for an indefinite
period; (iv) Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of
evaluating the merits and risks of the investment in the
Securities; (v) Purchaser can afford a complete loss of
Purchaser's investment in the Securities; and (vi) Purchaser is
willing to accept the foregoing investment risks.
n) Purchaser represents and warrants to the Issuer that
Purchaser's acquisition of the Securities is not a transaction
(or any element of a series of transactions) that is part of a
plan or scheme to evade the registration provisions of the Act.
o) Purchaser understands that there is currently no trading market
for the Securities and that none is expected to arise. Purchaser
further acknowledges that although there currently exists a
trading market for the Issuer's Common Stock, such market may
not exist or be accessible in sufficient volume at such time as
the Securities are converted into Common Stock.
Purchaser covenants to the Issuer that:
excluding the SEC Filings, Purchaser has not distributed, and
will not distribute any materials, and has not divulged, and
will not divulge, the contents thereof to anyone other than such
legal or financial advisors as Purchaser has deemed necessary
for purposes of evaluating an investment in the Securities and
no one (except such advisors) has used such materials, and
Purchaser has not made, and will not make, any copies thereof.
4. Issuer Representations and Covenants.
In order to induce Purchaser to enter into this Agreement, the Issuer
represents and warrants to the Purchaser as follows:
a) The Securities, when issued and delivered pursuant hereto, and
the Common Stock issuable upon conversion and/or exercise
thereof, when issued and delivered upon such conversion and/or
exercise thereof, will be duly and validly authorized and under
federal or state law issued, fully paid and nonassessable and
will not subject the Purchaser thereof to any liability
solely by reason of being such Purchaser.
b) The Issuer has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations
hereunder and, when accepted by the
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<PAGE> 41
Issuer, this Agreement will have been duly authorized by all
necessary actions of the directors and (if necessary) the
shareholders of Issuer, validly executed and delivered on behalf of
the Issuer and be a legally binding obligation of the Issuer,
enforceable in accordance with its terms.
c) The execution and delivery of this Agreement and the sale of the
Securities pursuant hereto and the issuance of the Common Stock
issuable upon conversion and/or exercise thereof of such Securities,
and the transaction contemplated by this Agreement do not and will
not conflict with or result in a breach by the Issuer of any of the
terms or provisions of, or constitute a default under, the Articles
of Incorporation or Bylaws of the Issuer or any indenture,
mortgage, deed of trust or other material agreement or instrument to
which the Issuer is a party or by which it or any of its property or
assets are bound or any existing applicable law, rule or regulation
or any applicable decree, judgment or order of any court, federal or
state regulatory body, administrative agency or other governmental
body having jurisdiction over the Issuer or any of its properties or
assets.
d) There are no facts or circumstances existing, and there has been no
event, which has had or which reasonably could be expected to have
in the future a material adverse effect with respect to the
financial condition, business affairs or prospects of the Issuer
other than as disclosed in the SEC Filings provided to Purchaser.
e) Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly qualified
and in good standing as a foreign corporation in all jurisdictions
where the failure to so qualify would have a material adverse effect
on the Issuer. The Issuer has not registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") but filed a registration statement on
Form 10 under the Exchange Act on April 3, 1997, and the Common
Stock is traded on the Electronic Bulletin Board maintained by the
National Association of Securities Dealers, Inc. under the symbol
NVMH.
f) The Purchaser shall, upon the purchase of the Securities and at
Closing, receive an opinion letter from the Issuer's counsel to the
effect that (i) the Issuer is duly incorporated and validly
existing; (ii) this Agreement, the issuance of the securities, the
issuance of Common Stock upon conversion and/or exercise thereof and
the other transactions contemplated by this Agreement have been
approved and duly authorized by all required corporate action; (iii)
the Securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable; and (iv) the Issuer has
reserved from its authorized but unissued shares of Common Stock a
sufficient number of shares to permit full conversion and/or
exercise thereof at the then applicable conversion and/or exercise
rate for all outstanding Securities.
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<PAGE> 42
5. Covenants of the Issuer.
For so long as any Securities held by Purchaser remain outstanding, the
Issuer covenants and agrees with the Purchaser that:
a) Issuer will undertake its best efforts to maintain the listing
of its Common Stock on the Electronic Bulletin Board, the NASDAQ
SmallCap Stock Market or the American Stock Exchange;
b) Except as expressly set forth in Section 7 below, and only until
the Registration Statement (as hereinafter defined) has been
declared effective, Issuer will not issue stop transfer
instructions to its transfer agent in regard to the Securities
or the Common Stock issuable upon conversion and/or exercise
thereof of the Securities;
c) The SEC Filings and any amendments thereto (i) do and will
conform in all material respects to the rules and regulations of
the Commission with respect thereto; (ii) do not and will not
contain an untrue statement of a material fact or omit to state
any material fact required to make the statements contained
therein not misleading;
d) Issuer will reserve from its authorized shares of Common Stock
sufficient shares to permit conversion and/or exercise thereof
in full of all outstanding Securities;
e) The conversion and/or exercise right of the Purchaser set forth
herein shall be limited such that in no instance shall the
maximum number of shares of Common Stock into which the
Purchaser may convert these Securities exceed, at any one time,
an amount equal to the remainder of (i) 4.99% of the then
issued and outstanding shares of Common Stock of the Issuer
following such conversion and/or exercise thereof, minus (ii)
the number of shares of Common Stock of the Issuer then held by
the Purchaser. Notwithstanding anything contained herein to the
contrary, in the event the Purchaser's stock holdings exceed
4.99% of the then issued and outstanding shares, it shall
immediately comply with all SEC filing and notification
requirements;
f) Neither the SEC Filings nor the Registration Statement (as
hereinafter defined) nor any amendments thereto, when declared
effective will contain a misstatement of material fact or will
omit a material fact necessary to make the statements contained
therein not misleading; and
g) The President and the Senior Vice President of the Issuer will
confirm the warranties, representations and covenants contained
in this Agreement at Closing.
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<PAGE> 43
The Issuer agrees to pay all costs and expenses, including reasonable
attorneys' fees, of one-half of one percent, which may be incurred by
the Purchaser in collecting any amount due or exercising the conversion
and/or exercise rights under these Securities.
6. Registration Rights: Liquidated Damages.
The Purchaser will be entitled to registration rights in respect of the
shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants (the terms of which are set forth below) as
follows: (1) The Issuer shall prepare and file, within 30 days of the
initial Closing Date, an amendment to its registration statement under
the Act on Form SB-2 (the "Registration Statement"), filed with the
Securities and Exchange Commission (the "Commission") on December 6,
1996, covering the resale of the shares of Common Stock issuable upon
conversion of the Debentures. The Issuer shall use its best efforts to
cause the Registration Statement to be declared effective by the
Commission no later than 120 days following the initial Closing Date and
shall promptly deliver to Purchaser copies of all amendments to such
Registration Statement and correspondence with the Commission with
respect thereto. The Issuer shall maintain the effectiveness of the
Registration Statement until all of the Common Stock issuable or issued
upon conversion or exercise of the Securities has been sold. The Issuer
shall pay all expenses of registration (other than underwriting fees and
discounts in respect of shares of Common Stock offered and sold under
such Registration Statement by the Purchaser, if any). (2) If the
Registration Statement is not declared effective by the Commission
during the 120-day period mentioned above, the Company shall pay in cash
or free trading common stock valued at Market Price, as hereinafter
defined, to the Purchaser, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) per month commencing 90 and ending
120 days after the initial Closing of the outstanding principal amount
of the Debentures, in the event that the Registration Statement is not
declared effective by the Commission within 90 days of the initial
Closing Date and three percent (3%) from 120 days after the Closing
Date until the Registration Statement is declared effective.
7. Transfer Agent Instructions, Book-Entry System, Liquidated Damages.
Each conversion of the Debentures and/or exercise of the Warrants will
be effected through a "book-entry" mechanism. Pursuant to this
book-entry mechanism, (1) immediately following each Closing, the Escrow
Agent will wire payment of the net offering proceeds to the Issuer and
the Issuer will instruct the Issuer's transfer agent to register the
Debentures in the name of the Purchaser on a Debenture Register to be
maintained by such transfer agent for the benefit of the Issuer and the
Purchaser; (2) the transfer agent will establish a set of book-entry
procedures to record transfers and conversions of the Debentures; and
(3) the Issuer will irrevocably instruct the transfer agent to issue
shares of Common Stock, bearing such legend as may be required by law,
to the Purchaser upon the valid exercise of the conversion privilege and
the fulfillment of other requirements of the transfer agent, including
but not limited to the effectiveness of the Registration Statement and
the delivery of an
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<PAGE> 44
opinion of the Company's counsel (which the Company shall promptly
supply) as to the issuance of such shares of Common Stock. If the
Company willfully fails to deliver shares of Common Stock without
restrictive legends or stop-transfer orders within four (4) New York
Stock Exchange Trading Days of delivery or a notice of conversion
following the effectiveness of the Registration Statement, or fails to
deliver legend certificates if requested prior thereto, liquidated
damages will accrue in an amount equal to $1,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered up to 10 days, and $2,000.00 for each
$100,000.00 principal amount of Debentures as to which conversion has
been requested then outstanding for each day that such shares of Common
Stock are not delivered in excess of 10 days. Such amounts will accrue
and be payable to the Purchaser by the Issuer upon demand notices of
conversion shall be submitted by facsimile transmission and shall be
deemed to have been received on the date transmitted.
8. Indemnification.
Each of the Issuer and the Purchaser agrees to indemnify and to hold
the other harmless from and against any and all losses, damages,
liabilities, costs and expenses which the other may sustain or incur
in connection with the breach by the indemnifying party of any
representation, warranty or covenant made in this Agreement. Each of
the Issuer and the Purchaser agrees that the Escrow Agent shall be
relieved of any liability arising out of acting as escrow agent and
each also hereby agrees to indemnify the Escrow Agent against expenses
including attorneys' fees, judgments, fines and amounts paid in
settlement incurred by the Escrow Agent as a result of any threatened,
pending or completed action, suit or proceeding of every nature by
reason of the fact that it served as escrow agent.
9. Notices.
All notices, requests, demands and other communications provided for
herein (collectively "Notices") shall be in writing. All Notices shall
be sent by hand delivery, U.S. mail with return receipt requested,
overnight courier, or facsimile with all delivery charges prepaid.
All notices will be effective when received by the addressee as
indicated by the return receipt, the receipt of the courier service, or
on the facsimile. All notices to the Purchaser and/or the Issuer shall
be delivered to the Escrow Agent (who may also act as counsel to
Purchaser) at the address indicated below:
Escrow Agent:
Alan R. Ackerman, Esq.
1719A Rt. 10 East
Parsippany, NJ 07054
Telephone: (201) 898-1177
Facsimile: (201) 898-1230
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<PAGE> 45
Facsimile: (201) 898-1230
The Escrow Agent shall be entitled to a fee of 1/2 of one percent for
subsequent tranches which shall close.
10. Closing Date.
This Agreement shall be effective from the date of execution by the
Purchaser. Each Closing shall be effected through delivery of funds and
certificates to the Escrow Agent. The Closing Date, which shall be so
designated by a "Closing Certificate" from the Escrow Agent, shall be
deemed to be that date upon which the Escrow Agent shall have the
Securities available for delivery to the Purchaser and the Purchaser's
funds in the Escrow Agent's account available for delivery to the
Issuer.
11. Origination Fee.
Issuer will pay from Escrow (and execute appropriate instructions with
respect thereto) an origination fee of ten percent (10%) of the gross
proceeds of the closing. Issuer will issue Warrants having a five (5)
year term and having an Exercise Price set at the Conversion Price
applicable to the Debenture being purchased at Closing. The number of
Warrants issued will be 5,000 warrants per $100,000 principal amount of
the Debentures.
12. Conditions to the Issuer's Obligation to Sell.
Issuer shall have the right to reject any subsequent Agreement which is
tendered to the Issuer hereunder for any securities offered after the
initial purchase of $1,700,000 of the Debentures. Any tender for the
initial $1,700,000 of the Debentures may only be rejected if the Issuer
reasonably believes any representations and warranties of such Purchaser
contained herein to be untrue, and in such event Issuer shall promptly
provide Purchaser written notice of such rejection and the reason
therefor and shall provide reasonable opportunity for a response to such
stated reason. Purchaser understands that Issuer's obligation to sell
the Securities is conditioned upon:
(i) The receipt and acceptance by Issuer of this Agreement for all of
the Securities evidenced by execution of this Agreement by the
Issuer or Issuer's duly authorized agent. In the absence of a
written acknowledgement of this Agreement by the Issuer, the
delivery of Securities to the designated Escrow Agent and/or the
transfer of funds to the Issuer shall be deemed to be
constructive acceptance of this Agreement.
(ii) Delivery to the Escrow Agent by Purchaser of good funds as payment
in full of the Purchase Price of the securities subscribed for and
all fees and commission hereunder.
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<PAGE> 46
13. Conditions to Purchaser's Obligation to Purchaser.
Issuer understands that Purchaser's obligation to purchase the
Securities is conditioned upon delivery of (i) the opinion of counsel
specified in Section 4(f) herein; (ii) the Securities as described
herein; and (iii) such documents, certificates and other evidence of
the Issuer's compliance with necessary corporate and statutory
formalities as Purchaser shall reasonably require. Each Closing is
conditioned upon (a) the execution and delivery of, and performance
under, appropriate documentation (including but not limited to an
executed Agreement, form of debenture, warrants, and book-entry transfer
agreement), all in form and substance mutually acceptable to the parties
and containing representations, warranties and agreements customary for
transactions of this type; (b) the truth and accuracy of each of the
representations and warranties contained herein, both when made and as
of each Closing Date; (c) satisfactory completion of due diligence by
Purchaser; (d) the absence of any material adverse change in the
business, condition (financial or otherwise), earnings or prospects of
the Issuer; and (e) the availability of a valid exemption under the Act
regarding the offering and sale of the Securities and shares of Common
Stock issuable on the conversion or exercise thereof.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Additionally, all signatories hereby
consent to the State of New York as the jurisdictional situs of all
disputes.
15. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereof
with respect to the subject matter hereof and supersedes any and all
prior contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended
only by a writing executed by all parties hereto. This Agreement may be
executed in counterparts, and the facsimile transmission of an executed
counterpart to this Agreement shall be effective as an original.
16. Announcements.
No public announcement concerning the events and transactions
contemplated by this Agreement shall be made by Issuer without the prior
approval of Purchaser, which approval shall not be unreasonably
withheld.
Full Name and Address of Purchaser for Registration Purposes:
NAME: Mendel Group, Inc.
ADDRESS: 17 West 17th St., 8th Floor, New York, NY 10011
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<PAGE> 47
Tel. No. (212) 463-0100
Fax No. (212) 463-0091
Contact No. Florence Mendel, President
17. Delivery Instructions: (If different from Registration Name)
NAME: L. H. Financial Services
ADDRESS: c/o Essex House, 160 Central Park South, Suite 3212, New York, NY
Tel. No. (212) 586-8224
Fax No. (212) 586-8244
Contact Name: Arie Rabinowitz
Special Instructions: In each closing, Purchaser will receive debentures
representing One Hundred Percent (100%) of its
subscription in denominations of $100,000 each. Each
Debenture will specify a First Conversion Date of the
later of the date of effective registration, or
forty-five (45) days from the Closing Date.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written below. This Agreement must be accepted by the Issuer no later than
5:00 p.m. Eastern Time, on the third United States business day after the date
of execution by the Purchaser or it shall be deemed to be null and void.
Dated this day of July, 1997.
Purchaser Name: Mary Park Properties
BY: /s/ FLORENCE MENDEL
---------------------------------
Official signatory of Purchaser
Name (Printed:) MENDEL GROUP, INC.
17 West 17th St., 8th Floor, New York, NY
Title:
President MENDEL GROUP, INC.
---------------------------
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<PAGE> 48
United States
- ------------------------------------
Accepted this 1st day of July, 1997
A MANHATTAN MINING INCORPORATED
By: /s/ [SIG]
--------------------------------
Official Signatory of Issuer
I have full authority to bind Nevada Manhattan Mining Incorporated JSK ( )
Name (Printed): JEFFREY S. KRAMER
--------------------
Jeffrey S. Kramer
Title:
C.O.O.
- ------------------------------------
12
<PAGE> 1
EXHIBIT 4.(ix)
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144, RULE
144A OR ANY SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR (iii)
UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH
EXERCISE, SALE OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT, PROVIDED
THAT THE HOLDER OF THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER
DELIVERS TO THE COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK OF
NEVADA MANHATTAN MINING INCORPORATED
THIS CERTIFIES that, for value received, Alan Zazoff, (herein called
"Holder") is entitled to subscribe for and purchase from Nevada Manhattan Mining
Incorporated (herein called the "Company") a corporation organized and existing
under the laws of the State of Nevada, at the price of $6.75 per share, (the
"Warrant Exercise Price") (subject to adjustment as set forth in paragraph 3
below) at any time up to and including July 1, 2002, 20,000 fully paid and
nonassessable shares of the Company's Common Stock, no par value. This warrant
is issued in accordance with the Subscription Agreement dated as of July 7, 1997
(the "Agreement") between the Company and Mary Park Properties, and is subject
in all respects to the relevant provisions of the Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share) at the principal
office of the Company at 5038 Parkway Calabasas, Suite 100, Calabasas,
California 91302 (or such office or agency of the Company as it may from time to
time reasonably designate) at any time within the aforementioned period, and by
payment to the Company by certified check or bank draft of the Warrant Exercise
Price for such shares. The Holder may also exercise this Warrant in whole or in
part in a "cashless" or "net-issue" exercise. In the latter event, the Holder
will deliver this Warrant to the Company with a notice stating the number of
shares to be delivered to the Holder and the number of shares with respect to
which the Warrant is being surrendered in payment of the aggregate Warrant
Exercise Price for the shares to be delivered to the Holder. For purposes of
this provision, all shares as to which the Warrant is surrendered will be valued
at the Current Market Price (as defined below). The notice accompanying the
Warrant shall also set forth the number of shares remaining subject to the
Warrant. As an example of the foregoing, if the Warrant Exercise Price
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<PAGE> 2
is $5.00 per share, the Current market Price is $10.00 per share, and the
Warrant were exercised for 1,000 shares, the Company would deliver 500 shares of
the Company's Common Stock to the Holder and the Warrant would be surrendered
for exercise with respect to the remaining 500 shares in payment of the $5,000
Aggregate Warrant Exercise Price. The Company shall not be obligated to issue
fractional shares of Common Stock upon exercise of this Warrant but shall pay to
the Holder an amount in cash equal to the Current Market Price per share
multiplied by such fraction (rounded to the nearest cent). The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. Subject to the provisions of the next succeeding paragraph and this
paragraph 1, certificates for the shares of stock so purchased shall be
delivered to the Holder within four business days after the rights represented
by this Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant shall not then have been exercised or surrendered shall
also be delivered to the Holder hereof within two business days.
2. SHARES TO BE FULLY PAID: RESERVATION OF SHARES.
The Company covenants and agrees:
(i) That all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant,
will, upon issuance, be fully paid and nonassessable
and free from all preemptive rights, and taxes, lien
and charges with respect to the issuance thereof;
(ii) That during the period within which the rights
represented by this Warrant may be exercised, the
Company will at all times have authorized and
reserved for the purpose of the issuance upon
exercise of the rights evidenced by this Warrant, a
sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by
this Warrant;
(iii) That the Company will take all such action as may be
necessary to assure that the Common Stock issuable
upon the exercise hereof may be so issued without
violation of any applicable law or regulation or of
any requirements of any domestic securities exchange
or market upon which any capital stock of the Company
may be listed or traded;
(iv) That the Company will not take any action if the
total number of shares of Common Stock issuable after
such action and upon exercise of all warrants and
other rights to purchase or acquire Common Stock,
together with all shares of Common Stock then
outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's
Articles of Incorporation. In the event any stock or
securities of the Company other than Common Stock are
issuable upon the exercise hereof,
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<PAGE> 3
the Company will take or refrain from taking any
action referred to in clauses (i) through (iv) of
this paragraph 2 as though such clauses applied to
such other shares or securities then issuable upon
the exercise hereof;
(v) The Company has all requisite corporate power and
authority to execute and deliver this Warrant; the
execution and delivery of this Warrant have been duly
and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the
part of the Company are necessary to authorize this
Warrant; this Warrant has been duly and validly
executed and delivered by the Company and constitutes
a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms;
(vi) No order, permit, consent, approval, license,
authorization or validation of, and no registration
or filing of notice with, any governmental entity is
necessary to authorize or permit, or is required in
connection with, the execution, delivery of
performance of this Warrant or the consummation by
the Company of the transactions contemplated hereby
and;
(vii) Neither the execution, delivery nor compliance by the
Company with any of the provisions hereof will (a)
violate, conflict with or result in any breach of any
provision of the Company's charter documents, (b)
result in a violation or breach or termination of, or
constitute a default under or conflict with any
provision of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or
obligation to which the Company is subject, or (c)
violate any judgment, order, writ, injunction,
decree, award, statute, rule or regulation to which
the Company is subject.
3. ADJUSTMENT OF SHARES ISSUABLE OR WARRANT EXERCISE
The above provisions are subject to the following:
If the Company shall pay a dividend or make a distribution in shares of
its Common Stock, subdivide (split) its outstanding shares of Common Stock,
combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities or any
assets of the Company or of another entity, the number of shares of Common Stock
or other securities the Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised in full immediately prior to the happening of such
event, and the Warrant Exercise Price per share shall be correspondingly
3
<PAGE> 4
adjusted. The Warrant Exercise Price shall also be adjusted in accordance with
the Special Instructions contained within the Subscription Agreements. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. The Holder of this Warrant shall
be entitled to participate in any subscription or other rights offering made to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this Warrant remains unexercised immediately prior
to the record date for such subscription rights offering. If the Company is
consolidated or merged with or into another corporation or entity or if all or
substantially all of its assets are conveyed to another corporation or entity
this Warrant shall thereafter be exercisable for the purchase of the kind and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a Holder of the number of
shares of Common Stock of the Company which could have been purchased on the
exercise of this Warrant in full immediately prior to such 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 Holder of this Warrant to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of shares of Common Stock the Holder of this Warrant is entitled to
purchase) shall thereafter be applicable, as nearly as possible, in relation to
any shares of Common Stock or other securities or other property thereafter
deliverable upon the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or
conveyance, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
transaction and is not the issuer of the shares of stock or other securities or
property to be delivered to holders of shares of the Common Stock outstanding at
the effective time thereof, then such issuer shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities, cash
or other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
4. NOTICE OF ADJUSTMENT.
Upon any adjustment of the number of shares of Common Stock issuable
upon exercise of this Warrant or the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof by first class mail,
postage prepaid, addressed to the Holder at the address of such Holder as shown
on the books of the Company and pursuant to Paragraph 17, which notice shall
state the Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
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<PAGE> 5
5. OTHER NOTICES.
In case at any time:
1. The Company shall declare any cash dividend upon its Common
Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the
Holders of its Common Stock;
2. The Company shall offer for subscription to the Holders of any
of its Common Stock any additional shares of Common Stock of
any class or other rights;
3. There shall be any capital reorganization or reclassification
of the capital stock of the Company or consolidation or merger
of the Company with the sale of all or substantially all of
its assets to another corporation or entity; or
4. There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
Then in any one or more of said cases the Company shall give by first
class mail postage prepaid, addressed to the Holder of this Warrant at the
address of such Holder as shown on the books of the Company and pursuant to
Paragraph 17(i) at least 20 days prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger or sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization or reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, at least 20 days prior written notice of the date
when the same shall take place. Any notice required by clause (i) shall also
specify in the case of any such dividend, distribution or subscription rights
the date on which the holders of Common Stock shall be entitled thereto and a
notice required by (ii) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger or
sale, dissolution, liquidation or winding up as the case may be.
6. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than of the Holder of
the Warrant exercised.
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<PAGE> 6
7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any matter which interferes with a timely
exercise of this Warrant. The Company will not, by any action, seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith seek to carry out all such terms and take all such action as
may be necessary or appropriate in order to protect the rights of the Holder
against impairment.
8. NO VOTING RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
9. REGISTRATION AND TRANSFER OF SECURITIES; DEFINITIONS.
"Holder" means Alan Zazoff and its successors, representatives and
assigns. If there is more than one Holder at any time, each such Holder shall be
entitled to the rights and privileges granted hereunder.
"Company" means Nevada Manhattan Mining Incorporated and its successors
and assigns.
"Registration", "register" and like words mean compliance with all of
the federal and state laws, rules, regulations and provisions of agreements and
corporate documents pertaining to lawful and unconditional transfer of the
securities by way of a public offering or distribution.
"Security", or "securities" means the shares of stock of all classes,
type and series, and all rights however evidenced or contained, to which the
Holder shall be entitled upon the exercise of this Warrant.
10. TRANSFERS.
Prior to any transfer or attempted transfer of any securities (except a
transfer by a Holder to an affiliate, subsidiary, employee or shareholder of the
Holder), the Holder shall give written notice to the Company of such Holder's
intention to effect such transfer. Holder will not transfer or dispose of this
Warrant and will not sell or transfer any securities except pursuant to (i) an
effective registration statement under the Act; (ii) Rule 144, Rule 144A or any
successor rule under the Act permitting such sale or transfer; or (iii) any
other exemption under the Act provided that the Holder delivers an opinion of
Holder's counsel reasonably satisfactory to counsel to the Company that an
exemption from registration under the Act is available. Each certificate
evidencing the securities issued upon such transfer shall bear the restrictive
legend set forth on the first page of this Warrant modified to delete references
to the Warrant, if appropriate, unless
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<PAGE> 7
in the reasonable opinion of Holder's counsel such legend is not required in
order to insure compliance with the Act.
11. REGISTRATION.
(a) The Company shall comply with its obligation to register this
Warrant and the Common Stock issuable upon exercise thereof as
set forth in paragraph 1 of this Agreement;
(b) Each time the Company shall propose the registration under the
Act of any securities of the Company, the Company shall give
written notice (the "Company Notice") of such proposed
registration to the Holder. The Company will include in any
such Registration Statement any securities (or portion
thereof) of any Holder who 15 days after the mailing of a
Company Notice shall request inclusion. Upon receipt of such
notice (a "Holder Notice") from a Holder, the Company will (i)
as expeditiously as possible but in any event within 60 days
of any request hereunder file a Registration Statement on such
form as the Company shall deem appropriate; (ii) cause such
Registration Statement to be declared effective and keep it
effective as long as required to allow the Holder to effect
the disposition of the securities registered and thereafter as
long as required by the Act; (iii) notify the Holder
immediately after it shall receive notice thereof, of the time
when such Registration Statement has become effective or any
supplement to any prospectus forming a part of such
Registration Statement has been filed; (iv) notify the Holder
immediately of any request by the Securities and Exchange
Commission (hereinafter referred to as the "Commission") for
the amending or supplementing of such Registration Statement
or prospectus; (v) prepare and immediately file with the
Commission and immediately notify the Holder of the filing of
such amendment or supplement to such Registration Statement or
prospectus as may be necessary to correct any statement or
omission, if at any time when a prospectus relating to the
security is required to be delivered under the Act, any event
shall have occurred as a result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading; (vi) in case the Holder or any underwriter for the
Holder is required to deliver a prospectus, at a time when the
prospectus then in effect may no longer comply with the
requirements of the Act, prepare promptly upon request of the
Holder such amendment or amendments to such Registration
Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of
Section 10 of the Act; (vii) not file any amendment or
supplement to the Registration Statement or prospectus to
which the Holder shall reasonably object after having been
furnished a copy at a reasonable time prior to the filing
thereof; (viii) advise the Holder immediately after it shall
receive notice or obtain knowledge thereof of the issuance of
any stop order by the Commission
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<PAGE> 8
suspending the effectiveness of any such Registration
Statement or of the initiation or threatening of any
proceeding for that purpose and use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; (ix) qualify
the security for transfer under the securities laws of such
states as may be designated by the Company; (x) furnish to the
Holder as soon as available copies of any such Registration
Statement and each preliminary or final prospectus, or
supplement required to be prepared pursuant to this Paragraph
11, all in such quantities as the Holder may from time to time
reasonably request; and (xi) make generally available to its
security holders earnings statements satisfying the provisions
of Section 11(a) of the Act, no later than 30 days after the
end of any 12-month period commencing at the end of any fiscal
quarter in which securities are sold to underwriters in an
underwritten offering or if not sold to underwriters in an
underwritten offering beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement. The Company shall have no
obligation to register securities of a Holder if, at the time
of such request the securities may be sold pursuant to Rule
144 under the Act.
The Company will pay the costs and expenses incident to the performance
of its obligations under this Paragraph 11, including the fees and expenses of
its counsel, the fees and expenses of its accountants and all other costs and
expenses incident to the preparations, printing and filing under the Act of any
such Registration Statement, each prospectus and all amendments and supplements
thereof, the costs incurred in connection with the qualification of the
securities under the laws of various jurisdictions (including fees and
disbursements of counsel to the Company), the cost of furnishing to the Holder
copies of any such Registration Statement, each preliminary prospectus, the
final prospectus and each amendment and supplement thereto, all expenses
incident to delivery of the security to any underwriter or underwriters, but not
any underwriting commissions or discounts charged to the Holder in connection
with the registration of securities.
12. INDEMNIFICATION.
The Company will indemnify and hold harmless each Holder and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls the Holder or underwriter within the meaning of the Act against any
losses, claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Holder or underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such loses, claims,
damages or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which the securities were registered under the Act,
any preliminary prospectus or prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Holder, underwriter and each
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<PAGE> 9
such controlling person for any legal or other expenses reasonably incurred by
the Holder, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, expense or liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, expense or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omissions made in conformity with written information furnished by
the Holder or underwriter in writing specifically for use in the preparation
thereof.
Each Holder will indemnify and hold harmless the Company, each of its
Directors, each of its Officers who have signed said Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company, or any
such Director, Officer or controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) are caused by any untrue or alleged untrue statement of any
material fact contained in said Registration Statement, said preliminary
prospectus or prospectus, or amendment or amendments or supplements thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written
information furnished by the Holder for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such Director, Officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. It shall be a
condition of the Company under Paragraphs 11 and 12 hereof that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Promptly after receipt by an indemnified party pursuant hereto of notice
of any claim or the commencement of any action to which indemnity would apply,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant hereto, notify the indemnifying party of such claim
or action, but the omissions to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, provided,
however, that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
person and not of the indemnifying party unless (a) the indemnifying party has
agreed to pay such fees or expenses; (b) the indemnifying party shall have
failed to assure the defense of such claim and employ counsel reasonably
satisfactory to such indemnified party; or (c) in the reasonable judgment of
such indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claims (in which case, if
the indemnified party notifies the indemnifying party in writing that such
indemnified party elects to employ separate counsel at
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<PAGE> 10
the expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such indemnified party.)
13. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
The rights and obligations of the Company, of the Holder of this
Warrant and of the Holder of the shares of Common Stock issuable upon exercise
of this Warrant contained herein shall survive the exercise of this Warrant.
14. DESCRIPTIVE READINGS AND GOVERNING LAW.
The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. This
Warrant shall be construed and enforced in accordance with the laws of the State
of New York and the rights of the Holder shall be governed by the laws of such
state.
15. RULE 144.
The Company covenants that it will file, on a timely basis, the reports
required to be filed by it under the Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder, and it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell securities without registration under the Act within the limitation of the
conditions provided by (a) Rule 144 and 144A under the Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of the Holder, the Company will
deliver to such Holder a written statement verifying that it has complied with
such information and requirements.
16. ARBITRATION.
Any controversies, claims or dispute arising out of or under this
Warrant or the obligations of the parties hereunder shall be resolved by binding
arbitration to be held in New York, New York, under the auspices and subject to
the rules than pertaining of the American Arbitration Association. The
provisions of the applicable Code of Civil Procedure of the State of New York
shall be applicable to any arbitration proceeding conducted in accordance with
the terms hereof. The arbitrators shall apply New York and federal law in such
arbitration and shall have the power to grant injunctive relief. Any decision of
the arbitrators shall be enforceable in any court of competent jurisdiction.
17. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by first class mail, postage prepaid, or
delivered either by hand or by messenger, addressed: (a) if to the Company, to
the principal offices of the Company in California to the attention of its
president; (b) if to the Holder, to c/o Zazoff Associates, 116 Littleton Road,
Parsippany, New Jersey 07054: or to such other address as the Holder shall have
furnished to the
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<PAGE> 11
Company. All such notices or communications shall be deemed given when actually
delivered by hand or messenger or, if mailed, three days after deposit in the
U.S. Mail.
18. SUCCESSORS AND ASSIGNS.
All covenants, agreements, representations and warranties contained in
this Warrant shall bind the parties hereto and their respective successors and
assigns.
19. DAMAGES.
Without limiting in any way any of the rights the Holder may otherwise
have at law or in equity, for damages or otherwise, the Company hereby agrees to
indemnify and hold harmless the Holder from and against any loss or expense that
may be incurred or suffered by the Holder which arises from any of the
following: (i) any registration statement under Paragraph 11(a) is not filed
with the Commission on or before the time required in the Agreement and
Paragraph 11(a); or (ii) the Company is not able for any reason within its
control (A) to cause a registration statement under this Agreement and Paragraph
11(a) to be declared effective by the Commission within the time required by the
Agreement and to remain effective until completion of the offering; or (B) to
cause the securities to be qualified or registered for sale in all appropriate
jurisdictions as provided in Paragraph 11(a) and to remain so qualified or
registered thereafter during the applicable period under applicable law.
20. NO INCONSISTENT AGREEMENTS.
The Company has not previously entered into, and will not on or after
the date of this Warrant enter into, any agreement with respect to its
securities which is inconsistent with the terms of this Warrant, including any
agreement which impairs or limits the rights granted to the Holder in this
Warrant, or which otherwise conflicts with the provisions hereof or would
preclude the Company from discharging its obligations hereunder.
21. SEVERABILITY.
In the event than any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
22. ENTIRE AGREEMENT.
This Warrant constitutes the entire agreement of the parties with
respect to the subject matter hereof.
23. AMENDMENT.
Any provision of this Warrant may be amended, waived or modified by a
writing signed by the Company and the Holder.
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<PAGE> 12
24. CONFIDENTIALITY.
The parties hereto agree that the existence of this Warrant, and the
terms hereof, shall be held in the strictest confidence and shall not be
disclosed to any third party unless (a) such disclosure is required by law, or
(b) such disclosure is agreed upon in writing by the Holder and the Company.
NEVADA MANHATTAN MINING INCORPORATED
BY: /s/ JEFFREY S. KRAMER
-----------------------------------------
JEFFREY S. KRAMER, SENIOR VICE PRESIDENT
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<PAGE> 13
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144, RULE
144A OR ANY SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR (iii)
UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH
EXERCISE, SALE OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT, PROVIDED
THAT THE HOLDER OF THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER
DELIVERS TO THE COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK OF
NEVADA MANHATTAN MINING INCORPORATED
THIS CERTIFIES that, for value received, Alan Zazoff, (herein called
"Holder") is entitled to subscribe for and purchase from Nevada Manhattan Mining
Incorporated (herein called the "Company") a corporation organized and existing
under the laws of the State of Nevada, at the price of $6.75 per share, (the
"Warrant Exercise Price") (subject to adjustment as set forth in paragraph 3
below) at any time up to and including July 1, 2002, 25,000 fully paid and
nonassessable shares of the Company's Common Stock, no par value. This warrant
is issued in accordance with the Subscription Agreement dated as of July 7, 1997
(the "Agreement") between the Company and Austat Anstalt Schaan, a corporation
of Liechtensten, and is subject in all respects to the relevant provisions of
the Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share) at the principal
office of the Company at 5038 Parkway Calabasas, Suite 100, Calabasas,
California 91302 (or such office or agency of the Company as it may from time to
time reasonably designate) at any time within the aforementioned period, and by
payment to the Company by certified check or bank draft of the Warrant Exercise
Price for such shares. The Holder may also exercise this Warrant in whole or in
part in a "cashless" or "net-issue" exercise. In the latter event, the Holder
will deliver this Warrant to the Company with a notice stating the number of
shares to be delivered to the Holder and the number of shares with respect to
which the Warrant is being surrendered in payment of the aggregate Warrant
Exercise Price for the shares to be delivered to the Holder. For purposes of
this provision, all shares as to which the Warrant is surrendered will be valued
at the Current Market Price (as defined below). The notice accompanying the
Warrant shall also set forth the number of shares remaining subject to the
Warrant. As an example of the foregoing, if the Warrant Exercise Price
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<PAGE> 14
is $5.00 per share, the Current market Price is $10.00 per share, and the
Warrant were exercised for 1,000 shares, the Company would deliver 500 shares of
the Company's Common Stock to the Holder and the Warrant would be surrendered
for exercise with respect to the remaining 500 shares in payment of the $5,000
Aggregate Warrant Exercise Price. The Company shall not be obligated to issue
fractional shares of Common Stock upon exercise of this Warrant but shall pay to
the Holder an amount in cash equal to the Current Market Price per share
multiplied by such fraction (rounded to the nearest cent). The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. Subject to the provisions of the next succeeding paragraph and this
paragraph 1, certificates for the shares of stock so purchased shall be
delivered to the Holder within four business days after the rights represented
by this Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant shall not then have been exercised or surrendered shall
also be delivered to the Holder hereof within two business days.
2. SHARES TO BE FULLY PAID: RESERVATION OF SHARES.
The Company covenants and agrees:
(i) That all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant,
will, upon issuance, be fully paid and nonassessable
and free from all preemptive rights, and taxes, lien
and charges with respect to the issuance thereof;
(ii) That during the period within which the rights
represented by this Warrant may be exercised, the
Company will at all times have authorized and
reserved for the purpose of the issuance upon
exercise of the rights evidenced by this Warrant, a
sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by
this Warrant;
(iii) That the Company will take all such action as may be
necessary to assure that the Common Stock issuable
upon the exercise hereof may be so issued without
violation of any applicable law or regulation or of
any requirements of any domestic securities exchange
or market upon which any capital stock of the Company
may be listed or traded;
(iv) That the Company will not take any action if the
total number of shares of Common Stock issuable after
such action and upon exercise of all warrants and
other rights to purchase or acquire Common Stock,
together with all shares of Common Stock then
outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's
Articles of Incorporation. In the event any stock or
securities of the Company other than Common Stock are
issuable upon the exercise hereof,
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the Company will take or refrain from taking any
action referred to in clauses (i) through (iv) of
this paragraph 2 as though such clauses applied to
such other shares or securities then issuable upon
the exercise hereof;
(v) The Company has all requisite corporate power and
authority to execute and deliver this Warrant; the
execution and delivery of this Warrant have been duly
and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the
part of the Company are necessary to authorize this
Warrant; this Warrant has been duly and validly
executed and delivered by the Company and constitutes
a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms;
(vi) No order, permit, consent, approval, license,
authorization or validation of, and no registration
or filing of notice with, any governmental entity is
necessary to authorize or permit, or is required in
connection with, the execution, delivery of
performance of this Warrant or the consummation by
the Company of the transactions contemplated hereby
and;
(vii) Neither the execution, delivery nor compliance by the
Company with any of the provisions hereof will (a)
violate, conflict with or result in any breach of any
provision of the Company's charter documents, (b)
result in a violation or breach or termination of, or
constitute a default under or conflict with any
provision of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or
obligation to which the Company is subject, or (c)
violate any judgment, order, writ, injunction,
decree, award, statute, rule or regulation to which
the Company is subject.
3. ADJUSTMENT OF SHARES ISSUABLE OR WARRANT EXERCISE
The above provisions are subject to the following:
If the Company shall pay a dividend or make a distribution in shares of
its Common Stock, subdivide (split) its outstanding shares of Common Stock,
combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities or any
assets of the Company or of another entity, the number of shares of Common Stock
or other securities the Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised in full immediately prior to the happening of such
event, and the Warrant Exercise Price per share shall be correspondingly
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<PAGE> 16
adjusted. The Warrant Exercise Price shall also be adjusted in accordance with
the Special Instructions contained within the Subscription Agreements. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. The Holder of this Warrant shall
be entitled to participate in any subscription or other rights offering made to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this Warrant remains unexercised immediately prior
to the record date for such subscription rights offering. If the Company is
consolidated or merged with or into another corporation or entity or if all or
substantially all of its assets are conveyed to another corporation or entity
this Warrant shall thereafter be exercisable for the purchase of the kind and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a Holder of the number of
shares of Common Stock of the Company which could have been purchased on the
exercise of this Warrant in full immediately prior to such 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 Holder of this Warrant to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of shares of Common Stock the Holder of this Warrant is entitled to
purchase) shall thereafter be applicable, as nearly as possible, in relation to
any shares of Common Stock or other securities or other property thereafter
deliverable upon the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or
conveyance, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
transaction and is not the issuer of the shares of stock or other securities or
property to be delivered to holders of shares of the Common Stock outstanding at
the effective time thereof, then such issuer shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities, cash
or other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
4. NOTICE OF ADJUSTMENT.
Upon any adjustment of the number of shares of Common Stock issuable
upon exercise of this Warrant or the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof by first class mail,
postage prepaid, addressed to the Holder at the address of such Holder as shown
on the books of the Company and pursuant to Paragraph 17, which notice shall
state the Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
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<PAGE> 17
5. OTHER NOTICES.
In case at any time:
1. The Company shall declare any cash dividend upon its Common
Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the
Holders of its Common Stock;
2. The Company shall offer for subscription to the Holders of any
of its Common Stock any additional shares of Common Stock of
any class or other rights;
3. There shall be any capital reorganization or reclassification
of the capital stock of the Company or consolidation or merger
of the Company with the sale of all or substantially all of
its assets to another corporation or entity; or
4. There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
Then in any one or more of said cases the Company shall give by first
class mail postage prepaid, addressed to the Holder of this Warrant at the
address of such Holder as shown on the books of the Company and pursuant to
Paragraph 17(i) at least 20 days prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger or sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization or reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, at least 20 days prior written notice of the date
when the same shall take place. Any notice required by clause (i) shall also
specify in the case of any such dividend, distribution or subscription rights
the date on which the holders of Common Stock shall be entitled thereto and a
notice required by (ii) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger or
sale, dissolution, liquidation or winding up as the case may be.
6. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than of the Holder of
the Warrant exercised.
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7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any matter which interferes with a timely
exercise of this Warrant. The Company will not, by any action, seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith seek to carry out all such terms and take all such action as
may be necessary or appropriate in order to protect the rights of the Holder
against impairment.
8. NO VOTING RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
9. REGISTRATION AND TRANSFER OF SECURITIES; DEFINITIONS.
"Holder" means Alan Zazoff and its successors, representatives and
assigns. If there is more than one Holder at any time, each such Holder shall be
entitled to the rights and privileges granted hereunder.
"Company" means Nevada Manhattan Mining Incorporated and its successors
and assigns.
"Registration", "register" and like words mean compliance with all of
the federal and state laws, rules, regulations and provisions of agreements and
corporate documents pertaining to lawful and unconditional transfer of the
securities by way of a public offering or distribution.
"Security", or "securities" means the shares of stock of all classes,
type and series, and all rights however evidenced or contained, to which the
Holder shall be entitled upon the exercise of this Warrant.
10. TRANSFERS.
Prior to any transfer or attempted transfer of any securities (except a
transfer by a Holder to an affiliate, subsidiary, employee or shareholder of the
Holder), the Holder shall give written notice to the Company of such Holder's
intention to effect such transfer. Holder will not transfer or dispose of this
Warrant and will not sell or transfer any securities except pursuant to (i) an
effective registration statement under the Act; (ii) Rule 144, Rule 144A or any
successor rule under the Act permitting such sale or transfer, or (iii) any
other exemption under the Act provided that the Holder delivers an opinion of
Holder's counsel reasonably satisfactory to counsel to the Company that an
exemption from registration under the Act is available. Each certificate
evidencing the securities issued upon such transfer shall bear the restrictive
legend set forth on the first page of this Warrant modified to delete references
to the Warrant, if appropriate, unless
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<PAGE> 19
in the reasonable opinion of Holder's counsel such legend is not required in
order to insure compliance with the Act.
11. REGISTRATION.
(a) The Company shall comply with its obligation to register this
Warrant and the Common Stock issuable upon exercise thereof as
set forth in paragraph 1 of this Agreement;
(b) Each time the Company shall propose the registration under the
Act of any securities of the Company, the Company shall give
written notice (the "Company Notice") of such proposed
registration to the Holder. The Company will include in any
such Registration Statement any securities (or portion
thereof) of any Holder who 15 days after the mailing of a
Company Notice shall request inclusion. Upon receipt of such
notice (a "Holder Notice") from a Holder, the Company will (i)
as expeditiously as possible but in any event within 60 days
of any request hereunder file a Registration Statement on such
form as the Company shall deem appropriate; (ii) cause such
Registration Statement to be declared effective and keep it
effective as long as required to allow the Holder to effect
the disposition of the securities registered and thereafter as
long as required by the Act; (iii) notify the Holder
immediately after it shall receive notice thereof, of the time
when such Registration Statement has become effective or any
supplement to any prospectus forming a part of such
Registration Statement has been filed; (iv) notify the Holder
immediately of any request by the Securities and Exchange
Commission (hereinafter referred to as the "Commission") for
the amending or supplementing of such Registration Statement
or prospectus; (v) prepare and immediately file with the
Commission and immediately notify the Holder of the filing of
such amendment or supplement to such Registration Statement or
prospectus as may be necessary to correct any statement or
omission, if at any time when a prospectus relating to the
security is required to be delivered under the Act, any event
shall have occurred as a result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading; (vi) in case the Holder or any underwriter for the
Holder is required to deliver a prospectus, at a time when the
prospectus then in effect may no longer comply with the
requirements of the Act, prepare promptly upon request of the
Holder such amendment or amendments to such Registration
Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of
Section 10 of the Act; (vii) not file any amendment or
supplement to the Registration Statement or prospectus to
which the Holder shall reasonably object after having been
furnished a copy at a reasonable time prior to the filing
thereof; (viii) advise the Holder immediately after it shall
receive notice or obtain knowledge thereof of the issuance of
any stop order by the Commission
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<PAGE> 20
suspending the effectiveness of any such Registration
Statement or of the initiation or threatening of any
proceeding for that purpose and use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; (ix) qualify
the security for transfer under the securities laws of such
states as may be designated by the Company; (x) furnish to the
Holder as soon as available copies of any such Registration
Statement and each preliminary or final prospectus, or
supplement required to be prepared pursuant to this Paragraph
11, all in such quantities as the Holder may from time to time
reasonably request; and (xi) make generally available to its
security holders earnings statements satisfying the provisions
of Section 11(a) of the Act, no later than 30 days after the
end of any 12-month period commencing at the end of any fiscal
quarter in which securities are sold to underwriters in an
underwritten offering or if not sold to underwriters in an
underwritten offering beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement. The Company shall have no
obligation to register securities of a Holder if, at the time
of such request the securities may be sold pursuant to Rule
144 under the Act.
The Company will pay the costs and expenses incident to the performance
of its obligations under this Paragraph 11, including the fees and expenses of
its counsel, the fees and expenses of its accountants and all other costs and
expenses incident to the preparations, printing and filing under the Act of any
such Registration Statement, each prospectus and all amendments and supplements
thereof, the costs incurred in connection with the qualification of the
securities under the laws of various jurisdictions (including fees and
disbursements of counsel to the Company), the cost of furnishing to the Holder
copies of any such Registration Statement, each preliminary prospectus, the
final prospectus and each amendment and supplement thereto, all expenses
incident to delivery of the security to any underwriter or underwriters, but not
any underwriting commissions or discounts charged to the Holder in connection
with the registration of securities.
12. INDEMNIFICATION.
The Company will indemnify and hold harmless each Holder and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls the Holder or underwriter within the meaning of the Act against any
losses, claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Holder or underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such loses, claims,
damages or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which the securities were registered under the Act,
any preliminary prospectus or prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Holder, underwriter and each
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<PAGE> 21
such controlling person for any legal or other expenses reasonably incurred by
the Holder, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, expense or liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, expense or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omissions made in conformity with written information furnished by
the Holder or underwriter in writing specifically for use in the preparation
thereof.
Each Holder will indemnify and hold harmless the Company, each of its
Directors, each of its Officers who have signed said Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company, or any
such Director, Officer or controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) are caused by any untrue or alleged untrue statement of any
material fact contained in said Registration Statement, said preliminary
prospectus or prospectus, or amendment or amendments or supplements thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written
information furnished by the Holder for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such Director, Officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. It shall be a
condition of the Company under Paragraphs 11 and 12 hereof that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Promptly after receipt by an indemnified party pursuant hereto of notice
of any claim or the commencement of any action to which indemnity would apply,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant hereto, notify the indemnifying party of such claim
or action, but the omissions to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, provided,
however, that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
person and not of the indemnifying party unless (a) the indemnifying party has
agreed to pay such fees or expenses; (b) the indemnifying party shall have
failed to assure the defense of such claim and employ counsel reasonably
satisfactory to such indemnified party; or (c) in the reasonable judgment of
such indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claims (in which case, if
the indemnified party notifies the indemnifying party in writing that such
indemnified party elects to employ separate counsel at
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<PAGE> 22
the expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such indemnified party.)
13. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
The rights and obligations of the Company, of the Holder of this
Warrant and of the Holder of the shares of Common Stock issuable upon exercise
of this Warrant contained herein shall survive the exercise of this Warrant.
14. DESCRIPTIVE READINGS AND GOVERNING LAW.
The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. This
Warrant shall be construed and enforced in accordance with the laws of the State
of New York and the rights of the Holder shall be governed by the laws of such
state.
15. RULE 144.
The Company covenants that it will file, on a timely basis, the reports
required to be filed by it under the Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder, and it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell securities without registration under the Act within the limitation of the
conditions provided by (a) Rule 144 and 144A under the Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of the Holder, the Company will
deliver to such Holder a written statement verifying that it has complied with
such information and requirements.
16. ARBITRATION.
Any controversies, claims or dispute arising out of or under this
Warrant or the obligations of the parties hereunder shall be resolved by binding
arbitration to be held in New York, New York, under the auspices and subject to
the rules than pertaining of the American Arbitration Association. The
provisions of the applicable Code of Civil Procedure of the State of New York
shall be applicable to any arbitration proceeding conducted in accordance with
the terms hereof. The arbitrators shall apply New York and federal law in such
arbitration and shall have the power to grant injunctive relief. Any decision of
the arbitrators shall be enforceable in any court of competent jurisdiction.
17. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by first class mail, postage prepaid, or
delivered either by hand or by messenger, addressed: (a) if to the Company, to
the principal offices of the Company in California to the attention of its
president; (b) if to the Holder, to c/o Zazoff Associates, 116 Littleton Road,
Parsippany, New Jersey 07054; or to such other address as the Holder shall have
furnished to the
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<PAGE> 23
Company. All such notices or communications shall be deemed given when actually
delivered by hand or messenger or, if mailed, three days after deposit in the
U.S. Mail.
18. SUCCESSORS AND ASSIGNS.
All covenants, agreements, representations and warranties contained in
this Warrant shall bind the parties hereto and their respective successors and
assigns.
19. DAMAGES.
Without limiting in any way any of the rights the Holder may otherwise
have at law or in equity, for damages or otherwise, the Company hereby agrees to
indemnify and hold harmless the Holder from and against any loss or expense that
may be incurred or suffered by the Holder which arises from any of the
following: (i) any registration statement under Paragraph 11(a) is not filed
with the Commission on or before the time required in the Agreement and
Paragraph 11(a); or (ii) the Company is not able for any reason within its
control (A) to cause a registration statement under this Agreement and Paragraph
11(a) to be declared effective by the Commission within the time required by the
Agreement and to remain effective until completion of the offering; or (B) to
cause the securities to be qualified or registered for sale in all appropriate
jurisdictions as provided in Paragraph 11(a) and to remain so qualified or
registered thereafter during the applicable period under applicable law.
20. NO INCONSISTENT AGREEMENTS.
The Company has not previously entered into, and will not on or after
the date of this Warrant enter into, any agreement with respect to its
securities which is inconsistent with the terms of this Warrant, including any
agreement which impairs or limits the rights granted to the Holder in this
Warrant, or which otherwise conflicts with the provisions hereof or would
preclude the Company from discharging its obligations hereunder.
21. SEVERABILITY.
In the event than any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
22. ENTIRE AGREEMENT.
This Warrant constitutes the entire agreement of the parties with
respect to the subject matter hereof.
23. AMENDMENT.
Any provision of this Warrant may be amended, waived or modified by a
writing signed by the Company and the Holder.
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<PAGE> 24
24. CONFIDENTIALITY.
The parties hereto agree that the existence of this Warrant, and the
terms hereof, shall be held in the strictest confidence and shall not be
disclosed to any third party unless (a) such disclosure is required by law, or
(b) such disclosure is agreed upon in writing by the Holder and the Company.
NEVADA MANHATTAN MINING INCORPORATED
BY: /s/ JEFFREY S. KRAMER
-----------------------------------------
JEFFREY S. KRAMER, SENIOR VICE PRESIDENT
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<PAGE> 25
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144, RULE
144A OR ANY SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR (iii)
UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH
EXERCISE, SALE OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT, PROVIDED
THAT THE HOLDER OF THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER
DELIVERS TO THE COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK OF
NEVADA MANHATTAN MINING INCORPORATED
THIS CERTIFIES that, for value received, Alan Zazoff, (herein called
"Holder") is entitled to subscribe for and purchase from Nevada Manhattan Mining
Incorporated (herein called the "Company") a corporation organized and existing
under the laws of the State of Nevada, at the price of $6.75 per share, (the
"Warrant Exercise Price") (subject to adjustment as set forth in paragraph 3
below) at any time up to and including July 1, 2002, 25,000 fully paid and
nonassessable shares of the Company's Common Stock, no par value. This warrant
is issued in accordance with the Subscription Agreement dated as of July 7, 1997
(the "Agreement") between the Company and UFH Endowment, Ltd., and is subject
in all respects to the relevant provisions of the Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share) at the principal
office of the Company at 5038 Parkway Calabasas, Suite 100, Calabasas,
California 91302 (or such office or agency of the Company as it may from time to
time reasonably designate) at any time within the aforementioned period, and by
payment to the Company by certified check or bank draft of the Warrant Exercise
Price for such shares. The Holder may also exercise this Warrant in whole or in
part in a "cashless" or "net-issue" exercise. In the latter event, the Holder
will deliver this Warrant to the Company with a notice stating the number of
shares to be delivered to the Holder and the number of shares with respect to
which the Warrant is being surrendered in payment of the aggregate Warrant
Exercise Price for the shares to be delivered to the Holder. For purposes of
this provision, all shares as to which the Warrant is surrendered will be valued
at the Current Market Price (as defined below). The notice accompanying the
Warrant shall also set forth the number of shares remaining subject to the
Warrant. As an example of the foregoing, if the Warrant Exercise Price
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<PAGE> 26
is $5.00 per share, the Current market Price is $10.00 per share, and the
Warrant were exercised for 1,000 shares, the Company would deliver 500 shares of
the Company's Common Stock to the Holder and the Warrant would be surrendered
for exercise with respect to the remaining 500 shares in payment of the $5,000
Aggregate Warrant Exercise Price. The Company shall not be obligated to issue
fractional shares of Common Stock upon exercise of this Warrant but shall pay to
the Holder an amount in cash equal to the Current Market Price per share
multiplied by such fraction (rounded to the nearest cent). The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. Subject to the provisions of the next succeeding paragraph and this
paragraph 1, certificates for the shares of stock so purchased shall be
delivered to the Holder within four business days after the rights represented
by this Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant shall not then have been exercised or surrendered shall
also be delivered to the Holder hereof within two business days.
2. SHARES TO BE FULLY PAID: RESERVATION OF SHARES.
The Company covenants and agrees:
(i) That all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant,
will, upon issuance, be fully paid and nonassessable
and free from all preemptive rights, and taxes, lien
and charges with respect to the issuance thereof;
(ii) That during the period within which the rights
represented by this Warrant may be exercised, the
Company will at all times have authorized and
reserved for the purpose of the issuance upon
exercise of the rights evidenced by this Warrant, a
sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by
this Warrant;
(iii) That the Company will take all such action as may be
necessary to assure that the Common Stock issuable
upon the exercise hereof may be so issued without
violation of any applicable law or regulation or of
any requirements of any domestic securities exchange
or market upon which any capital stock of the Company
may be listed or traded;
(iv) That the Company will not take any action if the
total number of shares of Common Stock issuable after
such action and upon exercise of all warrants and
other rights to purchase or acquire Common Stock,
together with all shares of Common Stock then
outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's
Articles of Incorporation. In the event any stock or
securities of the Company other than Common Stock are
issuable upon the exercise hereof,
2
<PAGE> 27
the Company will take or refrain from taking any
action referred to in clauses (i) through (iv) of
this paragraph 2 as though such clauses applied to
such other shares or securities then issuable upon
the exercise hereof;
(v) The Company has all requisite corporate power and
authority to execute and deliver this Warrant; the
execution and delivery of this Warrant have been duly
and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the
part of the Company are necessary to authorize this
Warrant; this Warrant has been duly and validly
executed and delivered by the Company and constitutes
a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms;
(vi) No order, permit, consent, approval, license,
authorization or validation of, and no registration
or filing of notice with, any governmental entity is
necessary to authorize or permit, or is required in
connection with, the execution, delivery of
performance of this Warrant or the consummation by
the Company of the transactions contemplated hereby
and;
(vii) Neither the execution, delivery nor compliance by the
Company with any of the provisions hereof will (a)
violate, conflict with or result in any breach of any
provision of the Company's charter documents, (b)
result in a violation or breach or termination of, or
constitute a default under or conflict with any
provision of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or
obligation to which the Company is subject, or (c)
violate any judgment, order, writ, injunction,
decree, award, statute, rule or regulation to which
the Company is subject.
3. ADJUSTMENT OF SHARES ISSUABLE OR WARRANT EXERCISE
The above provisions are subject to the following:
If the Company shall pay a dividend or make a distribution in shares of
its Common Stock, subdivide (split) its outstanding shares of Common Stock,
combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities or any
assets of the Company or of another entity, the number of shares of Common Stock
or other securities the Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised in full immediately prior to the happening of such
event, and the Warrant Exercise Price per share shall be correspondingly
3
<PAGE> 28
adjusted. The Warrant Exercise Price shall also be adjusted in accordance with
the Special Instructions contained within the Subscription Agreements. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. The Holder of this Warrant shall
be entitled to participate in any subscription or other rights offering made to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this Warrant remains unexercised immediately prior
to the record date for such subscription rights offering. If the Company is
consolidated or merged with or into another corporation or entity or if all or
substantially all of its assets are conveyed to another corporation or entity
this Warrant shall thereafter be exercisable for the purchase of the kind and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a Holder of the number of
shares of Common Stock of the Company which could have been purchased on the
exercise of this Warrant in full immediately prior to such 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 Holder of this Warrant to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of shares of Common Stock the Holder of this Warrant is entitled to
purchase) shall thereafter be applicable, as nearly as possible, in relation to
any shares of Common Stock or other securities or other property thereafter
deliverable upon the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or
conveyance, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
transaction and is not the issuer of the shares of stock or other securities or
property to be delivered to holders of shares of the Common Stock outstanding at
the effective time thereof, then such issuer shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities, cash
or other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
4. NOTICE OF ADJUSTMENT.
Upon any adjustment of the number of shares of Common Stock issuable
upon exercise of this Warrant or the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof by first class mail,
postage prepaid, addressed to the Holder at the address of such Holder as shown
on the books of the Company and pursuant to Paragraph 17, which notice shall
state the Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
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<PAGE> 29
5. OTHER NOTICES.
In case at any time:
1. The Company shall declare any cash dividend upon its Common
Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the
Holders of its Common Stock;
2. The Company shall offer for subscription to the Holders of any
of its Common Stock any additional shares of Common Stock of
any class or other rights;
3. There shall be any capital reorganization or reclassification
of the capital stock of the Company or consolidation or merger
of the Company with the sale of all or substantially all of
its assets to another corporation or entity; or
4. There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
Then in any one or more of said cases the Company shall give by first
class mail postage prepaid, addressed to the Holder of this Warrant at the
address of such Holder as shown on the books of the Company and pursuant to
Paragraph 17(i) at least 20 days prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger or sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization or reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, at least 20 days prior written notice of the date
when the same shall take place. Any notice required by clause (i) shall also
specify in the case of any such dividend, distribution or subscription rights
the date on which the holders of Common Stock shall be entitled thereto and a
notice required by (ii) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger or
sale, dissolution, liquidation or winding up as the case may be.
6. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than of the Holder of
the Warrant exercised.
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7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any matter which interferes with a timely
exercise of this Warrant. The Company will not, by any action, seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith seek to carry out all such terms and take all such action as
may be necessary or appropriate in order to protect the rights of the Holder
against impairment.
8. NO VOTING RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
9. REGISTRATION AND TRANSFER OF SECURITIES; DEFINITIONS.
"Holder" means Alan Zazoff and its successors, representatives and
assigns. If there is more than one Holder at any time, each such Holder shall be
entitled to the rights and privileges granted hereunder.
"Company" means Nevada Manhattan Mining Incorporated and its successors
and assigns.
"Registration", "register" and like words mean compliance with all of
the federal and state laws, rules, regulations and provisions of agreements and
corporate documents pertaining to lawful and unconditional transfer of the
securities by way of a public offering or distribution.
"Security", or "securities" means the shares of stock of all classes,
type and series, and all rights however evidenced or contained, to which the
Holder shall be entitled upon the exercise of this Warrant.
10. TRANSFERS.
Prior to any transfer or attempted transfer of any securities (except a
transfer by a Holder to an affiliate, subsidiary, employee or shareholder of the
Holder), the Holder shall give written notice to the Company of such Holder's
intention to effect such transfer. Holder will not transfer or dispose of this
Warrant and will not sell or transfer any securities except pursuant to (i) an
effective registration statement under the Act; (ii) Rule 144, Rule 144A or any
successor rule under the Act permitting such sale or transfer; or (iii) any
other exemption under the Act provided that the Holder delivers an opinion of
Holder's counsel reasonably satisfactory to counsel to the Company that an
exemption from registration under the Act is available. Each certificate
evidencing the securities issued upon such transfer shall bear the restrictive
legend set forth on the first page of this Warrant modified to delete references
to the Warrant, if appropriate, unless
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<PAGE> 31
in the reasonable opinion of Holder's counsel such legend is not required in
order to insure compliance with the Act.
11. REGISTRATION.
(a) The Company shall comply with its obligation to register this
Warrant and the Common Stock issuable upon exercise thereof as
set forth in paragraph 1 of this Agreement;
(b) Each time the Company shall propose the registration under the
Act of any securities of the Company, the Company shall give
written notice (the "Company Notice") of such proposed
registration to the Holder. The Company will include in any
such Registration Statement any securities (or portion
thereof) of any Holder who 15 days after the mailing of a
Company Notice shall request inclusion. Upon receipt of such
notice (a "Holder Notice") from a Holder, the Company will (i)
as expeditiously as possible but in any event within 60 days
of any request hereunder file a Registration Statement on such
form as the Company shall deem appropriate; (ii) cause such
Registration Statement to be declared effective and keep it
effective as long as required to allow the Holder to effect
the disposition of the securities registered and thereafter as
long as required by the Act; (iii) notify the Holder
immediately after it shall receive notice thereof, of the time
when such Registration Statement has become effective or any
supplement to any prospectus forming a part of such
Registration Statement has been filed; (iv) notify the Holder
immediately of any request by the Securities and Exchange
Commission (hereinafter referred to as the "Commission") for
the amending or supplementing of such Registration Statement
or prospectus; (v) prepare and immediately file with the
Commission and immediately notify the Holder of the filing of
such amendment or supplement to such Registration Statement or
prospectus as may be necessary to correct any statement or
omission, if at any time when a prospectus relating to the
security is required to be delivered under the Act, any event
shall have occurred as a result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading; (vi) in case the Holder or any underwriter for the
Holder is required to deliver a prospectus, at a time when the
prospectus then in effect may no longer comply with the
requirements of the Act, prepare promptly upon request of the
Holder such amendment or amendments to such Registration
Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of
Section 10 of the Act; (vii) not file any amendment or
supplement to the Registration Statement or prospectus to
which the Holder shall reasonably object after having been
furnished a copy at a reasonable time prior to the filing
thereof; (viii) advise the Holder immediately after it shall
receive notice or obtain knowledge thereof of the issuance of
any stop order by the Commission
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<PAGE> 32
suspending the effectiveness of any such Registration
Statement or of the initiation or threatening of any
proceeding for that purpose and use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; (ix) qualify
the security for transfer under the securities laws of such
states as may be designated by the Company; (x) furnish to the
Holder as soon as available copies of any such Registration
Statement and each preliminary or final prospectus, or
supplement required to be prepared pursuant to this Paragraph
11, all in such quantities as the Holder may from time to time
reasonably request; and (xi) make generally available to its
security holders earnings statements satisfying the provisions
of Section 11(a) of the Act, no later than 30 days after the
end of any 12-month period commencing at the end of any fiscal
quarter in which securities are sold to underwriters in an
underwritten offering or if not sold to underwriters in an
underwritten offering beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement. The Company shall have no
obligation to register securities of a Holder if, at the time
of such request the securities may be sold pursuant to Rule
144 under the Act.
The Company will pay the costs and expenses incident to the performance
of its obligations under this Paragraph 11, including the fees and expenses of
its counsel, the fees and expenses of its accountants and all other costs and
expenses incident to the preparations, printing and filing under the Act of any
such Registration Statement, each prospectus and all amendments and supplements
thereof, the costs incurred in connection with the qualification of the
securities under the laws of various jurisdictions (including fees and
disbursements of counsel to the Company), the cost of furnishing to the Holder
copies of any such Registration Statement, each preliminary prospectus, the
final prospectus and each amendment and supplement thereto, all expenses
incident to delivery of the security to any underwriter or underwriters, but not
any underwriting commissions or discounts charged to the Holder in connection
with the registration of securities.
12. INDEMNIFICATION.
The Company will indemnify and hold harmless each Holder and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls the Holder or underwriter within the meaning of the Act against any
losses, claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Holder or underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such loses, claims,
damages or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which the securities were registered under the Act,
any preliminary prospectus or prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Holder, underwriter and each
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<PAGE> 33
such controlling person for any legal or other expenses reasonably incurred by
the Holder, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, expense or liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, expense or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omissions made in conformity with written information furnished by
the Holder or underwriter in writing specifically for use in the preparation
thereof.
Each Holder will indemnify and hold harmless the Company, each of its
Directors, each of its Officers who have signed said Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company, or any
such Director, Officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) are caused by any untrue or alleged untrue statement of any
material fact contained in said Registration Statement, said preliminary
prospectus or prospectus, or amendment or amendments or supplements thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written
information furnished by the Holder for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such Director, Officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. It shall be a
condition of the Company under Paragraphs 11 and 12 hereof that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Promptly after receipt by an indemnified party pursuant hereto of notice
of any claim or the commencement of any action to which indemnity would apply,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant hereto, notify the indemnifying party of such claim
or action, but the omissions to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, provided,
however, that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
person and not of the indemnifying party unless (a) the indemnifying party has
agreed to pay such fees or expenses; (b) the indemnifying party shall have
failed to assure the defense of such claim and employ counsel reasonably
satisfactory to such indemnified party; or (c) in the reasonable judgment of
such indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claims (in which case, if
the indemnified party notifies the indemnifying party in writing that such
indemnified party elects to employ separate counsel at
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<PAGE> 34
the expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such indemnified party.)
13. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
The rights and obligations of the Company, of the Holder of this
Warrant and of the Holder of the shares of Common Stock issuable upon exercise
of this Warrant contained herein shall survive the exercise of this Warrant.
14. DESCRIPTIVE READINGS AND GOVERNING LAW.
The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. This
Warrant shall be construed and enforced in accordance with the laws of the State
of New York and the rights of the Holder shall be governed by the laws of such
state.
15. RULE 144.
The Company covenants that it will file, on a timely basis, the reports
required to be filed by it under the Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder, and it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell securities without registration under the Act within the limitation of the
conditions provided by (a) Rule 144 and 144A under the Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of the Holder, the Company will
deliver to such Holder a written statement verifying that it has complied with
such information and requirements.
16. ARBITRATION.
Any controversies, claims or dispute arising out of or under this
Warrant or the obligations of the parties hereunder shall be resolved by binding
arbitration to be held in New York, New York under the auspices and subject to
the rules than pertaining of the American Arbitration Association. The
provisions of the applicable Code of Civil Procedure of the State of New York
shall be applicable to any arbitration proceeding conducted in accordance with
the terms hereof. The arbitrators shall apply New York and federal law in such
arbitration and shall have the power to grant injunctive relief. Any decision of
the arbitrators shall be enforceable in any court of competent jurisdiction.
17. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by first class mail, postage prepaid, or
delivered either by hand or by messenger, addressed: (a) if to the Company, to
the principal offices of the Company in California to the attention of its
president; (b) if to the Holder, to c/o Zazoff Associates, 116 Littleton Road,
Parsippany, New Jersey 07054; or to such other address as the Holder shall have
furnished to the
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<PAGE> 35
Company. All such notices or communications shall be deemed given when actually
delivered by hand or messenger or, if mailed, three days after deposit in the
U.S. Mail.
18. SUCCESSORS AND ASSIGNS.
All covenants, agreements, representations and warranties contained in
this Warrant shall bind the parties hereto and their respective successors and
assigns.
19. DAMAGES.
Without limiting in any way any of the rights the Holder may otherwise
have at law or in equity, for damages or otherwise, the Company hereby agrees to
indemnify and hold harmless the Holder from and against any loss or expense that
may be incurred or suffered by the Holder which arises from any of the
following: (i) any registration statement under Paragraph 11(a) is not filed
with the Commission on or before the time required in the Agreement and
Paragraph 11(a); or (ii) the Company is not able for any reason within its
control (A) to cause a registration statement under this Agreement and Paragraph
11(a) to be declared effective by the Commission within the time required by the
Agreement and to remain effective until completion of the offering; or (B) to
cause the securities to be qualified or registered for sale in all appropriate
jurisdictions as provided in Paragraph 11(a) and to remain so qualified or
registered thereafter during the applicable period under applicable law.
20. NO INCONSISTENT AGREEMENTS.
The Company has not previously entered into, and will not on or after
the date of this Warrant enter into, any agreement with respect to its
securities which is inconsistent with the terms of this Warrant, including any
agreement which impairs or limits the rights granted to the Holder in this
Warrant, or which otherwise conflicts with the provisions hereof or would
preclude the Company from discharging its obligations hereunder.
21. SEVERABILITY.
In the event than any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
22. ENTIRE AGREEMENT.
This Warrant constitutes the entire agreement of the parties with
respect to the subject matter hereof.
23. AMENDMENT.
Any provision of this Warrant may be amended, waived or modified by a
writing signed by the Company and the Holder.
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<PAGE> 36
24. CONFIDENTIALITY.
The parties hereto agree that the existence of this Warrant, and the
terms hereof, shall be held in the strictest confidence and shall not be
disclosed to any third party unless (a) such disclosure is required by law, or
(b) such disclosure is agreed upon in writing by the Holder and the Company.
NEVADA MANHATTAN MINING INCORPORATED
BY: /s/ JEFFREY S. KRAMER
-----------------------------------------
JEFFREY S. KRAMER, SENIOR VICE PRESIDENT
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<PAGE> 37
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") AND THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT CANNOT BE SOLD OR
TRANSFERRED, UNLESS AND UNTIL (i) THEY ARE SO REGISTERED OR, (ii) RULE 144, RULE
144A OR ANY SUCCESSOR RULE UNDER THE ACT PERMITS SUCH SALE OR TRANSFER, OR (iii)
UNLESS SUCH REGISTRATION IS NOT THEN REQUIRED UNDER THE CIRCUMSTANCES OF SUCH
EXERCISE, SALE OR TRANSFER UNDER ANY OTHER EXEMPTION UNDER THE ACT, PROVIDED
THAT THE HOLDER OF THIS WARRANT OR SHARES OF COMMON STOCK ISSUABLE HEREUNDER
DELIVERS TO THE COMPANY AN OPINION OF HOLDER'S COUNSEL THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK OF
NEVADA MANHATTAN MINING INCORPORATED
THIS CERTIFIES that, for value received, Alan Zazoff, (herein called
"Holder") is entitled to subscribe for and purchase from Nevada Manhattan Mining
Incorporated (herein called the "Company") a corporation organized and existing
under the laws of the State of Nevada, at the price of $6.75 per share, (the
"Warrant Exercise Price") (subject to adjustment as set forth in paragraph 3
below) at any time up to and including July 1, 2002, 5,250 fully paid and
nonassessable shares of the Company's Common Stock, no par value. This warrant
is issued in accordance with the Subscription Agreement dated as of July 7, 1997
(the "Agreement") between the Company and Mendel Group, Inc., and is subject
in all respects to the relevant provisions of the Agreement.
This Warrant is subject to the following provisions, terms and
conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
The rights represented by this Warrant may be exercised by the Holder
hereof, in whole or in part (but not as to a fractional share) at the principal
office of the Company at 5038 Parkway Calabasas, Suite 100, Calabasas,
California 91302 (or such office or agency of the Company as it may from time to
time reasonably designate) at any time within the aforementioned period, and by
payment to the Company by certified check or bank draft of the Warrant Exercise
Price for such shares. The Holder may also exercise this Warrant in whole or in
part in a "cashless" or "net-issue" exercise. In the latter event, the Holder
will deliver this Warrant to the Company with a notice stating the number of
shares to be delivered to the Holder and the number of shares with respect to
which the Warrant is being surrendered in payment of the aggregate Warrant
Exercise Price for the shares to be delivered to the Holder. For purposes of
this provision, all shares as to which the Warrant is surrendered will be valued
at the Current Market Price (as defined below). The notice accompanying the
Warrant shall also set forth the number of shares remaining subject to the
Warrant. As an example of the foregoing, if the Warrant Exercise Price
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<PAGE> 38
is $5.00 per share, the Current market Price is $10.00 per share, and the
Warrant were exercised for 1,000 shares, the Company would deliver 500 shares of
the Company's Common Stock to the Holder and the Warrant would be surrendered
for exercise with respect to the remaining 500 shares in payment of the $5,000
Aggregate Warrant Exercise Price. The Company shall not be obligated to issue
fractional shares of Common Stock upon exercise of this Warrant but shall pay to
the Holder an amount in cash equal to the Current Market Price per share
multiplied by such fraction (rounded to the nearest cent). The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. Subject to the provisions of the next succeeding paragraph and this
paragraph 1, certificates for the shares of stock so purchased shall be
delivered to the Holder within four business days after the rights represented
by this Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant shall not then have been exercised or surrendered shall
also be delivered to the Holder hereof within two business days.
2. SHARES TO BE FULLY PAID: RESERVATION OF SHARES.
The Company covenants and agrees:
(i) That all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant,
will, upon issuance, be fully paid and nonassessable
and free from all preemptive rights, and taxes, lien
and charges with respect to the issuance thereof;
(ii) That during the period within which the rights
represented by this Warrant may be exercised, the
Company will at all times have authorized and
reserved for the purpose of the issuance upon
exercise of the rights evidenced by this Warrant, a
sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by
this Warrant;
(iii) That the Company will take all such action as may be
necessary to assure that the Common Stock issuable
upon the exercise hereof may be so issued without
violation of any applicable law or regulation or of
any requirements of any domestic securities exchange
or market upon which any capital stock of the Company
may be listed or traded;
(iv) That the Company will not take any action if the
total number of shares of Common Stock issuable after
such action and upon exercise of all warrants and
other rights to purchase or acquire Common Stock,
together with all shares of Common Stock then
outstanding, would exceed the total number of shares
of Common Stock then authorized by the Company's
Articles of Incorporation. In the event any stock or
securities of the Company other than Common Stock are
issuable upon the exercise hereof,
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<PAGE> 39
the Company will take or refrain from taking any
action referred to in clauses (i) through (iv) of
this paragraph 2 as though such clauses applied to
such other shares or securities then issuable upon
the exercise hereof;
(v) The Company has all requisite corporate power and
authority to execute and deliver this Warrant; the
execution and delivery of this Warrant have been duly
and validly authorized by the Company's Board of
Directors and no other corporate proceedings on the
part of the Company are necessary to authorize this
Warrant; this Warrant has been duly and validly
executed and delivered by the Company and constitutes
a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms;
(vi) No order, permit, consent, approval, license,
authorization or validation of, and no registration
or filing of notice with, any governmental entity is
necessary to authorize or permit, or is required in
connection with, the execution, delivery of
performance of this Warrant or the consummation by
the Company of the transactions contemplated hereby
and;
(vii) Neither the execution, delivery nor compliance by the
Company with any of the provisions hereof will (a)
violate, conflict with or result in any breach of any
provision of the Company's charter documents, (b)
result in a violation or breach or termination of, or
constitute a default under or conflict with any
provision of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or
obligation to which the Company is subject, or (c)
violate any judgment, order, writ, injunction,
decree, award, statute, rule or regulation to which
the Company is subject.
3. ADJUSTMENT OF SHARES ISSUABLE OR WARRANT EXERCISE
The above provisions are subject to the following:
If the Company shall pay a dividend or make a distribution in shares of
its Common Stock, subdivide (split) its outstanding shares of Common Stock,
combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities or any
assets of the Company or of another entity, the number of shares of Common Stock
or other securities the Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities or assets which such Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised in full immediately prior to the happening of such
event, and the Warrant Exercise Price per share shall be correspondingly
3
<PAGE> 40
adjusted. The Warrant Exercise Price shall also be adjusted in accordance with
the Special Instructions contained within the Subscription Agreements. An
adjustment made pursuant to this Section 3 shall become effective immediately
after the record date in the case of a stock dividend or other distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification. The Holder of this Warrant shall
be entitled to participate in any subscription or other rights offering made to
holders of shares of Common Stock as if such Holder had purchased the full
number of shares as to which this Warrant remains unexercised immediately prior
to the record date for such subscription rights offering. If the Company is
consolidated or merged with or into another corporation or entity or if all or
substantially all of its assets are conveyed to another corporation or entity
this Warrant shall thereafter be exercisable for the purchase of the kind and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a Holder of the number of
shares of Common Stock of the Company which could have been purchased on the
exercise of this Warrant in full immediately prior to such 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 Holder of this Warrant to the end that the provisions set forth herein
(including provisions with respect to changes in and other adjustments of the
number of shares of Common Stock the Holder of this Warrant is entitled to
purchase) shall thereafter be applicable, as nearly as possible, in relation to
any shares of Common Stock or other securities or other property thereafter
deliverable upon the exercise of this Warrant.
The Company shall not effect any such consolidation, merger or
conveyance, unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
transaction and is not the issuer of the shares of stock or other securities or
property to be delivered to holders of shares of the Common Stock outstanding at
the effective time thereof, then such issuer shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities, cash
or other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
4. NOTICE OF ADJUSTMENT.
Upon any adjustment of the number of shares of Common Stock issuable
upon exercise of this Warrant or the Warrant Exercise Price, then and in each
such case, the Company shall give written notice thereof by first class mail,
postage prepaid, addressed to the Holder at the address of such Holder as shown
on the books of the Company and pursuant to Paragraph 17, which notice shall
state the Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
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<PAGE> 41
5. OTHER NOTICES.
In case at any time:
1. The Company shall declare any cash dividend upon its Common
Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the
Holders of its Common Stock;
2. The Company shall offer for subscription to the Holders of any
of its Common Stock any additional shares of Common Stock of
any class or other rights;
3. There shall be any capital reorganization or reclassification
of the capital stock of the Company or consolidation or merger
of the Company with the sale of all or substantially all of
its assets to another corporation or entity; or
4. There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
Then in any one or more of said cases the Company shall give by first
class mail postage prepaid, addressed to the Holder of this Warrant at the
address of such Holder as shown on the books of the Company and pursuant to
Paragraph 17(i) at least 20 days prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger or sale,
dissolution, liquidation or winding up and (ii) in the case of such
reorganization or reclassification, consolidation, merger or sale, dissolution,
liquidation or winding up, at least 20 days prior written notice of the date
when the same shall take place. Any notice required by clause (i) shall also
specify in the case of any such dividend, distribution or subscription rights
the date on which the holders of Common Stock shall be entitled thereto and a
notice required by (ii) shall also specify the date on which the holders of the
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger or
sale, dissolution, liquidation or winding up as the case may be.
6. ISSUE TAX.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof, provided that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than of the Holder of
the Warrant exercised.
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7. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the
transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any matter which interferes with a timely
exercise of this Warrant. The Company will not, by any action, seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith seek to carry out all such terms and take all such action as
may be necessary or appropriate in order to protect the rights of the Holder
against impairment.
8. NO VOTING RIGHTS.
This Warrant shall not entitle the Holder hereof to any voting rights or
other rights as a stockholder of the Company.
9. REGISTRATION AND TRANSFER OF SECURITIES; DEFINITIONS.
"Holder" means Alan Zazoff and its successors, representatives and
assigns. If there is more than one Holder at any time, each such Holder shall be
entitled to the rights and privileges granted hereunder.
"Company" means Nevada Manhattan Mining Incorporated and its successors
and assigns.
"Registration", "register" and like words mean compliance with all of
the federal and state laws, rules, regulations and provisions of agreements and
corporate documents pertaining to lawful and unconditional transfer of the
securities by way of a public offering or distribution.
"Security", or "securities" means the shares of stock of all classes,
type and series, and all rights however evidenced or contained, to which the
Holder shall be entitled upon the exercise of this Warrant.
10. TRANSFERS.
Prior to any transfer or attempted transfer of any securities (except a
transfer by a Holder to an affiliate, subsidiary, employee or shareholder of the
Holder), the Holder shall give written notice to the Company of such Holder's
intention to effect such transfer. Holder will not transfer or dispose of this
Warrant and will not sell or transfer any securities except pursuant to (i) an
effective registration statement under the Act; (ii) Rule 144, Rule 144A or any
successor rule under the Act permitting such sale or transfer; or (iii) any
other exemption under the Act provided that the Holder delivers an opinion of
Holder's counsel reasonably satisfactory to counsel to the Company that an
exemption from registration under the Act is available. Each certificate
evidencing the securities issued upon such transfer shall bear the restrictive
legend set forth on the first page of this Warrant modified to delete references
to the Warrant, if appropriate, unless
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<PAGE> 43
in the reasonable opinion of Holder's counsel such legend is not required in
order to insure compliance with the Act.
11. REGISTRATION.
(a) The Company shall comply with its obligation to register this
Warrant and the Common Stock issuable upon exercise thereof as
set forth in paragraph 1 of this Agreement;
(b) Each time the Company shall propose the registration under the
Act of any securities of the Company, the Company shall give
written notice (the "Company Notice") of such proposed
registration to the Holder. The Company will include in any
such Registration Statement any securities (or portion
thereof) of any Holder who 15 days after the mailing of a
Company Notice shall request inclusion. Upon receipt of such
notice (a "Holder Notice") from a Holder, the Company will (i)
as expeditiously as possible but in any event within 60 days
of any request hereunder file a Registration Statement on such
form as the Company shall deem appropriate; (ii) cause such
Registration Statement to be declared effective and keep it
effective as long as required to allow the Holder to effect
the disposition of the securities registered and thereafter as
long as required by the Act; (iii) notify the Holder
immediately after it shall receive notice thereof, of the time
when such Registration Statement has become effective or any
supplement to any prospectus forming a part of such
Registration Statement has been filed; (iv) notify the Holder
immediately of any request by the Securities and Exchange
Commission (hereinafter referred to as the "Commission") for
the amending or supplementing of such Registration Statement
or prospectus; (v) prepare and immediately file with the
Commission and immediately notify the Holder of the filing of
such amendment or supplement to such Registration Statement or
prospectus as may be necessary to correct any statement or
omission, if at any time when a prospectus relating to the
security is required to be delivered under the Act, any event
shall have occurred as a result of which any such prospectus
or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading; (vi) in case the Holder or any underwriter for the
Holder is required to deliver a prospectus, at a time when the
prospectus then in effect may no longer comply with the
requirements of the Act, prepare promptly upon request of the
Holder such amendment or amendments to such Registration
Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of
Section 10 of the Act; (vii) not file any amendment or
supplement to the Registration Statement or prospectus to
which the Holder shall reasonably object after having been
furnished a copy at a reasonable time prior to the filing
thereof; (viii) advise the Holder immediately after it shall
receive notice or obtain knowledge thereof of the issuance of
any stop order by the Commission
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<PAGE> 44
suspending the effectiveness of any such Registration
Statement or of the initiation or threatening of any
proceeding for that purpose and use its best efforts to
prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; (ix) qualify
the security for transfer under the securities laws of such
states as may be designated by the Company; (x) furnish to the
Holder as soon as available copies of any such Registration
Statement and each preliminary or final prospectus, or
supplement required to be prepared pursuant to this Paragraph
11, all in such quantities as the Holder may from time to time
reasonably request; and (xi) make generally available to its
security holders earnings statements satisfying the provisions
of Section 11(a) of the Act, no later than 30 days after the
end of any 12-month period commencing at the end of any fiscal
quarter in which securities are sold to underwriters in an
underwritten offering or if not sold to underwriters in an
underwritten offering beginning with the first month of the
Company's first fiscal quarter commencing after the effective
date of the Registration Statement. The Company shall have no
obligation to register securities of a Holder if, at the time
of such request the securities may be sold pursuant to Rule
144 under the Act.
The Company will pay the costs and expenses incident to the performance
of its obligations under this Paragraph 11, including the fees and expenses of
its counsel, the fees and expenses of its accountants and all other costs and
expenses incident to the preparations, printing and filing under the Act of any
such Registration Statement, each prospectus and all amendments and supplements
thereof, the costs incurred in connection with the qualification of the
securities under the laws of various jurisdictions (including fees and
disbursements of counsel to the Company), the cost of furnishing to the Holder
copies of any such Registration Statement, each preliminary prospectus, the
final prospectus and each amendment and supplement thereto, all expenses
incident to delivery of the security to any underwriter or underwriters, but not
any underwriting commissions or discounts charged to the Holder in connection
with the registration of securities.
12. INDEMNIFICATION.
The Company will indemnify and hold harmless each Holder and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls the Holder or underwriter within the meaning of the Act against any
losses, claims, damages or liabilities (or actions in respect thereof), joint or
several, to which the Holder or underwriter or such controlling person may
become subject, under the Act or otherwise, insofar as such loses, claims,
damages or liabilities (or actions in respect thereof) are caused by any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which the securities were registered under the Act,
any preliminary prospectus or prospectus contained therein, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse the
Holder, underwriter and each
8
<PAGE> 45
such controlling person for any legal or other expenses reasonably incurred by
the Holder, underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage, expense or liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage, expense or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omissions made in conformity with written information furnished by
the Holder or underwriter in writing specifically for use in the preparation
thereof.
Each Holder will indemnify and hold harmless the Company, each of its
Directors, each of its Officers who have signed said Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities to which the Company, or any
such Director, Officer or controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) are caused by any untrue or alleged untrue statement of any
material fact contained in said Registration Statement, said preliminary
prospectus or prospectus, or amendment or amendments or supplements thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written
information furnished by the Holder for use in the preparation thereof; and will
reimburse any legal or other expenses reasonably incurred by the Company or any
such Director, Officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. It shall be a
condition of the Company under Paragraphs 11 and 12 hereof that the Holder
confirm to the Company in writing, prior to the effective date of any
Registration Statement in which are included securities of such Holder, the
agreement of such Holder as set forth in the previous sentence.
Promptly after receipt by an indemnified party pursuant hereto of notice
of any claim or the commencement of any action to which indemnity would apply,
such indemnified party will, if a claim thereof is to be made against the
indemnifying party pursuant hereto, notify the indemnifying party of such claim
or action, but the omissions to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, provided,
however, that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
person and not of the indemnifying party unless (a) the indemnifying party has
agreed to pay such fees or expenses; (b) the indemnifying party shall have
failed to assure the defense of such claim and employ counsel reasonably
satisfactory to such indemnified party; or (c) in the reasonable judgment of
such indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claims (in which case, if
the indemnified party notifies the indemnifying party in writing that such
indemnified party elects to employ separate counsel at
9
<PAGE> 46
the expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such indemnified party.)
13. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT.
The rights and obligations of the Company, of the Holder of this
Warrant and of the Holder of the shares of Common Stock issuable upon exercise
of this Warrant contained herein shall survive the exercise of this Warrant.
14. DESCRIPTIVE READINGS AND GOVERNING LAW.
The descriptive headings of the several paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant. This
Warrant shall be construed and enforced in accordance with the laws of the State
of New York and the rights of the Holder shall be governed by the laws of such
state.
15. RULE 144.
The Company covenants that it will file, on a timely basis, the reports
required to be filed by it under the Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the Commission
thereunder, and it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable such Holder to
sell securities without registration under the Act within the limitation of the
conditions provided by (a) Rule 144 and 144A under the Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of the Holder, the Company will
deliver to such Holder a written statement verifying that it has complied with
such information and requirements.
16. ARBITRATION.
Any controversies, claims or dispute arising out of or under this
Warrant or the obligations of the parties hereunder shall be resolved by binding
arbitration to be held in New York, New York, under the auspices and subject to
the rules than pertaining of the American Arbitration Association. The
provisions of the applicable Code of Civil Procedure of the State of New York
shall be applicable to any arbitration proceeding conducted in accordance with
the terms hereof. The arbitrators shall apply New York and federal law in such
arbitration and shall have the power to grant injunctive relief. Any decision of
the arbitrators shall be enforceable in any court of competent jurisdiction.
17. NOTICES.
All notices and other communications required or permitted hereunder
shall be in writing and shall be mailed by first class mail, postage prepaid, or
delivered either by hand or by messenger, addressed: (a) if to the Company, to
the principal offices of the Company in California to the attention of its
president; (b) if to the Holder, to c/o Zazoff Associates, 116 Littleton Road,
Parsippany, New Jersey 07054; or to such other address as the Holder shall have
furnished to the
10
<PAGE> 47
Company. All such notices or communications shall be deemed given when actually
delivered by hand or messenger or, if mailed, three days after deposit in the
U.S. Mail.
18. SUCCESSORS AND ASSIGNS.
All covenants, agreements, representations and warranties contained in
this Warrant shall bind the parties hereto and their respective successors and
assigns.
19. DAMAGES.
Without limiting in any way any of the rights the Holder may otherwise
have at law or in equity, for damages or otherwise, the Company hereby agrees to
indemnify and hold harmless the Holder from and against any loss or expense that
may be incurred or suffered by the Holder which arises from any of the
following: (i) any registration statement under Paragraph 11(a) is not filed
with the Commission on or before the time required in the Agreement and
Paragraph 11(a); or (ii) the Company is not able for any reason within its
control (A) to cause a registration statement under this Agreement and Paragraph
11(a) to be declared effective by the Commission within the time required by the
Agreement and to remain effective until completion of the offering; or (B) to
cause the securities to be qualified or registered for sale in all appropriate
jurisdictions as provided in Paragraph 11(a) and to remain so qualified or
registered thereafter during the applicable period under applicable law.
20. NO INCONSISTENT AGREEMENTS.
The Company has not previously entered into, and will not on or after
the date of this Warrant enter into, any agreement with respect to its
securities which is inconsistent with the terms of this Warrant, including any
agreement which impairs or limits the rights granted to the Holder in this
Warrant, or which otherwise conflicts with the provisions hereof or would
preclude the Company from discharging its obligations hereunder.
21. SEVERABILITY.
In the event than any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.
22. ENTIRE AGREEMENT.
This Warrant constitutes the entire agreement of the parties with
respect to the subject matter hereof.
23. AMENDMENT.
Any provision of this Warrant may be amended, waived or modified by a
writing signed by the Company and the Holder.
11
<PAGE> 48
24. CONFIDENTIALITY.
The parties hereto agree that the existence of this Warrant, and the
terms hereof, shall be held in the strictest confidence and shall not be
disclosed to any third party unless (a) such disclosure is required by law, or
(b) such disclosure is agreed upon in writing by the Holder and the Company.
NEVADA MANHATTAN MINING INCORPORATED
BY: /s/ JEFFREY S. KRAMER
-----------------------------------------
JEFFREY S. KRAMER, SENIOR VICE PRESIDENT
12
<PAGE> 1
EXHIBIT 4.(X)
SCHEDULE "A"
FORM OF DEBENTURE
No. 1 $100,000
NEVADA MANHATTAN MINING INCORPORATED
8% SENIOR CONVERTIBLE DEBENTURE DUE JULY 1, 2000
The securities represented hereby have not been registered under the Securities
Act of 1933, as amended (the "Act") and may not be sold, transferred or
hypothecated, except pursuant to the registration under the Act or an exemption
from the registration requirements of the Act.
This Debenture is one of a duly authorized issue of Debentures of Nevada
Manhattan Mining Incorporated, a corporation duly organized and existing under
the laws of the State of Nevada (the "Issuer") designated as Eight Percent (8%)
Convertible Debentures Due July 1, 2000, in an aggregate principal amount not
exceeding Four Million Dollars ($4,000,000.00).
FOR VALUE RECEIVED, the Issuer promises to pay to Mary Park Properties, the
registered holder hereof and its successors and assigns (the "Holder"), the
principal sum of One Hundred Thousand Dollars ($100,000), on July 1, 2000
("Maturity Date"), and to pay interest on the principal sum outstanding at the
rate of 8% per annum. Interest shall be due and payable quarterly on the last
day of June, September, December and March in each year. Accrual of interest
shall commence on the first business day to occur after the date hereof and
shall continue until payment in full of the principal amount has been made or
duly provided for. At the option of Issuer, interest may be paid in common stock
of the Issuer ("Common Stock") at the average of the closing "bid" prices for
the common stock for the five trading days immediately prior to the date on
which such interest payment is due. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Issuer regarding registration and transfers of
the Debentures (the "Debenture Register"); provided, however, that the Issuer's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Subscription Agreement dated as of July 1, 1997 between the Issuer and Holder
(the "Subscription Agreement"). Except as set forth above, the principal of,
and interest on, this Debenture are payable in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, at the address last appearing on the Debenture
Register of the Issuer as designated in writing by the Holder hereof from time
to time. The Issuer will pay the principal of and all accrued and unpaid
interest due and upon this Debenture on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder at the last address
as set forth on the Debenture Register.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of One Hundred Thousand
Dollars ($100,000) and integral multiples thereof. The Debentures are
exchangeable for an equal aggregate
<PAGE> 2
principal amount of Debentures of different authorized denominations, as
requested by the Holders surrendering the same. No service charge will
be made for registration, transfer or exchange.
2. The Issuer shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld
under the applicable provisions of the United States income tax or other
applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment representations of
the original Holder hereof and may be transferred or exchanged in
compliance with the Act and applicable state securities laws. Prior to
the due presentment for transfer of this Debenture, the Issuer and any
agent of the Issuer may treat the person in whose name this Debenture is
duly registered on the Issuer's Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and all other
purposes, whether or not his Debenture be overdue, and neither the
Issuer nor any such agent shall be affected by notice to the contrary.
4. The holder of this Debenture is entitled, at its option, at any time
commencing forty-five days from the date hereof, to convert the
principal amount of this Debenture, together with all accumulated
interest, into shares of Common Stock of the Issuer (the "Common
Stock") at a conversion price for each share of Common Stock equal to
Seventy-Five percent (75%) of the Market Price (as defined below) of the
Common Stock for all conversions for which notice is received after the
date hereof. For purposes of this Section 4, the "Market Price" shall be
the lesser of (a) the closing bid price of the Common Stock on the day
prior to Closing; or (b) the average closing bid price of the Common
Stock for the five (5) New York Stock Exchange Trading days immediately
preceding each conversion date, in each case as reported by the National
Association of Securities Dealers Automated Quoting System, or as
reported by the American Stock Exchange of the Common Stock shall then
be listed in trading upon such exchange. Such conversion shall be
effected by surrendering the Debentures to be converted (with a copy by
facsimile or courier, to the Issuer) to the Issuer, with the form of
conversion notice attached hereto as Exhibit 1, executed by the Holder
of this Debenture or a specified portion (as provided) hereof, and
accompanied, if required by the Issuer, by proper assignment hereof in
blank. No fractional shares or scrip representing fractions of shares
will be issued on conversion or payment in lieu of interest, but the
number of shares issuable shall be rounded to the nearest whole share,
with the fraction paid in cash at the discretion of the Issuer. For
purposes of this Debenture, the "Conversion Date" on which notice of
conversion is given shall be deemed to be the date on which the Holder
has delivered by facsimile transmission a duly executed notice of
conversion followed by delivery by mail or courier of this Debenture,
with the conversion notice duly executed, to the Issuer, if such notice
of conversion and this Debenture are received by mail or courier by the
Issuer within three (3) business days.
5. No provision of this Debenture shall alter or impair the obligation of
the Issuer which is absolute and unconditional, to pay the principal of,
and interest on, this Debenture at the place, time, and rate, and in the
coin or currency, herein prescribed.
2
<PAGE> 3
6. The Issuer hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, bringing of suit and
diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any
amount called for hereunder.
7. The issuer agrees to pay all costs and expenses, including reasonable
attorney's fees which may be incurred by the Holder in collecting any
amount due or exercising the conversion rights under this Debenture.
8. If one or more of the following described "Events of Default" shall
occur:
a) The Issuer shall default in the payment of principal or interest
on this Debenture; or
b) Any of the representations or warranties made by the Issuer
herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished
by or on behalf of the Issuer in connection with the execution
and delivery of this Debenture or the Subscription Agreement
shall be false or misleading in any material respect at the time
made; or
c) The Issuer shall fail to perform or observe any other covenant,
term, provision, condition, agreement or obligation of the
Issuer under this Debenture or the Subscription Agreement,
including but not limited to conversion of this Debenture as
provided herein and therein, and such failure shall continue
uncured for a period of seven (7) days after notice from the
Holder of such failure; or
d) The Issuer shall (1) become insolvent; (2) admit in writing its
inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings
for its dissolution; or (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for it or for a
substantial part of its property or business; or
e) A trustee, liquidator or receiver shall be appointed for the
Issuer for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the
properties or assets of the Issuer and shall not be dismissed
within thirty (30) calendar days thereafter; or
g) Any money judgment, writ or warrant of attachment or similar
process in excess of Four Hundred Thousand Dollars ($400,000.00)
in the aggregate shall be entered or
3
<PAGE> 4
filed against the Issuer or any of its properties or other
assets and shall remain unvacated, unbonded or unstayed for
a period of fifteen (15) calendar days or in any event later
than five (5) calendar days prior to the date of any proposed
sale thereunder; or
h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by
or against the Issuer, and if instituted against the Issuer,
shall not be dismissed within thirty (30) calendar days after
such institution or the Issuer shall by any action or answer
approve of, consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in answering a
petition filed in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any
such proceeding;
or
I) The Issuer shall have its Common Stock delisted from an
exchange or an over-the-counter market;
then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's
sole discretion, the Holder may consider this Debenture immediately
due and payable, without presentment, demand protest or notice of any
kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration
of any period of grace, enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded
by law.
9. This Debenture is subject in all respects to the provisions, terms and
conditions of the Subscription Agreement which is, in its entirety,
incorporated herein by this reference.
10. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claims based hereon, or
otherwise in respect hereof, against any incorporator, shareholder,
officer or director, as such, past, present or future, of the Issuer or
any successor corporation, whether by virtue of any constitution,
statute, or rule of law, or by enforcement by any assessment or penalty
or otherwise, all such liability being, by acceptance hereof and as
part of the consideration for the issue hereof, expressly waived and
released.
11. The Holder of this Debenture, by execution of the Subscription
Agreement and acceptance hereof, agrees that this Debenture is being
acquired for investment purposes and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which
shall not result in a
4
<PAGE> 5
violation of the Act or any applicable state Blue Sky law or similar laws
relating to the sale of securities.
12. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Debenture will not in any way be affected
or impaired thereby.
13. This Debenture and the agreements referred to in this Debenture
constitute the full and entire understanding and agreement between the Issuer
and the Holder with respect hereto. Neither this Debenture nor any terms hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the Issuer and the Holder. This Debenture is in all
respects subject to the terms and conditions contained in the Subscription
Agreement.
14. This Debenture shall be governed by and construed in accordance with
the laws of the State of New York. Additionally, all signatories hereby consent
to the State of New York as the jurisdictional situs of all disputes.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by an officer thereunto duly authorized.
NEVADA MANHATTAN MINING INCORPORATED
BY: /s/ [SIG]
------------------------------------
Office Signatory of Issuer
- ---------------------------------------
Name (Printed)
- ---------------------------------------
Title
- ---------------------------------------
Date
5
<PAGE> 1
EXHIBIT 5
May 28, 1997
NEVADA MANHATTAN MINING INCORPORATED
5038 North Parkway Calabasas
Suite 100
Calabasas, California 91302
Re: Proposed sale of Common Stock in Nevada Manhattan Mining Incorporated
Gentlemen:
We have acted as Special Counsel to Nevada Manhattan Mining Incorporate (the
"Company") in connection with the Company's proposed offer and sale of Common
Stock to be registered pursuant to Form SB-2 dated May 28, 1997 and the exhibits
thereto attached. Capitalized terms not otherwise defined herein have the same
meaning as set forth in the Prospectus which is appended to Form SB-2.
In rendering the opinion hereinafter expressed, we have examined such documents,
instruments, and matters of law as we have deemed appropriate, including the
following documents (collectively referred to herein as the "Related
Documents"):
1. Form SB-2;
2. The Prospectus;
3. The exhibits accompanying Form SB-2; and
4. Such other documents including the Company's articles of incorporation,
bylaws, minutes of directors meetings and other documents pertinent to
the opinion herein expressed.
In conducting our examination, we have assumed: (i) the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such copies; (ii)
the accuracy of the representations and warranties of factual matters made by
the Company in any certificates delivered to us for our examination in the
Related Documents; and (iii) other than the Related Documents, there are no
documents between the Company and other parties which would limit, expand, or
otherwise modify the respective rights and obligations of the Company other than
those set forth in the Related Documents or which would have an effect on the
opinion herein rendered.
<PAGE> 2
As to questions of fact material to certain matters set forth in this opinion
except as otherwise provided herein, we have relied solely upon a certificate of
the Company duly executed by a person authorized to execute such certificates.
Based on and subject to the foregoing and the limitations set forth herein and
based on our examination of such questions of law as we have deemed appropriate
under the circumstances, we are of the opinion that the Common Stock when sold
pursuant to the terms and conditions outlined in the Prospectus will be legally
issued, fully paid, and non-assessable.
We are qualified to practice law in the state of California and we do not
purport to express any opinion herein concerning any law other than the laws of
the state of California and the federal law of the United States of America.
This opinion is limited to the matters expressly set forth herein and no opinion
is implied or may be inferred beyond the matters expressly stated herein.
This opinion is as of the date shown above. We have not undertaken and hereby
disclaim any obligation to advise you of any change in any matter after the date
hereof which is otherwise stated in this opinion
Very Truly Yours,
Lloyd S. Pantell, APLC
By Lloyd S. Pantell, Esq.
<PAGE> 1
EXHIBIT 10.(x)
AMENDMENT TO PRINCIPLES OF AGREEMENT
Whereas this amendment is dated June 17, 1997 and entered into by and between
MAXWELL ENERGY AND METALS TECHNOLOGIES LTD. (referred to as "Maxwells"), and
NEVADA MANHATTAN MINING INCORPORATED, (referred to as "Nevada"). Maxwells and
Nevada are hereinafter referred to as the "Parties."
The purpose of this amendment is to amend the terms and conditions contained in
the Parties Principles of Agreement dated August 19th, 1996, (hereinafter
referred to as POA).
The Parties hereby agree as follows:
Section II, subsection 2(a) of the POA is amended to read as follows:
These shares will be immediately released to Maxwell upon
Nevada receiving an independent valuation of a minimum of
Twelve Million Dollars (US$12,000,000) worth of value in
mineralization or other natural resources on the subject
property in Kalimantan. Valuation of the Property will be
appraised by an independent expert appraiser to be mutually
chosen by the Parties.
This Amendment to the POA is executed this 28th day of July, 1997 by:
/s/ JEFFREY KRAMER /s/ WILLIAM HB CHAN
- --------------------------- ---------------------------------
By: Jeffrey Kramer By: William HB Chan
Date: 7-28-97 Date: 7-28-1997
Nevada Manhattan Mining Maxwell Energy and Metals
Incorporated Technologies, Ltd.
<PAGE> 1
EXHIBIT 10.(xxvi)
AGREEMENT TO JOINTLY
DEVELOP TIMBER PROPERTIES
THIS AGREEMENT is made on the 30th day of May 1997 by and between
Equatorial Resources (Brasil) Ltda., a company organized under the laws of the
Brazil (hereinafter referred to as "Equatorial") and Jonasa-Joaquim Fonseca,
Navegacao, Industria E Comercio S/A (hereinafter referred to as "Jonassa") and
is made with reference to the following facts:
WHEREAS, on June 29, 1984 Companhia Agropecuaria Do Rio Jabuti ("CADRJ")
and Madeira Intex S.A. International Exports ("Madeira") entered into a joint
venture regarding the joint development of certain timber properties located in
the state of Para, Brazil (the "Jonassa Concessions");
WHEREAS, through a series of five amendments, the rights and obligations
of CADRJ on the one hand and Madeira on the other hand have been assigned and
delegated to Jonasa and Equatorial, respectively;
WHEREAS, while the scope of the Jonasa Concessions was subsequently
expanded to include 276,000 hectares of timber properties, the Federative
Republic of Brazil has condemned _____________ hectares, appropriated such
properties for the persons who have invaded them, and have agreed to pay Jonasa
for such appropriation;
WHEREAS, the current parties desire to reconstitute the relationship so
established so as to adapt to these and other evolving facts and circumstances
and to more clearly define their rights and responsibilities;
NOW THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The Concessions. The parties hereby agree that the
properties subject to this Agreement consist of __________
hectares of timber properties more particularly described in the
<PAGE> 2
schedule hereto attached as Exhibit A and which are owned by Jonassa. Jonassa
hereby warrants that he has good and marketable title to its properties as
revealed by the title examinations of Carlos Platilha, true and correct copies
of which are hereto attached as Exhibit B.
2. Development of Properties. On the terms and conditions which follow
and in consideration of the payment of ___________ Thousand Dollars (US
$___,000) the receipt of which is hereby acknowledged, Jonasa hereby grants to
Equatorial the sole and exclusive right to harvest all of the timber which
Jonasa presently or in the future has the right to harvest and sell (either
internally within Brazil or for export) by virtue of the current or future
authorizations held or to be held by Jonasa. Equatorial acknowledges that it
shall be solely responsible for employing the crews necessary to conduct
harvesting operations, applying appropriate reclamation methods and techniques
so as to assure reforestation, and all costs necessary to transport the
harvested timber to the mill. Equatorial shall acquire title to the timber so
harvested at the time at which it has been severed from the property. Risk of
loss shall pass at the time that title has passed to Equatorial.
3. Payment. Equatorial hereby agrees to pay to Jonasa fifty percent
(50%) of the net proceeds received on the sale of all timber and related
products produced and sold under this Agreement. For the purposes of this
provision, the term "net proceeds" shall mean the gross sales price of the
lumber sold, less the costs of harvesting, reclamation, transportation to the
mill, milling expenses, physicalization duties, transportation f.o.b. to the
ports of Belem and __________, and certain operating expenses associated with
Equatorial's operations in Brazil. The parties estimate these costs to be
approximately One Hundred Seventy Dollars (US $170) per cubic meter.
4. Designation of Export Agent. The parties hereto
designate Equatorial Resources (Brazil) Ltda. As their exclusive
export agent with respect to all products produced and sold
pursuant to this Agreement.
2
<PAGE> 3
5. Covenants of Jonassa. Jonassa hereby covenants and
agrees as follows:
A. It has good and marketable title to the properties
identified on the schedule attached hereto as Exhibit A and has
the sole right to enter into this Agreement without the necessity
of securing the consent of any third party;
B. It has obtained all requisite licenses, including
authorization from IBAMA, to conduct the operations contemplated
by this Agreement and to export the timber externally;
C. Equatorial will not be required to obtain any
further authorization from any third party to engage in the
activities contemplated by this Agreement, including the consent
of IBAMA to transfer the authority to engage in the operations
contemplated by this Agreement;
D. It has not entered into any other agreement
regarding the Jonassa Concessions which would conflict with the
rights granted to Equatorial pursuant to this Agreement;
E. The performance of each and every obligation
required to be performed by Jonassa under this Agreement will not
result in a breach now or in the future of any agreement or
covenant entered into or made by Jonassa;
F. It hereby warrants and defend title to the timber
to be acquired by Equatorial pursuant to this Agreement.
3
<PAGE> 4
6. Covenants of Equatorial. Equatorial warrants and
agrees as follows:
A. Equatorial has requisite authority to enter into
this Agreement and to perform each and every condition required
on its part to be performed pursuant to this Agreement;
B. This Agreement and the obligations required to be
performed by Equatorial have been approved by its Board of
Directors;
C. There are no other consents or actions required to
be obtained in order to bind Equatorial pursuant to this
Agreement;
D. The performance of each and every obligation
required to be performed by Equatorial under this Agreement will
not result in a breach now or in the future of any agreement or
covenant entered into or made by Equatorial;
E. Equatorial will provide an accounting to Jonassa
on a quarterly basis of the timber harvested by Equatorial;
F. Jonassa shall have the right to inspect that portion of
Equatorial's books and records which pertain to the amount of timber harvested
by Equatorial on the Jonassa Concessions.
7. Reciprocal Duties. Both parties to this Agreement warrant and agree
to exercise a duty of utmost care and disclosure and to act as fiduciaries
towards one another with respect to the operations subject to this Agreement. It
is understood and agreed that Jonassa shall deal exclusively with Equatorial
with respect to the harvesting of timber on the Jonassa Concessions. The
foregoing duties shall not, however, require either party to offer the other
party a right of first refusal to participate in any other activity on
properties other than the Jonassa Concessions or to require Jonassa to offer to
Equatorial the right to participate in any other business activities conducted
on the portion of the Jonassa Concessions owned by it.
4
<PAGE> 5
8. Term. The term of this Agreement shall be for ten years and will
automatically be renewed for additional ten year terms unless either party
notifies the other party in writing at least one year prior to the renewal date
that it is affirmatively electing to terminate this Agreement.
9. Taxes. Except as set forth in Paragraph 3. above,
both parties agree to be responsible for any and to pay all taxes
due and payable by each of them by virtue of their participation
in this Agreement, including but not limited to income taxes,
ICMS taxes and other relevant taxes.
10. Notices. Any and all notices shall be deemed given
if in writing and mailed postage prepaid, messengered, and/or
sent by facsimile with a hard copy mailed postage prepaid and
addressed as follows:
A. If to Jonasa:
Rua Professor Nelson Ribeiro
Number 161
Belem, Brazil
Attention: Joaquim Luiz da Fonseca Neto
B. If to Equatorial:
c/o Nevada Manhattan Mining
5038 N. Parkway Calabasas
Suite 100
Calabasas, California 91302
Attention: Christopher D. Michaels, President
Facsimile 001-310-443-3281
11. Official Version. This Agreement has been prepared
in both the English and Portuguese languages solely for the
convenience of the parties. In the event of any inconsistencies
in the interpretation of the two versions, the Portuguese version
shall be considered the official version for resolving any
disputes between the parties.
5
<PAGE> 6
12. Venue. In the event of any dispute between the parties or question
of interpretation under this Agreement, the parties agree to submit the matter
to the appropriate judicial tribunal located in the State of Sao Paulo having
subject matter jurisdiction. Such tribunal shall have exclusive venue over the
parties and the subject matter for the purposes of resolving any disputes or
questions of interpretation under this Agreement. The parties hereby waive any
right to challenge the jurisdiction or venue of such tribunal.
13. Interpretation. This Agreement and the rights and
responsibilities of the parties shall be governed in accordance
with the laws of the State of Sao Paulo and Brazil.
14. Representation. Both parties hereby acknowledge that they have been
represented by counsel of their choice in this matter, have had an opportunity
to review the terms and conditions of this Agreement, have asked questions of
their counsel as to any language contained herein which they did not understand,
and have received a satisfactory explanation from counsel so that they
understand their respective rights and obligations under this Agreement. The
parties further represent and warrant that they are entering into this Agreement
under their own free will and not under duress.
15. Indemnification. Each party will indemnify and hold the other party
harmless from and against any loss, claim, damage, cost, or liability insofar as
any such loss, claim, damage, cost, or liability results from any act or
omission of such party.
16. Successors and Assigns. This Agreement shall be
binding upon the parties and their respective agents, servants,
employees, directors, officers, attorneys, accountants,
successors, and assigns.
6
<PAGE> 7
17. Severability. In the event any provision in this
Agreement is held invalid, illegal, or unenforceable, the
validity, legality, and enforceability of the remaining
provisions to this Agreement shall not be affected or impaired.
18. Integration. This Agreement represents the entire
understanding reached by the parties with respect to the subject
matter hereof. Any prior understandings, agreements, or
documents which are inconsistent with this Agreement are hereby
merged into and superseded by this Agreement.
19. Amendments. Any amendment to this Agreement shall be
in writing and signed by the party to be charged before such
amendment may revise, amend, or augment the terms of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by an authorized representative as of the date first hereinabove
written.
EQUATORIAL RESOURCES (BRAZIL)
LTDA.
By:_____________________________
IGNATIUS Z. THEODOROU
JONASA-JOAQUIM FONSECA,
NAVEGACAO, INDUSTRIA E.
COMMERCIO S/A
By: ____________________________
JOAQUIM LUIZ DA FONSECA NETO
7
<PAGE> 1
EXHIBIT 10.(xxvii)
AGREEMENT TO ACQUIRE SAWMILL
THIS AGREEMENT is made on the 30th day of May 1997 by and between
Equatorial Resources (Brasil) Ltda., a company organized under the laws of the
Brazil as the agent and designee of Equatorial Resources Ltd., a company
organized under the laws of the British Virgin Islands (hereinafter collectively
referred to as "Equatorial"), Jonasa Madeiras Ltda. and Jonasa-Joaquim Fonseca,
Navegacao, Industria E Comercio S/A (hereinafter collectively referred to as
"Jonasa") and is made with reference to the following facts:
WHEREAS, in December 1996, the parties and/or their predecessors entered
into an oral agreement pertaining to the acquisition by Equatorial's parent,
Nevada Manhattan Mining Incorporated, of a 246 hectare tract located in the
vicinity of the town of San Miguel, Para, Brazil and a sawmill located on such
tract, various improvements thereon, and certain items of personal property
associated with operating the sawmill and the business conducted at the sawmill
(the "Property");
WHEREAS, since December 1996, Equatorial and/or its parent have operated
the sawmill located on the Property and have spent in excess of Four Hundred
Eighty Thousand Dollars ($480,000) in improvements in reliance upon the oral
agreement entered into between the parties;
WHEREAS, related companies of the parties have entered into a series of
agreements regarding the joint development and harvesting of certain timber
properties;
WHEREAS, the disputes relating to the Estate of Francisco Joaquim
Fonseca have recently been resolved such that upon payment to Brasil to Banco do
Brasil of certain monies due from the Federative Republic Brasil, Jonasa will
own the Property free and clear of all liens and encumbrances;
WHEREAS, it is the intent of the parties and related entities to utilize
the sawmill on the Property to produce lumber and timber-related products from
the timber harvested from the properties to be jointly developed as described
above and from other properties;
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The Property. The parties hereby agree that the Property subject to
this Agreement consists of 246 hectares, a sawmill located on said tract,
various improvements thereon, and certain items of personal property associated
with operating the sawmill and the business conducted at the sawmill. The
Property, all improvements thereon, and certain items of personal property
(including the sawmill and the machinery comprising the sawmill) are more
particularly described in the schedule hereto attached as Exhibit A which
schedule includes the Real Estate Registry relating to the Property. Jonasa
hereby warrants that it has good and marketable title to its Property as
revealed by the title examinations of Carlos Platilha, true and correct copies
of which are hereto attached as Exhibit B.
2. Purchase Price of Property. On the terms and conditions which follow
and in consideration of the payment of Ten Dollars (US $10) and the expenditure
of the sum of _________ Dollars ($_____) in improvements since December 1996,
the receipt and expenditure of which are hereby acknowledged, Jonasa hereby
grants to Equatorial all right, title, and interest, which Jonasa now or at any
time hereinafter shall have in and to the Property free and clear of all liens,
encumbrances, and other clouds on title.
3. Covenants of Jonasa. Jonasa hereby covenants and agrees as
follows:
A. It has good and marketable title to the tracts comprising the
Property and the improvements thereon (including the sawmill) which are
identified on the schedule attached hereto as Exhibit A free and clear of all
liens, encumbrances, and/or clouds on title;
2
<PAGE> 3
B. It has the sole and exclusive right to enter into this
Agreement as reflected in the settlement agreement relating to the Estate of
Francisco Joaquim Fonseca attached hereto as Exhibit C and does not need to
secure the consent of any third party;
C. It will warrant and defend title at its sole cost and expense
to all of the tracts, improvements, and items of personal property comprising
the Property, and will incur and pay all necessary expenses associated with such
warranty or with delivering the Property free and clear of all liens,
encumbrances, and other clouds on title;
D. It has not entered into any other agreement regarding the
Property which would conflict with the rights granted to Equatorial pursuant to
this Agreement;
E. The performance of each and every obligation required to
be performed by Jonasa under this Agreement will not result in a breach now
or in the future of any agreement or covenant entered into or made by Jonasa;
F. It has obtained the irrevocable commitment from
Banco do Brasil that such banking institution will reconvey the mortgage
encumbering the Property as evidenced by the document hereto attached
as Exhibit D;
4. Covenants of Equatorial. Equatorial warrants and agrees
as follows:
A. Equatorial has requisite authority to enter into this
Agreement and to perform each and every condition required on its part to
be performed pursuant to this Agreement;
B. This Agreement and the obligations required to be performed
by Equatorial have been approved by its Board of Directors;
C. There are no other consents or actions required to be
obtained in order to bind Equatorial pursuant to this Agreement;
D. The performance of each and every obligation required
to be performed by Equatorial under this Agreement will not result in a
breach now or in the future of any agreement or covenant entered into or
made by Equatorial;
3
<PAGE> 4
5. Taxes. Both parties agree to be responsible for any and to
pay all taxes due and payable by each of them by virtue of their participation
in this Agreement, including but not limited to income taxes, ICMS taxes and
other relevant taxes.
6. Notices. Any and all notices shall be deemed given if in
writing and mailed postage prepaid, messengered, and/or sent by facsimile
with a hard copy mailed postage prepaid and addressed as follows:
A. If to Jonasa:
Rua Professor Nelson Ribeiro
Number 161
Belem, Brazil
Attention: Joaquim Luiz da Fonseca Neto
B. If to Equatorial:
c/o Nevada Manhattan Mining
5038 N. Parkway Calabasas
Suite 100
Calabasas, California 91302
Attention: Christopher D. Michaels, President
Facsimile 001-310-443-3281
7. Official Version. This Agreement has been prepared in both the
English and Portuguese languages solely for the convenience of the parties.
In the event of any inconsistencies in the interpretation of the two versions,
the Portuguese version shall be considered the official version for resolving
any disputes between the parties.
4
<PAGE> 5
8. Venue. In the event of any dispute between the parties or question of
interpretation under this Agreement, the parties agree to submit the matter to
the Courts of the City of Sao Paulo, Capital of the State of Sao Paulo, Brazil.
Such Courts shall have exclusive venue over the parties and the subject matter
for the purposes of resolving any disputes or questions of interpretation under
this Agreement. The parties hereby waive any right to challenge the jurisdiction
or venue of such tribunal.
9. Interpretation. This Agreement and the rights and
responsibilities of the parties shall be governed in accordance with the laws
of Brazil.
10. Representation. Both parties hereby acknowledge that they have been
represented by counsel of their choice in this matter, have had an opportunity
to review the terms and conditions of this Agreement, have asked questions of
their counsel as to any language contained herein which they did not understand,
and have received a satisfactory explanation from counsel so that they
understand their respective rights and obligations under this Agreement. The
parties further represent and warrant that they are entering into this Agreement
under their own free will and not under duress.
11. Indemnification. Each party will indemnify and hold the other party
harmless from and against any loss, claim, damage, cost, or liability insofar as
any such loss, claim, damage, cost, or liability results from any act or
omission of such party.
12. Successors and Assigns. This Agreement shall be binding upon
the parties and their respective agents, servants, employees, directors,
officers, attorneys, accountants, successors, and assigns.
13. Severability. In the event any provision in this Agreement
is held invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions to this Agreement shall not be
affected or impaired.
5
<PAGE> 6
14. Integration. This Agreement represents the entire understanding
reached by the parties with respect to the subject matter hereof. Any prior
understandings, agreements, or documents which are inconsistent with this
Agreement are hereby merged into and superseded by this Agreement.
15. Amendments. Any amendment to this Agreement shall be in
writing and signed by the party to be charged before such amendment may revise,
amend, or augment the terms of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by an authorized representative as of the date first hereinabove
written.
EQUATORIAL RESOURCES (BRAZIL)
LTDA. AS AGENT FOR EQUATORIAL
RESOURCES LTD.
WITNESS:
_________________ By:________________________________
IGNATIUS Z. THEODOROU
JONASA-JOAQUIM FONSECA,
NAVEGACAO, INDUSTRIA E.
COMMERCIO S/A
WITNESS:
________________ By: _______________________________
JOAQUIM LUIZ DA FONSECA NETO
JONASA MADEIRA LTDA.
WITNESS:
________________
By: _______________________________
JOAQUIM LUIZ DA FONSECA NETO
6
<PAGE> 1
EXHIBIT 10.(xxviii)
AGREEMENT TO HARVEST TIMBER
AND DEVELOP TIMBER PROPERTIES
THIS AGREEMENT is made on the 30th day of May 1997 by and between
Equatorial Resources (Brasil) Ltda., a company organized under the laws of
Brazil, established in Irituia City, road BR-010, Km 04, Para, registered on
C.G.C. number 01.787.856/0001-50, here represented by the undersigned manager,
(hereinafter referred to as "Equatorial") and Terranorte S.A., a company
organized under the laws of Brazil, established at Travessa Quintino Bocaiuva,
1210, Belem, Para, registered on C.G.C. number 04.551.042/0001-92, State
registered number 15090295-6, represented by Mr. Dario Jose Baleiros Bernardes,
Brazilian, married, business administrator, CPF number 109.230.472-04
(hereinafter referred to as "Terranorte") and is made with reference to
the following facts:
WHEREAS, on or about March 2, 1997, Equatorial and Terranorte entered
into a letter of intent regarding the joint development of certain timber rural
properties located in the forest for harvesting timber in the state of Para,
Brazil, including properties owned by Terranorte as well as properties
contiguous to or near the properties so owned by Terranorte (the "Terranorte
Concessions");
WHEREAS, under the terms of the letter of intent, the parties outlined
three options available to mutually develop the Terranorte Concessions;
WHEREAS, the parties desire to retain two of the three options through
the term of this Agreement so as to provide the greatest degree of flexibility
to adapt to changing facts and circumstances;
WHEREAS, the parties intend by this Agreement to formalize the letter
of intent so that their rights and responsibilities may be better defined;
1
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. The Concessions. The parties hereby agree that the properties subject
to this Agreement consist of 18,274.51 hectares of rural properties, with forest
areas for harvesting timber, more particularly described in the schedule hereto
attached as Exhibit A, which when signed by the parties will become part of this
Agreement. Terranorte hereby warrants that it has the right and the necessary
authorizations issued by the relevant Brazilian authorities to harvest timber on
the above-mentioned properties in an amount sufficient to accomplish its
obligations undertaken in this Agreement. Terranorte hereby warrants that it has
good and marketable title to the properties described in Exhibit A, which are
true and correct copies of which are hereto attached as Exhibit B. Terranorte
hereby undertakes to use his best efforts to secure the authorization of the
owners of the remaining properties which are anticipated to be included within
this Agreement. Such additional properties shall be identified on a schedule to
be attached as Exhibit C and shall be modified from time to time to reflect the
inclusion of each additional property subject to this Agreement.
2. Development Options. TERRANORTE, hereby, in consideration of
the payment of Twenty-Eight Thousand Reais (RS $28,000), to be paid on the
terms and conditions following below, grants to Equatorial the option to
elect one or more of the following two options regarding the development of
its properties:
A. Equatorial shall have the right to harvest all of the timber
located in TERRANORTE's properties, authorized by the applicable Brazilian
authorities and shall pay to Terranorte the price established in Exhibit D,
according to each species, subtracting therefrom Ninteen Reais (R$19.00), which
is the extraction expenses,with the balance to be paid to TERRANORTE for the of
timber harvested.
2
<PAGE> 3
B. Equatorial shall have the right to elect to require Terranorte
to employ its own crews to harvest the timber, to be sold to EQUATORIAL, as logs
delivered at the Moju River, with first quality, with a circumference of (two
hundred) 200 or more, in volume not less than 10.000 m3 (ten thousand cubic
meters), legalized and authorized by IBAMA and The Secretary of Finance of The
State of Para, by paying the prices below established:
Massaranduba: R$ 43.00 by m3
Jatoba: R$ 65.00 by m3
Angelim Vermelho R$ 40.00 by m3
Angelim Pedra R$ 55.00 by m3
Tatajuba R$ 65.00 by m3
Tauari R$ 31.00 by m3
During the times that this second option is employed, Terranorte
shall be solely responsible for the cost of employing the crews, the cost of
reclamation, and for transporting the timber to the Moju River, Para; however,
that the transportation expenses after loading at Moju River shall be borne by
Equatorial. TERRANORTE agrees that the payment in the amount of R$ 28,000.00
(twenty eight thousand reais), mentioned above, will be credited to EQUATORIAL
at the same time that payment is due to TERRANORTE under this option.
3. Manner of Election; Change of Options. Equatorial may elect any one or
more of the foregoing options by notifying Terranorte in writing of the
option it so elects. Equatorial shall also have the right to elect different
options with respect to each property comprising the Terranorte Concessions
and to change the option or options under which harvesting operations under
this Agreement will be conducted by notifying Terranorte in writing of its
election to change. Such change will become effective within thirty days of
notification by TERRANORTE.
3
<PAGE> 4
4. Designation of Export Agent. Both parties hereby designate
Equatorial Resources (Brasil) Ltda. as their exclusive export agent with
respect to all products produced and sold pursuant to this Agreement.
5. Covenants of Terranorte. Terranorte hereby covenants and agrees
as follows:
A. It has good and marketable title to harvest the property
and all vegetation, according to the laws relating to harvesting and
forestation, identified on the schedule attached hereto as Exhibit A and has
the sole right to enter into this Agreement without the necessity of securing
the consent of any third party;
B. It has obtained all requisite licenses, including
authorization from IBAMA, to conduct the operations contemplated by
this Agreement;
C. Equatorial will not be required to obtain any further
authorization from any third party to engage in the activities contemplated
by Paragraph 2.A. or B. above, including the consent of IBAMA.
D. It has not entered into any other agreement regarding the
Terranorte Concessions which would conflict with the rights granted to
Equatorial pursuant to this Agreement;
E. The performance of each and every obligation required to be
performed by Terranorte under this Agreement will not result in a breach now or
in the future of any agreement or covenant entered into or made by Terranorte;
4
<PAGE> 5
F. It will warrant and defend title to the timber to be
acquired by Equatorial pursuant to this Agreement.
6. Covenants of Equatorial. Equatorial warrants and agrees
as follows:
A. Equatorial has requisite authority to enter into this
Agreement and to perform each and every condition required on its part to be
performed pursuant to this Agreement;
B. This Agreement and the obligations required to be performed
by Equatorial have been approved by its Board of Directors;
C. There are no other consents or actions required to be
obtained in order to bind Equatorial pursuant to this Agreement;
D. The performance of each and every obligation required to
be performed by Equatorial under this Agreement will not result in a breach
now or in the future of any agreement or covenant entered into or made by
Equatorial;
E. During any period in which Equatorial has elected to
develop all or any part of the Terranorte Concessions pursuant to
Paragraph 2.A., Equatorial will provide an accounting to Terranorte on a
quarterly basis of the timber harvested by Equatorial;
F. Terranorte shall have the right to inspect that portion of
Equatorial's books and records which pertain to the amount of timber harvested
by Equatorial on the Terranorte Concessions.
G. EQUATORIAL's rights under this Agreement will
become good and valuable only after full payment of
the specified prices to TERRANORTE.
5
<PAGE> 6
7. Reciprocal Duties. Both parties to this Agreement warrant and agree
to exercise a duty of utmost care and disclosure and to act as fiduciaries
towards one another with respect to the operations subject to this Agreement. It
is understood and agreed that Terranorte shall deal exclusively with Equatorial
with respect to the harvesting of timber on the Terranorte Concessions. The
foregoing duties shall not, however, require either party to offer the other
party a right of first refusal to participate in any other activity on
properties other than the Terranorte Concessions or to require Terranorte to
offer to Equatorial the right to participate in any other business activities
conducted on the portion of the Terranorte Concessions owned by it.
Notwithstanding the foregoing, Terranorte hereby acknowledges that it has
engaged in preliminary discussions with Equatorial regarding the possibility of
entering into an agreement for the development of pepper and/or other spices,
but that an agreement regarding such joint enterprise has not yet been reached.
8. Term. The term of this Agreement shall be for ten years and shall be
automatically renewed for equal ten-year terms, unless one of the parties
notifies the other of its intention to terminate the agreement at least one year
prior to the scheduled renewal date. This Agreement may not be unilaterally
terminated by Terranorte pursuant to this Paragraph in the event that Equatorial
has elected to operate one or more of the properties comprising the Terranorte
Concessions under Paragraph 2.B. and Terranorte has not actively conducted
harvesting operations due to force majeure or otherwise.
9. Taxes. Except as set forth in Paragraph 2. above, both
parties agree to be responsible for any and to pay all taxes due
and payable by each of them by virtue of their participation in
this Agreement, including but not limited to income tax, ICMS taxes
and other relevant taxes.
6
<PAGE> 7
10. Notices. Any and all notices shall be deemed given if
in writing and mailed postage prepaid, messengered, and/or sent by
facsimile with a hard copy mailed postage prepaid and addressed as
follows:
A. If to Terranorte:
At.: Sr. Dario Jose Balieiro Bernardes
Travessa Quintino Bocaiuva, 1210
Belem, Para - Brasil
Facsimile 223-2280/223-2200
B. If to Equatorial:
c/o Nevada Manhattan Mining
5038 N. Parkway Calabasas
Suite 100
Calabasas, California 91302
Facsimile 001-310-443-3281
11. Official Version. This Agreement has been prepared in both the
English and Portuguese languages solely for the convenience of the parties.
In the event of any inconsistencies in the interpretation of the two versions,
the Portuguese version shall be considered the official version for resolving
any disputes between the parties.
12. Venue. In the event of any dispute between the parties or question
of interpretation under this Agreement, the parties agree to submit the matter
to the appropriate judicial tribunal located in the Capital of the State of
Para, Brasil. The parties hereby waive any right to challenge the jurisdiction
or venue of such tribunal.
13. Interpretation. This Agreement and the rights and
responsibilities of the parties shall be governed in accordance with the laws
of Brazil.
7
<PAGE> 8
14. Representation. Both parties hereby acknowledge that they have been
represented by counsel of their choice in this matter, have had an opportunity
to review the terms and conditions of this Agreement, have asked questions of
their counsel as to any language contained herein which they did not understand,
and have received a satisfactory explanation from counsel so that they
understand their respective rights and obligations under this Agreement. The
parties further represent and warrant that they are entering into this Agreement
under their own free will and not under duress.
15. Indemnification. Each party will indemnify and hold the other party
harmless from and against any loss, claim, damage, cost, or liability insofar as
any such loss, claim, damage, cost, or liability results from any act or
omission of such party.
16. Successors and Assigns. This Agreement shall be binding upon
the parties and their respective agents, servants, employees, directors,
officers, attorneys, accountants, successors, and assigns.
17. Severability. In the event any provision in this Agreement is
held invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions to this Agreement shall not be
affected or impaired.
18. Integration. This Agreement represents the entire understanding
reached by the parties with respect to the subject matter hereof. Any prior
understandings, agreements, or documents which are inconsistent with this
Agreement are hereby merged into and superseded by this Agreement.
8
<PAGE> 9
19. Amendments. Any amendment to this Agreement shall be in
writing and signed by the party to be charged before such amendment may
revise, amend, or augment the terms of this Agreement.
The parties by an authorized
representative hereby sign this Agreement, in counterpart, before the witnesses
below, on the date hereinabove first written.
EQUATORIAL RESOURCES (BRASIL)
LTDA.
By:____/S/__________________
[IGNATIUS Z. THEODOROU]
EQUATORIAL RESOURCES
(BRASIL) LTDA.
_____/S/_________________
[DARIO BERNARDES]
TERRANORTE S.A.
9
<PAGE> 1
EXHIBIT 10.(xxix)
[EQUATORIAL RESOURCES (BRAZIL) LTDA. LETTERHEAD]
19 June 1997
Sr. Dario Jose Balieiro Bernardes
TERRANORTE S.A.
Travessa Quintino Bocaiuva, 1210
Belem-Para-Brasil
Re: Addendum to Contract for Extraction of Timber
And Development of Timber Properties dated 30 May 1997
------------------------------------------------------
Dear Dario:
This letter is intended to memorialize the discussions we have had to
acquire the rights to extract certain species of timber on properties located
adjacent to or in the vicinity of your property in Moju, Para.
Specifically, you have identified the following properties available
for development:
Name of Property Size of Property (Ha.)
- ---------------- ----------------------
Julival David Ferreira 8,000
Luis Fagundes 7,000
Arcileu de Paula (Silas) 25,000
Gastau Carvalho 3,000
Jesus Machado 30,000
Anfresio Nunes 390,000
Terranorte has agreed to use your best efforts to acquire the
properties and/or the rights to harvest the same species of timber which are
the subject of the above-referenced agreement (the "Agreement"). At the time at
which these properties are acquired by Terranorte, you and/or your designees,
it is agreed that such properties shall become subject to the terms and
conditions of the Agreement. Terranorte hereby agrees to notify Equatorial in
writing at such time as it or its designee has acquired these rights.
<PAGE> 2
EQUATORIAL RESOURCES (BRAZIL) LTDA.
Page 2
If this letter is consistent with your understanding of our agreement, kindly
signify by placing your signature on the space below provided for your
signature. A Portuguese version of this letter is enclosed for your
convenience.
Very truly yours,
EQUATORIAL RESOURCES (BRAZIL) LTDA.
By: /s/ IGNATIUS Z. THEODOROU
------------------------------------
Ignatius Z. Theodorou, President
AGREED AND ACCEPTED
TERRANORTE S.A.
By: /s/ DARIO JOSE BALIEIRO BERNARDES
------------------------------------
Dario Jose Balieiro Bernardes
nevman/bernarde.add
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