<PAGE>
i
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] Confidential, For Use of the
[x] Definitive Proxy Statement Commission Only (as permitted
Amendment No. 2
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
TERRA NATURAL RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(dba NEVADA MANHATTAN)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(SC14A-07/98)
<PAGE>
ii
(TERRA NATURAL RESOURCES CORPORATION LETTERHEAD)
December 1, 1998
Dear Stockholder:
On November 5, 1998, U.S. Stock Transfer Corporation, on behalf of
Nevada Manhattan, mailed a proxy statement to all stockholders of record as of
October 23, 1998. Subsequent to the mailing, the United States Securities and
Exchange Commission (the "Commission") contacted the Company and informed
management and counsel that the Proxy Statement and accompanying documents were
being reviewed by the Commission and comments would be forthcoming. During the
week ending Friday, November 20, 1998, the Company received comments from the
Commission and has heretofore amended the Proxy Statement to reflect the changes
outlined in the Commission's comments.
Please note the enclosed revised Proxy Statement for your review. As
well, the Company has included a new colored Proxy card for voting purposes.
Should you wish to amend your vote previously submitted, please fill out the new
Proxy card and submit it promptly; the new Proxy card will supersede your
previously mailed Proxy card. Should you wish to maintain your voting position
as it is reflected in the previously submitted Proxy, you do not need to respond
with the colored Proxy.
Please remember that when you complete and send in the enclosed Proxy,
either this new colored Proxy or the previously submitted Proxy, they can be
withdrawn should you attend the meeting and decide to change your vote.
Several of the proposals on the attached Proxy Statement require a
great amount of thought and attention to detail and we urge any and all
stockholders to feel free to ask questions, but again stress the need for prompt
stockholder response so the Company may move forward with respect to any and all
business development.
Again, should you wish to amend your previously submitted Proxy, please
immediately fill out the enclosed colored Proxy card and submit it to the
Company's transfer agent in the enclosed envelope. If your previously submitted
Proxy is satisfactory to you, you need not respond to this request.
Best Regards,
/s/ Christopher D. Michaels
Christopher D. Michaels
President/CEO
<PAGE>
1
TERRA NATURAL RESOURCES
(dba NEVADA MANHATTAN)
5038 North Parkway Calabasas
Suite 100
Calabasas, California 91302
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 9, 1998
TO THE STOCKHOLDERS OF TERRA NATURAL RESOURCES CORPORATION (dba NEVADA
MANHATTAN):
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Terra Natural Resources Corporation (the "Company") will be held on
December 9, 1998 at 9:00 A.M. at the Sheraton Gateway Hotel, Los Angeles
Airport, 6101 West Century Boulevard, Los Angeles, California for the purpose of
considering and acting on the following:
1. The election of seven persons to the Board of Directors to serve until
the next Annual Meeting or their earlier resignation or removal.
2. A proposed amendment to the Company's Articles of Incorporation to
change the Company's name to Nevada Manhattan Group, Incorporated.
3. A proposed amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common
Stock, $.01 par value per share, from 49,750,000 to 250,000,000.
4. A proposal to authorize the Board of Directors to grant options to
purchase up to 70,000,000 shares of the Company's Common Stock to an
investor.
5. Ratifying the Board's selection of Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's independent auditors for the fiscal year ending
May 31, 1999.
6. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
October 23, 1998 is the record date for determining which stockholders are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
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2
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE REVOKED
AT ANY TIME PRIOR TO ITS EXERCISE.
In order to facilitate planning for the Annual Meeting, please indicate on
the enclosed Proxy whether or not you plan to attend the Annual Meeting.
Dated: December 1, 1998
By Order of the Board of Directors,
Jeffrey S. Kramer
Secretary
<PAGE>
3
TERRA NATURAL RESOURCES
(dba NEVADA MANHATTAN)
5038 North Parkway Calabasas
Suite 100
Calabasas, California 91302
REVISED PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 9, 1998
The Board of Directors of Terra Natural Resources Corporation (the
"Company") is soliciting proxies in the form enclosed with this Proxy Statement
("Proxies") in connection with the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on December 9, 1998 at 9:00 A.M. at the
Sheraton Gateway Hotel, Los Angeles Airport, 6101 West Century Boulevard, Los
Angeles, California. The Company previously sent out proxy materials which are
superseded by this revised Proxy Statement. Stockholders who granted Proxies
prior to receipt of this revised Proxy Statement may revoke such Proxies in the
manner provided below.
It is expected that this Proxy Statement and the accompanying Proxy will
first be sent to stockholders on or about December 1, 1998. Only stockholders of
record at the close of business on October 23, 1998 are entitled to notice of
and to vote at the Annual Meeting.
The matters to be considered and voted upon at the Annual Meeting will be:
1. The election of seven persons to the Board of Directors to serve until
the next Annual Meeting or until their earlier resignation or removal.
2. A proposed amendment to the Company's Articles of Incorporation to
change the Company's name.
3. A proposed amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock").
4. A proposal to authorize the Board of Directors to grant options to
purchase up to 70,000,000 shares of the Company's Common Stock to an
investor.
5. Ratifying the Board's selection of Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's independent auditors for the fiscal year ending
May 31, 1999.
6. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
<PAGE>
4
A Proxy for use at the Annual Meeting is enclosed. Any stockholder who
executes and delivers the Proxy has the right to revoke it any time before it is
exercised by filing with U.S. Stock Transfer Corporation, 1745 Gardena Avenue,
Glendale, California 91204-2991, an instrument revoking the Proxy. It may also
be revoked if the stockholder executes a proxy bearing a later date or if the
stockholder attends the Annual Meeting and elects to vote thereat. Subject to
such revocation, all shares represented by a properly executed Proxy received in
time for the Annual Meeting will be voted by the Proxy holders in accordance
with the instructions on the Proxy.
If no instruction is specified on a Proxy with respect to a matter to be
acted upon, the shares represented thereby will be voted in favor of each item
of business set forth herein. It is not anticipated that any matters will be
presented at the Annual Meeting other than as set forth in the accompanying
Notice. If, however, any other business is properly presented at the Annual
Meeting, the Proxy will be voted in accordance with the best judgment and in the
discretion of the Proxy holders.
The Company's Board of Directors has determined that it is in the best
interests of the Company to adopt a procedure for stockholder proposals which
would give the Board of Directors the opportunity to consider such proposals,
thereby enabling the Board of Directors to inform stockholders about such
proposals. Accordingly, the Company's Board of Directors amended the Company's
Bylaws to add a new section as follows:
"STOCKHOLDER PROPOSALS. Proposals for business to be conducted
and actions to be taken by the stockholders at any annual or special
meeting may be made by resolution of the Board of Directors or a
committee appointed by the Board of Directors or by any stockholder
entitled to vote at such meeting. Notwithstanding the foregoing, any
stockholder may propose business to be conducted or actions to be
taken at a meeting of the stockholders only if written notice of such
stockholder's intent to propose such business or action has been given
to the Secretary of the Company not later than the earlier of (a) the
close of business on the fifteenth day following the date on which
notice of such meeting or the record date thereof is first publicly
announced [in this instance such public announcement was made on
October 13, 1998] and (b) forty-five days prior to the date that the
Company first mailed its proxy materials for the immediately preceding
annual meeting of stockholders with respect to proposals to be
considered at an annual meeting of stockholders. Each such notice
shall set forth: (a) the name and address of the stockholder who
intends to make the proposal; (b) a representation that the
stockholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at
the meeting to make the proposals specified in the notice; (c) a copy
of the proposal; and (d) such other information regarding the proposal
as is necessary to inform the stockholders with reasonable
particularity of the nature, purpose, intent and consequences of the
proposal to the Company if adopted. The presiding officer at the
meeting may refuse to acknowledge any proposal not made in compliance
with the foregoing procedure."
The aforesaid amendment to the Company's Bylaws does not apply to proposals
of security holders timely submitted in accordance with Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended. Such Rule generally
provides that, if a stockholder notifies the Company of his intention to present
a proposal for action at an upcoming stockholders' meeting, the Company must
include the proposal in the Company's proxy statement and form of proxy relating
to such meeting if the stockholder has met certain requirements. Such
requirements include timely notifying the Company of the proposal, providing the
Company with certain information, specified minimum stockholdings by the
stockholder and presentation of the proposal at the stockholders' meeting.
The expense of preparing, assembling, printing, mailing and filing this
Proxy Statement with the Securities and Exchange Commission and the materials
used in this solicitation of Proxies will be borne by the Company. It is
contemplated that Proxies will be solicited primarily through the mails.
Officers, directors and regular employees of the Company may also solicit
Proxies personally or by telephone, but will receive no compensation therefor in
addition to their regular compensation. The Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
<PAGE>
5
reasonable expenses in forwarding these proxy materials to their principals. In
addition, the Company may pay for and utilize the services of individuals or
companies not regularly employed by the Company in connection with the
solicitation of proxies if management of the Company determines that this is
advisable.
VOTING SECURITIES
Only stockholders of record as of the close of business on October 23, 1998
are entitled to notice of and to vote at the Annual Meeting or at any
adjournments thereof. As of the close of business on such date, there were
issued and outstanding 41,365,836 shares of the Company's Common Stock and
176,414 shares of Series A Preferred Stock, par value $1.00 per share (the
"Preferred Stock").
The Company is a plaintiff in lawsuits relating to convertible debentures
issued by the Company as described under "Legal Proceedings" in the Form 10-KSB
previously sent to stockholders (the "Form 10-KSB"). In that regard, parties to
such lawsuits allegedly converted convertible debentures into 6,569,104 shares
of Common Stock on or before the record date for the Annual Meeting. The Company
does not believe that it is obligated to issue such Common Stock and,
accordingly, does not consider such stock to be outstanding as of the aforesaid
record date.
The Company's Board of Directors is authorized to issue up to an aggregate
of 49,750,000 shares of Common Stock under its Articles of Incorporation. (See
"Proposed Increase in Authorized Common Stock" below with respect to a proposed
amendment of the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock.) Each holder of Common Stock will be entitled
to one vote for each share of Common Stock in his or her name on the books of
the transfer agent, U.S. Stock Transfer Corporation, as of the close of business
on the record date for the Annual Meeting on any matter submitted for a vote of
the stockholders.
The Company's Board of Directors is authorized to issue up to an aggregate
of 250,000 shares of Preferred Stock under the Company's Articles of
Incorporation. Except as otherwise expressly provided for by law or as provided
for under the terms of the Certificate of Determination relating to the
Preferred Stock, the holders of the Preferred Stock will be entitled to one vote
for each one share of Preferred Stock in his or her name on the books of the
transfer agent as of the close of business on the record date for the Annual
Meeting on any matter submitted for a vote of the stockholders of the Company.
The presence at the meeting in person or by proxy of the holders of shares
representing a majority of the voting power of the Company's stock entitled to
vote constitutes a quorum for the transaction of business. Nevada law provides
that a proxy is generally only valid for six months from its date unless the
stockholder specifies the duration of the proxy, which may not exceed seven
years. A plurality of the votes properly cast for the election of Directors by
the stockholders attending the meeting in person or by proxy will elect
Directors to office. With respect to amendments to the Company's Articles of
Incorporation, the vote of a majority of the outstanding voting power is
required. A majority of votes properly cast upon any other proposal will decide
the proposal. Abstentions and broker non-votes will count for purposes of
establishing a quorum, but will not count as votes cast for the election of
Directors or any other proposal and accordingly will have no legal effect.
<PAGE>
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 23, 1998
regarding the record and beneficial ownership of the Common Stock and Preferred
Stock by: (i) any individual or group (as that term is defined in the federal
securities laws) of affiliated individuals or entities who is known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock or Preferred Stock; (ii) each executive officer and
Director of the Company and each nominee for Director; and (iii) the executive
officers and Directors of the Company and the nominees for Director 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.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS TITLE OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER CLASS OWNERSHIP OF CLASS
- ------------------- -------- --------- --------
<S> <C> <C> <C>
TiNV1, Inc.(1) Common Stock 5,500,000(2) 13%
701 Ocean Avenue, Suite 108
Santa Monica, CA 90402 Preferred
Stock 0 *
Christopher D. Michaels Common Stock 1,658,917(3) 4%
5038 N. Pkwy Calabasas, Ste. 100
Calabasas, CA 91302 Preferred
Stock 5,314 3%
Jeffrey S. Kramer Common Stock 1,353,200(4) 3%
5038 N. Pkwy Calabasas, Ste 100
Calabasas, CA 91302 Preferred
Stock 8,550 5%
Stanley J. Mohr Common Stock 212,000(5) *
5038 N. Pkwy Calabasas, Ste 100
Calabasas, CA 91302 Preferred
Stock 1,220 *
Joe C. Rude III, M.D. Common Stock 3,256,230(6) 8%
3065 River N. Pkwy
Atlanta, Georgia 30328 Preferred
Stock 11,752 7%
William E. Wilson Common Stock 143,304(7) *
1819 E. Brainard Street
Pensacola, FL 32503 Preferred
Stock 789 *
Tetsuo Kitagawa Common Stock 5,500,000(8) 13%
23100 Ave. St. Luis, #389
Woodland Hills, CA 91364 Preferred
Stock 0 --
Hironao Mutoh Common Stock 5,500,000(8) 13%
536 Paseo De La Playa
Redondo Beach, CA 90277 Preferred
Stock 0 --
Neil H. Lewis Common Stock 0 --
18620 Hatteras Street, #175
Tarzana, CA 91356 Preferred
Stock 0 --
All Officers, Directors and
Nominees for Director Common Stock 12,123,651(9) 29%
as a Group
(eight persons) Preferred
Stock 27,625 16%
</TABLE>
_____
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7
* Less than 1%.
(1) On September 21, 1998 TiNV1, Inc. ("TiNV1"), newly formed California
corporation, filed with the Securities and Exchange Commission a Schedule
13D (the "Schedule 13D") regarding 5,500,000 shares of Common Stock it
purchased from the Company. The Schedule 13D indicated that TiNV1 was a
wholly-owned subsidiary of SYMIC, Inc. ("SYMIC"), a California corporation,
which in turn was a wholly-owned subsidiary of RDI, Inc. ("RDI"), a
California corporation. (The Schedule 13D further indicated that SYMIC had
entered into subscription agreements to issue 5% of its stock to each of
the following persons: Tetsuo Kitagawa, a nominee for Director; Hironao
Mutoh, a nominee for Director; and Richard Izumi.) The Schedule 13D stated
that RDI was in turn owned and controlled by Mr. Gakayev, whose address is
701 Ocean Avenue, Suite 108, Santa Monica, California 90402, and that Mr.
Kitagawa was sole Director and President, Chief Financial Officer and
Secretary of TiNV1, SYMIC and RDI. The Schedule 13D indicated that the
source of the funds used to purchase the stock was capital contributions to
RDI from personal funds of Movdy Gakayev, TiNV1's ultimate owner, and in
turn as capital contributions from RDI to SYMIC to TiNV1. For information
concerning TiNV1's purchase of the 5,500,000 shares and a related option
agreement in favor of TiNV1, see "Proposed Increase in Authorized Common
Stock" below.
(2) Excludes up to 70,000,000 shares of Common Stock which may be issued
pursuant to an option granted to TiNV1 as indicated under "Proposed
Increase in Authorized Common Stock" below. The 70,000,000 shares, together
with the 5,500,000 shares presently held by TiNV1, would represent
approximately 68% of the Company's presently outstanding Common Stock on a
pro forma basis as of October 23, 1998.
(3) Includes 120,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 5,314 shares of Common Stock issuable upon
conversion of 5,314 shares of Preferred Stock held by Mr. Michaels.
(4) Includes 90,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 8,550 shares of Common Stock issuable upon
conversion of 8,550 shares of Preferred Stock held by Mr. Kramer.
(5) Includes 105,000 shares held by The Lomar Trust, an affiliate of Mr. Mohr,
as well as 60,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 1,220 shares of Common Stock issuable upon
conversion of 1,220 shares of Preferred Stock held by Mr. Mohr.
(6) Includes shares owned by Dr. Carolyn Rude and Quantum Radiology (an
affiliate of Dr. Rude), as well as (a) 317,392 shares held as collateral as
provided under "Certain Relationships and Related Transactions" below, (b)
30,000 shares of Common Stock issuable upon exercise of stock options which
may be exercised in whole or in part within 60 days of the date of this
Proxy Statement and (c) 11,752 shares of Common Stock issuable upon
conversion of 11,752 shares of Preferred Stock held by Drs. Rude.
(7) Includes 789 shares of Common Stock issuable upon conversion of 789 shares
of Preferred Stock held by Mr. Wilson.
(8) Represents the shares held by TiNV1 as indicated above.
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8
(9) Includes 300,000 shares of Common Stock issuable upon exercise of stock
options held by all officers, Directors and nominees for Director as a
group which may be exercised in whole or in part within 60 days of the date
of this Proxy Statement and 27,625 shares of Common Stock issuable upon
conversion of 27,625 shares of Preferred Stock held by such persons.
ELECTION OF DIRECTORS
The number of Directors constituting the full Board of Directors currently
is fixed at seven, and seven nominees for Director are named in this Proxy
Statement. If elected, each of the Directors will serve for a one year term
expiring at the 1999 Annual Meeting or his earlier resignation or removal.
Approval of the election of each of the nominees as a Director of the Company
requires the affirmative vote of a plurality of the votes cast at the Annual
Meeting. (If Messrs. Kitagawa, Mutoh and Lewis, TiNV1's nominees, are not
elected, TiNV1 has certain rights as provided under "Proposed Increase in
Authorized Common Stock.") In the event that any of the named nominees for
Director becomes unable or unwilling to accept nomination or election, the
person or persons voting the Proxy will vote for the election of such other
person as the Board of Directors may recommend. Unless otherwise instructed on
the Proxy, the Proxy holders will vote the Proxies received by them in favor of
the election of the nominees shown below.
The Company's Board of Directors has determined that it is in the best
interests of the Company to adopt a procedure for stockholder nominations of
Directors which would afford the Board of Directors the opportunity to consider
the qualifications of proposed nominees and, to the extent necessary or
desirable, inform the stockholders about such qualifications. Accordingly, on
August 17, 1998, the Company's Board of Directors amended the Company's Bylaws
to add a new section as follows:
"STOCKHOLDER NOMINATION OF DIRECTORS. Nominations for the Board of
Directors may be made by resolution of the Board of Directors or a
committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors. Notwithstanding the
foregoing, any stockholder may nominate one or more persons for election as
Directors at a meeting of the stockholders only if written notice of such
stockholder's intent to make such nomination or nominations has been given
to the Secretary of the Company not later than the close of business on the
fifteenth day following the date on which notice of such meeting or the
record date thereof is first publicly announced [in this instance such
public announcement was made on October 13, 1998] or, if earlier with
respect to an election of Directors to be held at the annual meeting of
stockholders, ninety days prior to the date that is one year from the date
of the immediately preceding annual meeting of stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of any arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated by the Board of Directors; and
(e) the consent of each nominee to serve as a Director of the Company if so
elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure."
<PAGE>
9
The seven nominees proposed by the Board of Directors for election as
Directors are:
Principal Occupation and Director
Name Age Offices with the Company Since
- ---- --- ------------------------ --------
Christopher D. Michaels 55 President, Chief 1986
Executive Officer and
Chairman of the Board of
Directors of the Company
Jeffrey S. Kramer 44 Senior Vice President, 1989
Chief Financial Officer
and Secretary-Treasurer
of the Company
Joe C. Rude III 53 Diagnostic radiologist 1995
with Quantum Radiology
William E. Wilson 82 Retired 1998
Tetsuo Kitagawa 50 Nominee for Director 1998
Hironao Mutoh 44 Nominee for Director --
Neil H. Lewis 56 Nominee for Director 1998
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES SET FORTH BELOW TO SERVE
AS DIRECTORS OF THE COMPANY FOR THE TERM INDICATED.
Information concerning the nominees for election as Directors and the
Company's executive officers is set forth below.
CHRISTOPHER D. MICHAELS cofounded the Company in June 1986. He has served as
President, Chief Executive Officer and Chairman of the Board of Directors since
1986. Mr. Michaels is also a Director, President and Chairman of the Board of
Equatorial Resources, Ltd. and Kalimantan Resources, Ltd., subsidiaries of the
Company.
JEFFREY S. KRAMER is Senior Vice President, Chief Financial Officer,
Secretary-Treasurer and a Director of the Company and has held these positions
since 1989. Mr. Kramer is also a Director, Vice President and
Secretary-Treasurer of Equatorial Resources, Ltd. and Kalimantan Resources, Ltd.
JOE C. RUDE III has been a Director since 1995. From 1977 to 1995, he was a
diagnostic radiologist associated with Cobb Radiology Associates, Austell,
Georgia, which merged with Quantum Radiology in 1995. Since 1995, Dr. Rude has
been a diagnostic radiologist at Quantum Radiology. Dr. Rude also is a co-owner
of the Ambulatory Care Center, a medical care company.
WILLIAM E. WILSON was elected a director in April 1998. Mr. Wilson purchased his
own insurance agency in 1954, which was sold in 1985; however, Mr. Wilson
remained an associate agent until his retirement in 1996.
<PAGE>
10
TETSUO KITAGAWA is a nominee for Director. Mr. Kitagawa has been a Director of
the Company since October 1998 and has been President of SYMIC, a management
consulting firm, since October 1997, prior to which he was employed by Marubeni
Finance (Holland) B.V. ("Marubeni Finance"). For the last six of those years, he
was a Managing Director of Marubeni Finance, which is a wholly-owned subsidiary
of Marubeni, one of Japan's leading general trading companies (sogo shosha).
HIRONAO MUTOH is a nominee for Director. Since October 1998, Mr. Mutoh has been
consulting to the Company, without compensation, in order to establish the
Company's trading activities with respect to commodities produced and available
to the Company. From 1993 to July 1998, Mr. Mutoh served as Managing Director at
Delphi Trade Finance, overseeing all aspects of the company.
NEIL H. LEWIS is a nominee for Director. Mr. Lewis, who has been a Director of
the Company since October 1998, is an attorney in private practice and is a
consultant to the Company. (Mr. Lewis presently receives consulting fees from
the Company equal to $2,700 per month.) From March 1996 to June 1998, he served
as Secretary and Chairman of the Board of Directors of Unipharm, Inc., a
consulting firm for international business contracts. From July 1995 to July
1997, Mr. Lewis served as General Counsel and Secretary of Metamin Inc., a
distributor of herbal products, prior to which he was an attorney in private
practice.
Regulatory Proceedings
- ----------------------
As previously reported, 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 federal securities laws. 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 the entry of a consent judgment, which
judgment was entered on April 7, 1994, against the Company and certain of the
Company's past and present key employees, including Christopher D. Michaels,
Jeffrey S. Kramer and Stanley J. Mohr. Pursuant to the terms of the consent
judgment, the Company, the aforesaid three executives and the Company's
officers, agents and certain others were permanently enjoined from (a) selling
securities in violation of the registration provisions of the federal securities
laws and (b) violating the antifraud provisions of the federal securities laws.
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 any improper gains. On April 7, 1994, in
response to the audit 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 acknowledgment that the Company and its executive
officers had received no improper gains as a result of prior activities by the
Company in offering and selling its securities and that the consent judgment
resolved 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 them.
<PAGE>
11
Executive Compensation
- ----------------------
The following table sets forth the compensation paid to the Company's
executive officers for the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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) ($) SARs(#)(2) ($) ($)
- ---------- ------ ----------- ---------- ----------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher
Michaels, 1998 $ 156,000 -- $5,408 -- 10,000 -- --
President 1997 $ 251,299 -- $6,264 -- 10,000 -- --
and Chairman 1996 $ 100,449 -- $6,316 $ 225,000(3) 10,000 -- --
of the Board
Jeffrey 1998 $ 156,000 -- $6,056 -- 10,000 -- --
Kramer, 1997 $ 224,397 -- $8,080 -- 10,000 -- --
Senior Vice 1996 $ 117,791 -- $7,658 $ 225,000(3) 10,000 -- --
President and
Director
</TABLE>
(1) The Company pays the annual cost of health insurance for Messrs. Michaels
and Kramer and their respective dependents.
(2) In lieu of any other compensation the Company annually grants options to
purchase 10,000 shares of Common Stock at a purchase price of $1.00 per
share to all members of the Board of Directors for each full year of
service as an active member of the Board. In general options are
exercisable in full upon issuance and may not be exercised after the
expiration of ten years from the date of the grant and are nontransferable
other than by inheritance. (In 1996, the options granted to Messrs.
Michaels and Kramer were extended to be exercisable through May 31, 2006.)
As of the date of this Proxy Statement the Company has granted options
aggregating 120,000 shares to Mr. Michaels and 90,000 shares to Mr. Kramer.
(3) In 1995 the Company granted each of Messrs. Michaels and Kramer options to
purchase 900,000 shares of Common Stock at an average price of $1.50 per
share. Such options were granted pursuant to their employment agreements
described below. Messrs. Michaels and Kramer each exercised their options
during fiscal 1996, at which time the Company's Board of Directors agreed
to issue these shares for services rendered in lieu of payment of the
exercise price. The Company valued these restricted securities at $.25 per
share.
Messrs. Michaels and Kramer entered into employment agreements with the
Company as of January 1995 employing them as President and Senior Vice
President, respectively, until June 2001, subject to their rights to terminate
their agreements on 90 days notice. Their annual salaries were to be equal to
their salaries at the time of execution of the agreements, subject to annual
increases (or in limited cases decreases) at the Board of Directors' discretion.
The agreements also provide for bonuses of from 25% (if the Company's cash flow
is at least $1,000,000) to 75% (if the Company's cash flow exceeds $3,000,000)
of their base salaries. If within 12 months of a change in control (as defined
in the agreements) their employment is terminated other than for cause or if
they resign and their compensation, status, title and/or reporting
responsibilities were diminished after the change in control, they will be
entitled to a payment equal to 36 times their highest monthly salary during the
employment term. (The TiNV1 transactions described under "Proposed Increase in
Authorized Common Stock" below will not result in such a change in control.) In
<PAGE>
12
addition, upon a change of control which effects a change in incumbent
management they will have the right to purchase a number of shares of Common
Stock at a price of $.05 per share equal to 5% of the Company's outstanding
Common Stock prior to giving effect to the exercise of the option, and the
Company will pay them an amount equal to their taxes in connection with such
exercise. Substantially all of the Company's obligations under the agreements
continue if there is a termination of the employees as a result of disability.
Options and Stock Appreciation Rights
- -------------------------------------
The following table provides information relating to options granted to
those persons named in the "Summary Compensation Table" above during fiscal
1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
% of Total
Number of Securities Options/SARs
Underlying Options/ Granted to Exercise
SARS Employees or Base Expiration
Name Granted(4) in Fiscal Year Price($/Sh) Date
---- ---------- -------------- ----------- ----
<S> <C> <C> <C> <C>
Christopher D. Michaels(1)... 10,000 20% $ 1.00 May 31, '08
Jeffrey S. Kramer(1)......... 10,000 20% $ 1.00 May 31, '08
</TABLE>
__________
(1) See footnote (2) to the "Summary Compensation Table" for the terms of the
options.
The following table sets forth certain information with regard to option
exercises during fiscal 1998 by each of the executive officers named in the
"Summary Compensation Table" above:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number Of Unexercised Value Of Unexercised
Securities Underlying In-The-Money
Options/SARS Option/SARs
Shares Acquired at May 31, 1998 At May 31, 1998
On Exercise Value Exercisable/ Exercisable/
Name (#) Realized Unexercisable Unexercisable
---- --- -------- ------------- -------------
<S> <C> <C> <C> <C>
Christopher D.
Michaels...... 0 0 120,000/0 --
Jeffrey S. Kramer 0 0 90,000/0 --
</TABLE>
<PAGE>
13
Certain Relationships and Related Transactions
- ----------------------------------------------
During fiscal 1997 and 1998 the Company borrowed funds from Jeffrey S.
Kramer, an officer and Director of the Company. As of October 19, 1998 Mr.
Kramer had loaned the Company an aggregate of $714,000 which was evidenced by
promissory notes payable in January 1999 bearing interest at the rate of 8.0%
per annum. On October 20, 1998 $500,000 principal amount of the notes and
accrued interest thereon were canceled in exchange for 583,200 shares of the
Company's Common Stock. (On October 20, 1998, the market price for the Company's
Common Stock was approximately $.83 per share.)
During fiscal 1997, 1998 and 1999 the Company borrowed funds from Joe C.
Rude, a Director of the Company, and his wife, Dr. Carolyn Rude. Such loans were
generally for a period of one year and provided for interest at a rate of 10%
per annum. Certain of such loans were non-recourse and were collateralized by
shares of the Company's Common Stock. (Drs. Rude have the right to vote such
shares.) If such non-recourse loans are not paid when due, Drs. Rude are
entitled to keep the collateral in repayment of the loans. The total amount of
loans made by Drs. Rude from fiscal 1997 to date is $307,000. As of October 31,
1998, non-recourse loans aggregating $82,000 of the $307,000 loaned to the
Company had not been paid when due, as a result of which Drs. Rude retained the
128,000 shares of Common Stock which collateralized said loans. The remaining
loans are due from March 1999 to September 1999 and are secured by 317,392
shares of Common Stock. The market value of the collateral securing non-recourse
loans at the time such collateral was pledged exceeded the amount of the loans,
in general ranging from approximately two to eight times the amount of the
loans. Because Drs. Rude have supported the Company a multitude of times during
the Company's history, both through their personal time and making funds
available to the Company, from late June to early July 1998 the Company
requested Drs. Rude to purchase 1,500,000 shares of Common Stock from the
Company for $95,000 in order to provide funds to the Company so that the
Company's Brazilian timber activities could remain in operation. On the dates of
purchase, the market price of Common Stock ranged from approximately $.19 to
$.31 per share.
During fiscal 1998, the Company repaid loans and interest aggregating
$545,000 to Christopher D. Michaels, an officer and Director of the Company. On
October 20, 1998, Mr. Michaels purchased 929,500 shares of the Company's
restricted Common Stock and issued in exchange therefor a promissory note in the
amount of $278,850 (which bears interest at the prime rate plus 1%) and is due
October 20, 2003. (On August 17, 1998, the date of the Board action approving
the stock purchase, the market price for the Company's Common Stock was
approximately $.48 per share.) While Mr. Michaels has the right to vote the
929,500 shares, he cannot dispose of shares unless he applies at least 80% of
the sales proceeds to repayment of the promissory note.
Board of Directors and Committee Information
- --------------------------------------------
The Board of Directors met ten times during fiscal 1998. The Board of
Directors has a compensation committee which reviews and approves the Company's
executive compensation and administers grants of stock and stock options to the
Company's Directors, executives and employees. This committee, currently
consisting of Joe C. Rude III, William E. Wilson and Jeffrey S. Kramer, held
three meetings during fiscal 1998. The Company does not have standing audit or
nominating committees.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and certain officers and persons who own more than 10%
of the Company's Common Stock to file with the Securities and Exchange
Commission reports of ownership and of changes in beneficial ownership of Common
Stock and other equity securities of the Company and to provide the Company with
copies of such reports. To the Company's knowledge, based solely on its review
of the copies of the forms received by it, or written representations from
certain reporting persons that no Forms 5 were required for those persons, the
Company believes that for fiscal 1998 all reports were timely filed except three
late filings of Form 4 (which have now been made) by Joe C. Rude III, a Director
of the Company.
<PAGE>
14
PROPOSAL TO CHANGE THE COMPANY'S NAME
The Company's Board of Directors believes that it is in the Company's best
interests to change its name from Terra Natural Resources Corporation to Nevada
Manhattan Group, Incorporated. In May 12, 1998 the Company's name was changed
from Nevada Manhattan Mining Incorporated to Terra Natural Resources Corporation
because the use of the term "mining" did not reflect the importance of the
Company's non-mining operations. Since such name change, however, a number of
the Company's stockholders (including TiNV1) have indicated that they believe
that the name "Terra Natural Resources Corporation" is too generic and is not as
familiar and distinctive as "Nevada Manhattan Group, Incorporated." In addition,
the Company believes that the name "Nevada Manhattan Group, Incorporated" is a
better name in the international markets in which the Company does business.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO CHANGE THE
NAME OF THE COMPANY TO NEVADA MANHATTAN GROUP, INCORPORATED.
PROPOSED INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has approved and deems advisable an amendment to
Article V of the Company's Articles of Incorporation which would increase the
number of authorized shares of Common Stock from 49,750,000 to 250,000,000. The
amendment will not increase or otherwise affect the number of authorized shares
of Preferred Stock which may be issued by the Company.
As of record date for the Annual Meeting, in addition to the 41,365,836
shares of Common Stock issued and outstanding, an additional 2,244,164 shares of
Common Stock were reserved for issuance upon exercises of stock options and for
conversions of Preferred Stock. (The foregoing does not give effect to any
Common Stock which may be issued upon conversion of the Company's convertible
debentures as described under "Voting Securities.") Therefore, as of the record
date, excluding any Common Stock issuable upon conversion of the Company's
convertible debentures, there were a total of 43,610,000 shares of Common Stock
either issued and outstanding or reserved for issuance out of a total of
49,750,000 authorized shares of Common Stock, leaving only 6,140,000 shares of
Common Stock available for subsequent issuance or reservation. Authorizing the
Company to issue more shares than currently authorized by the Articles of
Incorporation will not affect any substantive rights, powers or privileges of
holders of Common Stock, except to the extent such holders are diluted, pro
rata, by the issuance of additional shares of Common Stock. Current holders of
the Company's Common Stock presently own 100% of the outstanding Common Stock;
if the proposed amendment to Article V to the Company's Articles of
Incorporation is approved and if all shares available thereunder are issued,
then the percentage ownership of the current holders of the Company's Common
Stock would be reduced to approximately 17% of the outstanding Common Stock.
Holders of Common Stock do not have any preemptive rights with respect to future
issuances of Common Stock.
On September 2, 1998, after discussions were initiated by TiNV1, TiNV1
and the Company entered into a Subscription Agreement and a letter agreement,
each dated as of August 28, 1998 (collectively, the "Purchase Agreements"),
pursuant to which TiNV1 purchased 5,500,000 shares of the Company's Common Stock
from the Company for $500,000. The Schedule 13D indicates that the source of the
funds used to purchase the stock was capital contributions to RDI from personal
funds of Movdy Gakayev, TiNV1's ultimate owner, and in turn as capital
contributions from RDI to SYMIC to TiNV1. Prior to entering into the Purchase
Agreements, TiNV1 had no affiliations with the Company. At the time the purchase
was being negotiated, the Company's Common Stock was trading at approximately
$.25 per share. The Board of Directors believed that the TiNV1 purchase was in
the best interests of the Company since the Company had pressing financial
needs, with no significant cash resources available to it at the time and a
substantial working capital deficit. Such pressing financial needs included (a)
the necessity of funding fees and expenses relating to the lawsuits referred to
<PAGE>
15
under "Voting Securities" above (in that regard the Company believed it needed a
minimum of $250,000 to fund such fees and expenses) and (b) paying the Company's
short-term payables which were approximately $300,000 at a time when the Company
had less than $50,000 in its bank accounts. The Board of Directors'
determination that the Purchase Agreements and the Option Agreement referred to
below were fair was based upon the following factors, among others: (a) the
Company had attempted to raise money from a variety of sources, including
capital providers known to the Company and banks, most of which indicated they
were not willing to commit any funds to the Company regardless of the terms; (b)
the only entities which indicated they might be willing to commit funds required
the issuance of convertible debt instruments of the type which the Company
believed was responsible for the serious decline in the Common Stock's trading
value in 1997 and 1998; (c) the Common Stock to be issued to TiNV1 was not
registered under the Securities Act of 1933, as amended, and therefore was
subject to significant resale restrictions, necessitating a sale price
significantly less than the price of freely-tradable Common Stock; and (d) the
belief that TiNV1 could assist the Company in locating a number of valuable
acquisitions. In that regard, while TiNV1 is not required to locate acquisitions
for the Company, Tetsuo Kitigawa, Hironao Mutoh and Richard Izumi, who are
affiliated with TiNV1, indicated that they believed, and management concurred,
that TiNV1 could assist the Company in locating a number of valuable
acquisitions, certain of which they have already identified to the Company,
which acquisitions would not have been available to the Company if the TiNV1
investment was not made. Such potential acquisitions include a Russian company
involved in timber and mining operations, Japanese trading companies and
companies with Russian resource-based technologies. The 5,500,000 shares
represents approximately 13% of the Company's outstanding Common Stock as of
October 23, 1998. The Purchase Agreements provide that the Company's Board of
Directors will be expanded to seven and that three designees of TiNV1 will be
elected to the Board of Directors. As a condition to its investment, TiNV1
required that it be granted three of the seven Board seats. While such
representation is disproportionate to TiNV1's present holdings in the Company,
it is less than TiNV1's relative ownership in the Company if TiNV1 exercises the
option referred to below. In addition, TiNV1 refused to make an investment in
the Company unless TiNV1 was granted the three Board seats. Subject to certain
exceptions provided for in the Purchase Agreements, including exceptions arising
on sales of the Company's Common Stock by TiNV1, the Company has also agreed
that three designees of TiNV1 will be included in each management slate of
nominees for the Board of Directors and that the Company will use its continuing
best efforts to cause such nominees to be elected to the Board. (Messrs.
Kitagawa, Mutoh and Lewis are TiNV1's nominees.) The Purchase Agreements provide
that all acquisitions and divestitures by the Company which require Board
approval and any issuances of securities to the Company's debentureholders must
be approved by a supermajority of the Company's Board of Directors (initially at
least five of the seven directors).
The Company has agreed to use its best efforts to create a class of
preferred stock (the "New Preferred Stock") automatically convertible into
Common Stock on a public sale with attributes no less favorable than those
comprising the shares purchased by TiNV1. The New Preferred Stock voting as a
class will be entitled to elect three Directors (except as provided in the
Purchase Agreements), and the Company has the right to exchange the New
Preferred Stock for the Common Stock acquired by TiNV1.
If TiNV1's nominees are not elected to the Board of Directors in
accordance with the Purchase Agreement, TiNV1 will have the right to sell any of
the Common Stock purchased by it (or New Preferred Stock issued in exchange
therefor) to the Company at a price equal to the greater of the purchase price
therefor and the average price established by an independent valuation by two
major accounting firms (the "Put Price"). The Purchase Agreements provide that
TiNV1 shall have certain other rights if its designees are not so elected in the
event that the Company does not have legally sufficient funds to repurchase its
stock (among other things, to have legally available funds the Company's assets
must exceed its liabilities), including selling the stock to a third party, with
the Company being responsible for the difference between the Put Price and the
sale price.
<PAGE>
16
Simultaneously with the execution of the Purchase Agreements, the
Company entered into an option agreement (the "Option Agreement") with TiNV1,
which Option Agreement is subject to stockholder approval (see "Grant of
Authority Regarding TiNV1 Option" below), including approval of an amendment to
the Company's Articles of Incorporation to increase the number of authorized
shares of Common Stock to 250,000,000. The Option Agreement allows the optionee
to purchase, on or before September 1, 2005, up to 70,000,000 shares of the
Company's Common Stock at a purchase price of $.335 per share, which was the
market price of the Company's Common Stock on August 28, 1998, the date of the
Option Agreement. (The 70,000,000 shares, together with the 5,500,000 shares
presently held by TiNV1, would represent approximately 68% of the Company's
presently outstanding Common Stock on a pro forma basis as of October 23, 1998.)
If the required stockholder approval is not obtained within 150 days of August
28, 1998, then the Option Agreement will be void. TiNV1 has advised the
Company's Board of Directors that TiNV1 plans to transfer a portion of the
options evidenced by the Option Agreement to Christopher Michaels and Jeffrey
Kramer, the Company's two principal executive officers, to induce them to remain
with the Company for an extended period. While the number of options which may
be transferred has not been specified, it is anticipated that it may be in the
range of 3,500,000 to 7,000,000 of the options (five to ten percent) for such
executives in the aggregate.
In the event the Company does not obtain the aforesaid stockholder
approval within the 150 day period, then TiNV1 may elect to rescind the Purchase
Agreements and receive a refund of the purchase price or obtain from Messrs.
Michaels and Kramer for no consideration all of the Company securities owned by
them with the exception of stock options, which will then be canceled.
The Board believes that the increased number of authorized shares of
Common Stock contemplated by the proposed amendment is desirable to enable the
Company to issue Common Stock under the TiNV1 option as described under "Grant
of Authority Regarding TiNV1 Option" and to make additional shares of Common
Stock available for issuance or reservation without further stockholder action.
THE BOARD STRONGLY BELIEVES THAT NOT HAVING THE SHARES AVAILABLE FOR ISSUANCE
WILL BE EXTREMELY DETRIMENTAL TO THE COMPANY'S GROWTH. The Board believes that
having additional shares authorized and available for issuance or reservation
will allow the Company to have greater flexibility in considering potential
future actions involving the issuance of stock which may be necessary or
desirable to accommodate the Company's growth plan, including capital raising
transactions and acquisitions. Such purposes might include, without limitation,
the issuance and sale of Common Stock (i) as part or all of the consideration
paid for purchases of businesses or other assets and/or for finders and other
consulting fees relating to such purchases (in that regard the Company is
actively considering the possibility of various such purchases), (ii) in public
or private offerings as a means of obtaining additional capital, (iii) to
satisfy any current or future obligations of the Company, whether or not
relating to financings, (iv) in connection with the exercise of options,
warrants, rights or the conversion of convertible securities of the Company, (v)
as part or all of the consideration to repay or retire any debt of the Company
or to serve as collateral for such debt, (vi) in connection with stock
dividends, or (vii) with respect to existing or new employee benefit or stock
ownership plans or employment agreements. Except as described above and as
described under "Grant of Authority Regarding TiNV1 Option," the Company has no
current commitment to issue any additional shares of Common Stock or any shares
of Preferred Stock. The Company does not presently contemplate seeking
stockholder approval for any future issuances of capital stock unless required
to do so by an obligation imposed by applicable law or a regulatory authority.
In addition, the flexibility vested in the Company's Board of Directors
to authorize the issuance and sale of authorized but unissued shares of Common
Stock could enhance the Board of Directors' bargaining capability on behalf of
the Company's stockholders in a takeover offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities or the
removal of incumbent management, even if such a transaction were favored by the
holders of the requisite number of the then outstanding shares. Accordingly,
stockholders of the Company might be deprived of an opportunity to consider a
takeover proposal which a third party might consider if the Company did not have
authorized but unissued shares of Common Stock. The Company is not aware of any
<PAGE>
17
present efforts to gain control of the Company or to organize a proxy contest.
If such a proposal were presented, management would make a recommendation based
upon the best interests of the Company's stockholders.
Accordingly, the Board of Directors has proposed that the first
paragraph of Article V of the Company's Articles of Incorporation be amended to
increase the Company's authorized Common Stock. As so amended, the first
paragraph would read as set forth below:
"This corporation is authorized to issue two classes of stock
to be designated, respectively, 'Common Stock' and 'Preferred Stock.'
The total number of shares which the corporation is authorized to issue
is 250,250,000, of which 250,000,000 shares shall be Common Stock, par
value $.01 per share, and 250,000 shares shall be Preferred Stock, par
value of $1.00 per share."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO APPROVE
THE PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED COMMON STOCK.
GRANT OF AUTHORITY REGARDING TiNV1 OPTION
As indicated above, the Company has entered into the Option Agreement
with TiNV1, which Option Agreement is subject to stockholder approval, including
approval of the increase in authorized Common Stock as provided above. The
Option Agreement allows the optionee to purchase, on or before September 1,
2005, 70,000,000 shares of the Company's Common Stock at a purchase price of
$.335 per share, which was the approximate price of the Company's Common Stock
on the date when TiNV1 first began to fund the Company. (The 70,000,000 shares,
together with the 5,500,000 shares presently held by TiNV1, would represent
approximately 68% of the Company's presently outstanding Common Stock on a pro
forma basis as of October 23, 1998.) If the required stockholder approval is not
obtained within 150 days of August 28, 1998, then the Option Agreement will be
void. TiNV1 has not advised the Company whether TiNV1 plans to vote the
5,500,000 shares of the Company's Common Stock it purchased in September 1998 on
this proposal. While stockholder approval of the Option Agreement is not
required under Nevada law, the Board of Directors believed that the Option
Agreement should be submitted to the Company's stockholders for their approval
because of the magnitude of the number of shares covered by the Option Agreement
and because exercise of the Option Agreement would enable TiNV1 to control the
Company.
In the event the Company does not obtain the aforesaid stockholder
approval within the 150 day period, then TiNV1 may elect to rescind its
agreements with the Company and receive a refund of the $500,000 purchase price
paid by it for the 5,500,000 shares of Common Stock or obtain from Messrs.
Michaels and Kramer for no consideration all of the Company securities owned by
them with the exception of stock options, which will then be canceled.
TiNV1 has advised the Company's Board of Directors that TiNV1 plans to
transfer a portion of the options evidenced by the Option Agreement to
Christopher Michaels and Jeffrey Kramer, the Company's two principal executive
officers, to induce them to remain with the Company for an extended period.
While the number of options which may be transferred has not been specified, it
is anticipated that it may be in the range of 3,500,000 to 7,000,000 of the
options (five to ten percent) for such executives in the aggregate. In addition,
exercises of the Option Agreement, whether by TiNV1 or Messrs. Michaels and
Kramer, will increase the number of shares of Common Stock Messrs. Michaels and
Kramer may purchase on a change in control of the Company as described under
"Election of Directors" above.
It is the opinion of the Board of Directors that it is in the best
interest of the Company's stockholders for them to authorize the Board of
Directors to grant options to purchase up to 70,000,000 shares of Common Stock
<PAGE>
18
to TiNV1 as provided above. Messrs. Kitigawa, Mutoh and Izumi, who are
affiliated with TiNV1, have indicated that they believe, and the Board of
Directors concurs, that TiNV1 can assist the Company in locating a number of
valuable acquisitions, certain of which they have already identified to the
Company, which acquisitions will not be available to the Company if the TiNV1
Option is not approved. Such potential acquisitions include a Russian company
involved in timber and mining operations, Japanese trading companies and
companies with Russian resource-based technologies. Furthermore, since the
affiliation of TiNV1 with the Company was announced, the per share price of the
Company's Common Stock has increased from $.335 on the trading day prior to the
announcement of the agreements with TiNV1 to $.83 on October 20, 1998, an
increase of over 147%. Finally, the Board of Directors believes that (a) if
TiNV1 elects to rescind its agreements with the Company, the Company would have
difficulty repaying the $500,000 purchase price and (b) if TiNV1 elects to
acquire the Company securities and cause the cancellation of outstanding stock
options held by Christopher Michaels and Jeffrey S. Kramer, the Company's
principal executive officers, such officers will no longer have the same
incentives as they presently have to maximize stockholder value.
The Company had net operating loss carryforwards amounting to
approximately $25,000,000 as of the end of fiscal 1998, which will expire if not
utilized starting in 2002. In general, federal income tax law imposes an annual
limitation on the use of net operating loss carryovers (the "Annual Limitation")
if there has been more than a 50 point increase in the percentage of the value
of a corporation's stock owned by its 5% stockholders over a three-year period
(an "Ownership Change"). An option is generally not treated as exercised unless
the option is issued for an abusive principal purpose. An abusive principal
purpose is a purpose to postpone the time of an ownership change while giving
the holder the benefit of ownership currently or by allowing the corporation to
earn income to absorb its losses before the ownership change occurs. Although
the Company believes that the TiNV1 option should not be deemed exercised, there
is a risk that the Internal Revenue Service will successfully take the position
that the option is deemed exercised resulting in an Ownership Change. If the
option is not deemed exercised, an Ownership Change would occur if the option is
exercised within three years of TiNV1's original purchase of its shares or the
occurrence of other sufficient increases in ownership by 5% stockholders. On an
Ownership Change, the Annual Limitation, in general, will be an amount equal to
the long-term tax-exempt rate times the value of the corporation's stock
immediately before the Ownership Change. Currently the value of the Company's
stock is approximately $30,000,000 and the long-term tax-exempt rate is
approximately 5%, so that the Annual Limitation if an Ownership Change occurred
currently would be approximately $1,450,000. Accordingly, approval of the TiNV1
option could result in a loss of the Company's net operating loss carryforwards.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO AUTHORIZE
THE BOARD OF DIRECTORS TO GRANT OPTIONS TO TiNV1 TO PURCHASE UP TO 70,000,000
SHARES OF COMMON STOCK ON THE TERMS DESCRIBED ABOVE. The Board of Directors
believes that approval of the Option Agreement is in the best interests of the
stockholders because, among other things, the Board of Directors believes that
TiNV1 can assist the Company in locating valuable acquisitions, as described
above, which acquisitions will not be available to the Company if the TiNV1
Option is not approved. Furthermore, if the Option Agreement is not approved,
the Board of Directors believes that (a) if TiNV1 elects to rescind its
agreements with the Company, which TiNV1 has the right to do, the Company would
have difficulty repaying the $500,000 purchase price and (b) if TiNV1 elects to
acquire the Company securities and cause the cancellation of outstanding stock
options held by Christopher Michaels and Jeffrey S. Kramer, the Company's
principal executive officers, such officers will no longer have the same
incentives as they presently have to maximize stockholder value.
<PAGE>
19
RATIFICATION OF AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
appointed Merdinger, Fruchter, Rosen & Corso, P.C. as independent auditors to
audit the consolidated financial statements of the Company for the fiscal year
ending May 31, 1999. Representatives of Merdinger, Fruchter, Rosen & Corso, P.C.
will be present at the Annual Meeting and will be afforded the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
On July 7, 1998, the Company hired Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's new independent auditors, replacing Jackson & Rhodes P.C.
While Jackson & Rhodes P.C. performed to the Company's satisfaction, the
decision to change accountants, which was approved by the Board of Directors of
the Company, was based in part on the fact that Merdinger, Fruchter, Rosen &
Corso, P.C. has a Los Angeles office and is a larger firm than Jackson & Rhodes
P.C.
In connection with Jackson & Rhodes P.C.'s audits of the Company's
financial statements for fiscal 1996 and 1997, there were no disagreements with
such firm on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedures which, if not resolved to
the satisfaction of Jackson & Rhodes P.C., would have caused Jackson & Rhodes
P.C. to make reference to the matter in such firm's report. Jackson & Rhodes
P.C.'s report on the Company's financial statements for each period for which
Jackson & Rhodes P.C. performed an audit of the Company's financial statements
contained no adverse or disclaimer of opinion and was not modified or qualified
as to uncertainty, audit scope or accounting principles.
GENERAL INFORMATION
Other Business
Management of the Company does not intend to present any business at
the Annual Meeting other than as set forth in the attached Notice of Annual
Meeting of Stockholders, and it has no information that others will present any
other business at the Annual Meeting. However, if any other matters are properly
raised, the persons named in the accompanying Proxy intend to vote in accordance
with their judgment on such matters.
Stockholder Proposals
- ---------------------
Any proposals that stockholders of the Company desire to have included in
the Company's proxy statement for the 1999 Annual Meeting must be received by
the Secretary of the Company no later than the close of business on July 5,
1999. Any other proposals that stockholders desire to present at the 1999 Annual
Meeting must be received by the Secretary of the Company, in accordance with the
Company's Bylaws, not later than the earlier of (a) the close of business on the
fifteenth day following the date on which notice of the 1999 Annual Meeting or
the record date thereof is first publicly announced and (b) October 15, 1999.
Additional Information
- ----------------------
Additional copies of the Company's Annual Report on Form 10-KSB for fiscal
1998, excluding certain of the exhibits thereto, may be obtained by Stockholders
without charge by writing to Jeffrey S. Kramer, Secretary of the Company, at
5038 North Parkway Calabasas, Suite 100, Calabasas, California 91302.
By Order of the Board of Directors
By Jeffrey S. Kramer
Secretary
<PAGE>
20
Common Stock Proxy
TERRA NATURAL RESOURCES CORPORATION (dba NEVADA MANHATTAN)
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher D. Michaels and Jeffrey S.
Kramer, and each of them, proxies with power of substitution each, for and in
the name of the undersigned to vote all shares of Common Stock of TERRA NATURAL
RESOURCES CORPORATION, a Nevada corporation (the "Company"), that the
undersigned would be entitled to vote at the Company's Annual Meeting of
Stockholders (the "Meeting") to be held on December 9, 1998, and at any
adjournments thereof, upon the matters set forth in the Notice of Annual
Meeting, hereby revoking any proxy heretofore given. The proxies are further
authorized to vote in their discretion upon such other business as may properly
come before the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 5.
1. Election of Directors. [ ] For all nominees [ ] Withhold Authority to vote
listed below for all nominees listed
below
Nominees: Christopher D. Michaels, Jeffrey S. Kramer, Joe C. Rude III, William
E. Wilson, Tetsuo Kitagawa, Hironao Mutoh, Neil H. Lewis
For, except vote withheld from the following nominee(s):________________________
2. Proposed amendment to Articles of Incorporation to change the Company's
name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposed amendment to the Articles of Incorporation to increase the
authorized Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Authorization for Board of Directors to grant options to purchase up to
70,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Ratifying the appointment of independent accountants for fiscal year
ending May 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
<PAGE>
21
(Please sign and date below)
The undersigned hereby ratifies and confirms all that the Proxy Holders, or any
of them, or their substitutes, shall lawfully do or cause to be done by virtue
hereof and hereby revokes any and all proxies heretofore given by the
undersigned to vote at the Annual Meeting.
Dated:____________________________
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
(Please date this Proxy and sign above as your name(s)
appear(s) on this card. Joint owners each should sign
personally. Corporate proxies should be signed by an
authorized officer. Executors, administrators, trustees,
etc. should give their full titles.)
I(We) will will not attend the meeting in person.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
APPROVAL OF BOTH AMENDMENTS TO THE ARTICLES OF INCORPORATION, FOR AUTHORIZATION
FOR BOARD TO GRANT UP TO 70,000,000 OPTIONS, FOR RATIFICATION OF THE APPOINTMENT
OF MERDINGER, FRUCHTER, ROSEN & CORSO, P.C. AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
<PAGE>
22
Preferred Stock Proxy
TERRA NATURAL RESOURCES CORPORATION (dba NEVADA MANHATTAN)
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher D. Michaels and Jeffrey S.
Kramer, and each of them, proxies with power of substitution each, for and in
the name of the undersigned to vote all shares of Preferred Stock of TERRA
NATURAL RESOURCES CORPORATION, a Nevada corporation (the "Company"), that the
undersigned would be entitled to vote at the Company's Annual Meeting of
Stockholders (the "Meeting") to be held on December 9, 1998, and at any
adjournments thereof, upon the matters set forth in the Notice of Annual
Meeting, hereby revoking any proxy heretofore given. The proxies are further
authorized to vote in their discretion upon such other business as may properly
come before the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 5.
1. Election of Directors. [ ] For all nominees [ ] Withhold Authority to vote
listed below for all nominees listed
below
Nominees: Christopher D. Michaels, Jeffrey S. Kramer, Joe C. Rude III, William
E. Wilson, Tetsuo Kitagawa, Hironao Mutoh, Neil H. Lewis
For, except vote withheld from the following nominee(s):________________________
2. Proposed amendment to Articles of Incorporation to change the Company's
name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposed amendment to the Articles of Incorporation to increase the
authorized Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Authorization for Board of Directors to grant options to purchase up to
70,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Ratifying the appointment of independent accountants for fiscal year
ending May 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
<PAGE>
23
(Please sign and date below)
The undersigned hereby ratifies and confirms all that the Proxy Holders, or any
of them, or their substitutes, shall lawfully do or cause to be done by virtue
hereof and hereby revokes any and all proxies heretofore given by the
undersigned to vote at the Annual Meeting.
Dated:____________________________
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
(Please date this Proxy and sign above as your name(s)
appear(s) on this card. Joint owners each should sign
personally. Corporate proxies should be signed by an
authorized officer. Executors, administrators, trustees,
etc. should give their full titles.)
I(We) will will not attend the meeting in person.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
APPROVAL OF BOTH AMENDMENTS TO THE ARTICLES OF INCORPORATION, FOR AUTHORIZATION
FOR BOARD TO GRANT UP TO 70,000,000 OPTIONS, FOR RATIFICATION OF THE APPOINTMENT
OF MERDINGER, FRUCHTER, ROSEN & CORSO, P.C. AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
<PAGE>
[Marked copy of Schedule 14A filing follows]
<PAGE>
i
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] Confidential, For Use of the
[x] Definitive Proxy Statement Commission Only (as permitted
Amendment No. 2
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
TERRA NATURAL RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(dba NEVADA MANHATTAN)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
________________________________________________________________________________
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(SC14A-07/98)
<PAGE>
ii
(TERRA NATURAL RESOURCES CORPORATION LETTERHEAD)
December 1, 1998
Dear Stockholder:
On November 5, 1998, U.S. Stock Transfer Corporation, on behalf of
Nevada Manhattan, mailed a proxy statement to all stockholders of record as of
October 23, 1998. Subsequent to the mailing, the United States Securities and
Exchange Commission (the "Commission") contacted the Company and informed
management and counsel that the Proxy Statement and accompanying documents were
being reviewed by the Commission and comments would be forthcoming. During the
week ending Friday, November 20, 1998, the Company received comments from the
Commission and has heretofore amended the Proxy Statement to reflect the changes
outlined in the Commission's comments.
Please note the enclosed revised Proxy Statement for your review. As
well, the Company has included a new colored Proxy card for voting purposes.
Should you wish to amend your vote previously submitted, please fill out the new
Proxy card and submit it promptly; the new Proxy card will supersede your
previously mailed Proxy card. Should you wish to maintain your voting position
as it is reflected in the previously submitted Proxy, you do not need to respond
with the colored Proxy.
Please remember that when you complete and send in the enclosed Proxy,
either this new colored Proxy or the previously submitted Proxy, they can be
withdrawn should you attend the meeting and decide to change your vote.
Several of the proposals on the attached Proxy Statement require a
great amount of thought and attention to detail and we urge any and all
stockholders to feel free to ask questions, but again stress the need for prompt
stockholder response so the Company may move forward with respect to any and all
business development.
Again, should you wish to amend your previously submitted Proxy, please
immediately fill out the enclosed colored Proxy card and submit it to the
Company's transfer agent in the enclosed envelope. If your previously submitted
Proxy is satisfactory to you, you need not respond to this request.
Best Regards,
/s/ Christopher D. Michaels
Christopher D. Michaels
President/CEO
<PAGE>
1
TERRA NATURAL RESOURCES
(dba NEVADA MANHATTAN)
5038 North Parkway Calabasas
Suite 100
Calabasas, California 91302
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 9, 1998
TO THE STOCKHOLDERS OF TERRA NATURAL RESOURCES CORPORATION (dba NEVADA
MANHATTAN):
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Terra Natural Resources Corporation (the "Company") will be held on
December 9, 1998 at 9:00 A.M. at the Sheraton Gateway Hotel, Los Angeles
Airport, 6101 West Century Boulevard, Los Angeles, California for the purpose of
considering and acting on the following:
1. The election of seven persons to the Board of Directors to serve until
the next Annual Meeting or their earlier resignation or removal.
2. A proposed amendment to the Company's Articles of Incorporation to
change the Company's name to Nevada Manhattan Group, Incorporated.
3. A proposed amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common
Stock, $.01 par value per share, from 49,750,000 to 250,000,000.
4. A proposal to authorize the Board of Directors to grant options to
purchase up to 70,000,000 shares of the Company's Common Stock to an
investor.
5. Ratifying the Board's selection of Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's independent auditors for the fiscal year ending
May 31, 1999.
6. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
October 23, 1998 is the record date for determining which stockholders are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
<PAGE>
2
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE REVOKED
AT ANY TIME PRIOR TO ITS EXERCISE.
In order to facilitate planning for the Annual Meeting, please indicate on
the enclosed Proxy whether or not you plan to attend the Annual Meeting.
Dated: December 1, 1998
By Order of the Board of Directors,
Jeffrey S. Kramer
Secretary
<PAGE>
3
TERRA NATURAL RESOURCES
(dba NEVADA MANHATTAN)
5038 North Parkway Calabasas
Suite 100
Calabasas, California 91302
REVISED PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 9, 1998
The Board of Directors of Terra Natural Resources Corporation (the
"Company") is soliciting proxies in the form enclosed with this Proxy Statement
("Proxies") in connection with the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held on December 9, 1998 at 9:00 A.M. at the
Sheraton Gateway Hotel, Los Angeles Airport, 6101 West Century Boulevard, Los
Angeles, California. The Company previously sent out proxy materials which are
superseded by this revised Proxy Statement. Stockholders who granted Proxies
prior to receipt of this revised Proxy Statement may revoke such Proxies in the
manner provided below.
It is expected that this Proxy Statement and the accompanying Proxy will
first be sent to stockholders on or about December 1, 1998. Only stockholders of
record at the close of business on October 23, 1998 are entitled to notice of
and to vote at the Annual Meeting.
The matters to be considered and voted upon at the Annual Meeting will be:
1. The election of seven persons to the Board of Directors to serve until
the next Annual Meeting or until their earlier resignation or removal.
2. A proposed amendment to the Company's Articles of Incorporation to
change the Company's name.
3. A proposed amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock").
4. A proposal to authorize the Board of Directors to grant options to
purchase up to 70,000,000 shares of the Company's Common Stock to an
investor.
5. Ratifying the Board's selection of Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's independent auditors for the fiscal year ending
May 31, 1999.
6. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournments thereof.
<PAGE>
4
A Proxy for use at the Annual Meeting is enclosed. Any stockholder who
executes and delivers the Proxy has the right to revoke it any time before it is
exercised by filing with U.S. Stock Transfer Corporation, 1745 Gardena Avenue,
Glendale, California 91204-2991, an instrument revoking the Proxy. It may also
be revoked if the stockholder executes a proxy bearing a later date or if the
stockholder attends the Annual Meeting and elects to vote thereat. Subject to
such revocation, all shares represented by a properly executed Proxy received in
time for the Annual Meeting will be voted by the Proxy holders in accordance
with the instructions on the Proxy.
If no instruction is specified on a Proxy with respect to a matter to be
acted upon, the shares represented thereby will be voted in favor of each item
of business set forth herein. It is not anticipated that any matters will be
presented at the Annual Meeting other than as set forth in the accompanying
Notice. If, however, any other business is properly presented at the Annual
Meeting, the Proxy will be voted in accordance with the best judgment and in the
discretion of the Proxy holders.
The Company's Board of Directors has determined that it is in the best
interests of the Company to adopt a procedure for stockholder proposals which
would give the Board of Directors the opportunity to consider such proposals,
thereby enabling the Board of Directors to inform stockholders about such
proposals. Accordingly, the Company's Board of Directors amended the Company's
Bylaws to add a new section as follows:
"STOCKHOLDER PROPOSALS. Proposals for business to be conducted
and actions to be taken by the stockholders at any annual or special
meeting may be made by resolution of the Board of Directors or a
committee appointed by the Board of Directors or by any stockholder
entitled to vote at such meeting. Notwithstanding the foregoing, any
stockholder may propose business to be conducted or actions to be
taken at a meeting of the stockholders only if written notice of such
stockholder's intent to propose such business or action has been given
to the Secretary of the Company not later than the earlier of (a) the
close of business on the fifteenth day following the date on which
notice of such meeting or the record date thereof is first publicly
announced [in this instance such public announcement was made on
October 13, 1998] and (b) forty-five days prior to the date that the
Company first mailed its proxy materials for the immediately preceding
annual meeting of stockholders with respect to proposals to be
considered at an annual meeting of stockholders. Each such notice
shall set forth: (a) the name and address of the stockholder who
intends to make the proposal; (b) a representation that the
stockholder is a holder of record of stock of the Company entitled to
vote at such meeting and intends to appear in person or by proxy at
the meeting to make the proposals specified in the notice; (c) a copy
of the proposal; and (d) such other information regarding the proposal
as is necessary to inform the stockholders with reasonable
particularity of the nature, purpose, intent and consequences of the
proposal to the Company if adopted. The presiding officer at the
meeting may refuse to acknowledge any proposal not made in compliance
with the foregoing procedure."
The aforesaid amendment to the Company's Bylaws does not apply to proposals
of security holders timely submitted in accordance with Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended. Such Rule generally
provides that, if a stockholder notifies the Company of his intention to present
a proposal for action at an upcoming stockholders' meeting, the Company must
include the proposal in the Company's proxy statement and form of proxy relating
to such meeting if the stockholder has met certain requirements. Such
requirements include timely notifying the Company of the proposal, providing the
Company with certain information, specified minimum stockholdings by the
stockholder and presentation of the proposal at the stockholders' meeting.
The expense of preparing, assembling, printing, mailing and filing this
Proxy Statement with the Securities and Exchange Commission and the materials
used in this solicitation of Proxies will be borne by the Company. It is
contemplated that Proxies will be solicited primarily through the mails.
Officers, directors and regular employees of the Company may also solicit
Proxies personally or by telephone, but will receive no compensation therefor in
addition to their regular compensation. The Company will reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
<PAGE>
5
reasonable expenses in forwarding these proxy materials to their principals. In
addition, the Company may pay for and utilize the services of individuals or
companies not regularly employed by the Company in connection with the
solicitation of proxies if management of the Company determines that this is
advisable.
VOTING SECURITIES
Only stockholders of record as of the close of business on October 23, 1998
are entitled to notice of and to vote at the Annual Meeting or at any
adjournments thereof. As of the close of business on such date, there were
issued and outstanding 41,365,836 shares of the Company's Common Stock and
176,414 shares of Series A Preferred Stock, par value $1.00 per share (the
"Preferred Stock").
The Company is a plaintiff in lawsuits relating to convertible debentures
issued by the Company as described under "Legal Proceedings" in the Form 10-KSB
previously sent to stockholders (the "Form 10-KSB"). In that regard, parties to
such lawsuits allegedly converted convertible debentures into 6,569,104 shares
of Common Stock on or before the record date for the Annual Meeting. The Company
does not believe that it is obligated to issue such Common Stock and,
accordingly, does not consider such stock to be outstanding as of the aforesaid
record date.
The Company's Board of Directors is authorized to issue up to an aggregate
of 49,750,000 shares of Common Stock under its Articles of Incorporation. (See
"Proposed Increase in Authorized Common Stock" below with respect to a proposed
amendment of the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock.) Each holder of Common Stock will be entitled
to one vote for each share of Common Stock in his or her name on the books of
the transfer agent, U.S. Stock Transfer Corporation, as of the close of business
on the record date for the Annual Meeting on any matter submitted for a vote of
the stockholders.
The Company's Board of Directors is authorized to issue up to an aggregate
of 250,000 shares of Preferred Stock under the Company's Articles of
Incorporation. Except as otherwise expressly provided for by law or as provided
for under the terms of the Certificate of Determination relating to the
Preferred Stock, the holders of the Preferred Stock will be entitled to one vote
for each one share of Preferred Stock in his or her name on the books of the
transfer agent as of the close of business on the record date for the Annual
Meeting on any matter submitted for a vote of the stockholders of the Company.
The presence at the meeting in person or by proxy of the holders of shares
representing a majority of the voting power of the Company's stock entitled to
vote constitutes a quorum for the transaction of business. Nevada law provides
that a proxy is generally only valid for six months from its date unless the
stockholder specifies the duration of the proxy, which may not exceed seven
years. A plurality of the votes properly cast for the election of Directors by
the stockholders attending the meeting in person or by proxy will elect
Directors to office. With respect to amendments to the Company's Articles of
Incorporation, the vote of a majority of the outstanding voting power is
required. A majority of votes properly cast upon any other proposal will decide
the proposal. Abstentions and broker non-votes will count for purposes of
establishing a quorum, but will not count as votes cast for the election of
Directors or any other proposal and accordingly will have no legal effect.
<PAGE>
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 23, 1998
regarding the record and beneficial ownership of the Common Stock and Preferred
Stock by: (i) any individual or group (as that term is defined in the federal
securities laws) of affiliated individuals or entities who is known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock or Preferred Stock; (ii) each executive officer and
Director of the Company and each nominee for Director; and (iii) the executive
officers and Directors of the Company and the nominees for Director 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.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS TITLE OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER CLASS OWNERSHIP OF CLASS
- ------------------- -------- --------- --------
<S> <C> <C> <C>
TiNV1, Inc.(1) Common Stock 5,500,000(2) 13%
701 Ocean Avenue, Suite 108
Santa Monica, CA 90402 Preferred
Stock 0 *
Christopher D. Michaels Common Stock 1,658,917(3) 4%
5038 N. Pkwy Calabasas, Ste. 100
Calabasas, CA 91302 Preferred
Stock 5,314 3%
Jeffrey S. Kramer Common Stock 1,353,200(4) 3%
5038 N. Pkwy Calabasas, Ste 100
Calabasas, CA 91302 Preferred
Stock 8,550 5%
Stanley J. Mohr Common Stock 212,000(5) *
5038 N. Pkwy Calabasas, Ste 100
Calabasas, CA 91302 Preferred
Stock 1,220 *
Joe C. Rude III, M.D. Common Stock 3,256,230(6) 8%
3065 River N. Pkwy
Atlanta, Georgia 30328 Preferred
Stock 11,752 7%
William E. Wilson Common Stock 143,304(7) *
1819 E. Brainard Street
Pensacola, FL 32503 Preferred
Stock 789 *
Tetsuo Kitagawa Common Stock 5,500,000(8) 13%
23100 Ave. St. Luis, #389
Woodland Hills, CA 91364 Preferred
Stock 0 --
Hironao Mutoh Common Stock 5,500,000(8) 13%
536 Paseo De La Playa
Redondo Beach, CA 90277 Preferred
Stock 0 --
Neil H. Lewis Common Stock 0 --
18620 Hatteras Street, #175
Tarzana, CA 91356 Preferred
Stock 0 --
All Officers, Directors and
Nominees for Director Common Stock 12,123,651(9) 29%
as a Group
(eight persons) Preferred
Stock 27,625 16%
</TABLE>
_____
<PAGE>
7
* Less than 1%.
(1) On September 21, 1998 TiNV1, Inc. ("TiNV1"), newly formed California
corporation, filed with the Securities and Exchange Commission a Schedule
13D (the "Schedule 13D") regarding 5,500,000 shares of Common Stock it
purchased from the Company. The Schedule 13D indicated that TiNV1 was a
wholly-owned subsidiary of SYMIC, Inc. ("SYMIC"), a California corporation,
which in turn was a wholly-owned subsidiary of RDI, Inc. ("RDI"), a
California corporation. (The Schedule 13D further indicated that SYMIC had
entered into subscription agreements to issue 5% of its stock to each of
the following persons: Tetsuo Kitagawa, a nominee for Director; Hironao
Mutoh, a nominee for Director; and Richard Izumi.) The Schedule 13D stated
that RDI was in turn owned and controlled by Mr. Gakayev, whose address is
701 Ocean Avenue, Suite 108, Santa Monica, California 90402, and that Mr.
Kitagawa was sole Director and President, Chief Financial Officer and
Secretary of TiNV1, SYMIC and RDI. The Schedule 13D indicated that the
source of the funds used to purchase the stock was capital contributions to
RDI from personal funds of Movdy Gakayev, TiNV1's ultimate owner, and in
turn as capital contributions from RDI to SYMIC to TiNV1. For information
concerning TiNV1's purchase of the 5,500,000 shares and a related option
agreement in favor of TiNV1, see "Proposed Increase in Authorized Common
Stock" below.
(2) Excludes up to 70,000,000 shares of Common Stock which may be issued
pursuant to an option granted to TiNV1 as indicated under "Proposed
Increase in Authorized Common Stock" below. The 70,000,000 shares, together
with the 5,500,000 shares presently held by TiNV1, would represent
approximately 68% of the Company's presently outstanding Common Stock on a
pro forma basis as of October 23, 1998.
(3) Includes 120,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 5,314 shares of Common Stock issuable upon
conversion of 5,314 shares of Preferred Stock held by Mr. Michaels.
(4) Includes 90,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 8,550 shares of Common Stock issuable upon
conversion of 8,550 shares of Preferred Stock held by Mr. Kramer.
(5) Includes 105,000 shares held by The Lomar Trust, an affiliate of Mr. Mohr,
as well as 60,000 shares of Common Stock issuable upon exercise of stock
options which may be exercised in whole or in part within 60 days of the
date of this Proxy Statement and 1,220 shares of Common Stock issuable upon
conversion of 1,220 shares of Preferred Stock held by Mr. Mohr.
(6) Includes shares owned by Dr. Carolyn Rude and Quantum Radiology (an
affiliate of Dr. Rude), as well as (a) 317,392 shares held as collateral as
provided under "Certain Relationships and Related Transactions" below, (b)
30,000 shares of Common Stock issuable upon exercise of stock options which
may be exercised in whole or in part within 60 days of the date of this
Proxy Statement and (c) 11,752 shares of Common Stock issuable upon
conversion of 11,752 shares of Preferred Stock held by Drs. Rude.
(7) Includes 789 shares of Common Stock issuable upon conversion of 789 shares
of Preferred Stock held by Mr. Wilson.
(8) Represents the shares held by TiNV1 as indicated above.
<PAGE>
8
(9) Includes 300,000 shares of Common Stock issuable upon exercise of stock
options held by all officers, Directors and nominees for Director as a
group which may be exercised in whole or in part within 60 days of the date
of this Proxy Statement and 27,625 shares of Common Stock issuable upon
conversion of 27,625 shares of Preferred Stock held by such persons.
ELECTION OF DIRECTORS
The number of Directors constituting the full Board of Directors currently
is fixed at seven, and seven nominees for Director are named in this Proxy
Statement. If elected, each of the Directors will serve for a one year term
expiring at the 1999 Annual Meeting or his earlier resignation or removal.
Approval of the election of each of the nominees as a Director of the Company
requires the affirmative vote of a plurality of the votes cast at the Annual
Meeting. (If Messrs. Kitagawa, Mutoh and Lewis, TiNV1's nominees, are not
elected, TiNV1 has certain rights as provided under "Proposed Increase in
Authorized Common Stock.") In the event that any of the named nominees for
Director becomes unable or unwilling to accept nomination or election, the
person or persons voting the Proxy will vote for the election of such other
person as the Board of Directors may recommend. Unless otherwise instructed on
the Proxy, the Proxy holders will vote the Proxies received by them in favor of
the election of the nominees shown below.
The Company's Board of Directors has determined that it is in the best
interests of the Company to adopt a procedure for stockholder nominations of
Directors which would afford the Board of Directors the opportunity to consider
the qualifications of proposed nominees and, to the extent necessary or
desirable, inform the stockholders about such qualifications. Accordingly, on
August 17, 1998, the Company's Board of Directors amended the Company's Bylaws
to add a new section as follows:
"STOCKHOLDER NOMINATION OF DIRECTORS. Nominations for the Board of
Directors may be made by resolution of the Board of Directors or a
committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors. Notwithstanding the
foregoing, any stockholder may nominate one or more persons for election as
Directors at a meeting of the stockholders only if written notice of such
stockholder's intent to make such nomination or nominations has been given
to the Secretary of the Company not later than the close of business on the
fifteenth day following the date on which notice of such meeting or the
record date thereof is first publicly announced [in this instance such
public announcement was made on October 13, 1998] or, if earlier with
respect to an election of Directors to be held at the annual meeting of
stockholders, ninety days prior to the date that is one year from the date
of the immediately preceding annual meeting of stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of any arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had the nominee been nominated by the Board of Directors; and
(e) the consent of each nominee to serve as a Director of the Company if so
elected. The presiding officer at the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure."
<PAGE>
9
The seven nominees proposed by the Board of Directors for election as
Directors are:
Principal Occupation and Director
Name Age Offices with the Company Since
- ---- --- ------------------------ --------
Christopher D. Michaels 55 President, Chief 1986
Executive Officer and
Chairman of the Board of
Directors of the Company
Jeffrey S. Kramer 44 Senior Vice President, 1989
Chief Financial Officer
and Secretary-Treasurer
of the Company
Joe C. Rude III 53 Diagnostic radiologist 1995
with Quantum Radiology
William E. Wilson 82 Retired 1998
Tetsuo Kitagawa 50 Nominee for Director 1998
Hironao Mutoh 44 Nominee for Director --
Neil H. Lewis 56 Nominee for Director 1998
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES SET FORTH BELOW TO SERVE
AS DIRECTORS OF THE COMPANY FOR THE TERM INDICATED.
Information concerning the nominees for election as Directors and the
Company's executive officers is set forth below.
CHRISTOPHER D. MICHAELS cofounded the Company in June 1986. He has served as
President, Chief Executive Officer and Chairman of the Board of Directors since
1986. Mr. Michaels is also a Director, President and Chairman of the Board of
Equatorial Resources, Ltd. and Kalimantan Resources, Ltd., subsidiaries of the
Company.
JEFFREY S. KRAMER is Senior Vice President, Chief Financial Officer,
Secretary-Treasurer and a Director of the Company and has held these positions
since 1989. Mr. Kramer is also a Director, Vice President and
Secretary-Treasurer of Equatorial Resources, Ltd. and Kalimantan Resources, Ltd.
JOE C. RUDE III has been a Director since 1995. From 1977 to 1995, he was a
diagnostic radiologist associated with Cobb Radiology Associates, Austell,
Georgia, which merged with Quantum Radiology in 1995. Since 1995, Dr. Rude has
been a diagnostic radiologist at Quantum Radiology. Dr. Rude also is a co-owner
of the Ambulatory Care Center, a medical care company.
WILLIAM E. WILSON was elected a director in April 1998. Mr. Wilson purchased his
own insurance agency in 1954, which was sold in 1985; however, Mr. Wilson
remained an associate agent until his retirement in 1996.
<PAGE>
10
TETSUO KITAGAWA is a nominee for Director. Mr. Kitagawa has been a Director of
the Company since October 1998 and has been President of SYMIC, a management
consulting firm, since October 1997, prior to which he was employed by Marubeni
Finance (Holland) B.V. ("Marubeni Finance"). For the last six of those years, he
was a Managing Director of Marubeni Finance, which is a wholly-owned subsidiary
of Marubeni, one of Japan's leading general trading companies (sogo shosha).
HIRONAO MUTOH is a nominee for Director. Since October 1998, Mr. Mutoh has been
consulting to the Company, without compensation, in order to establish the
Company's trading activities with respect to commodities produced and available
to the Company. From 1993 to July 1998, Mr. Mutoh served as Managing Director at
Delphi Trade Finance, overseeing all aspects of the company.
NEIL H. LEWIS is a nominee for Director. Mr. Lewis, who has been a Director of
the Company since October 1998, is an attorney in private practice and is a
consultant to the Company. (Mr. Lewis presently receives consulting fees from
the Company equal to $2,700 per month.) From March 1996 to June 1998, he served
as Secretary and Chairman of the Board of Directors of Unipharm, Inc., a
consulting firm for international business contracts. From July 1995 to July
1997, Mr. Lewis served as General Counsel and Secretary of Metamin Inc., a
distributor of herbal products, prior to which he was an attorney in private
practice.
Regulatory Proceedings
- ----------------------
As previously reported, 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 federal securities laws. 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 the entry of a consent judgment, which
judgment was entered on April 7, 1994, against the Company and certain of the
Company's past and present key employees, including Christopher D. Michaels,
Jeffrey S. Kramer and Stanley J. Mohr. Pursuant to the terms of the consent
judgment, the Company, the aforesaid three executives and the Company's
officers, agents and certain others were permanently enjoined from (a) selling
securities in violation of the registration provisions of the federal securities
laws and (b) violating the antifraud provisions of the federal securities laws.
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 any improper gains. On April 7, 1994, in
response to the audit 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 acknowledgment that the Company and its executive
officers had received no improper gains as a result of prior activities by the
Company in offering and selling its securities and that the consent judgment
resolved 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 them.
<PAGE>
11
Executive Compensation
- ----------------------
The following table sets forth the compensation paid to the Company's
executive officers for the last three fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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) ($) SARs(#)(2) ($) ($)
- ---------- ------ ----------- ---------- ----------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher
Michaels, 1998 $ 156,000 -- $5,408 -- 10,000 -- --
President 1997 $ 251,299 -- $6,264 -- 10,000 -- --
and Chairman 1996 $ 100,449 -- $6,316 $ 225,000(3) 10,000 -- --
of the Board
Jeffrey 1998 $ 156,000 -- $6,056 -- 10,000 -- --
Kramer, 1997 $ 224,397 -- $8,080 -- 10,000 -- --
Senior Vice 1996 $ 117,791 -- $7,658 $ 225,000(3) 10,000 -- --
President and
Director
</TABLE>
(1) The Company pays the annual cost of health insurance for Messrs. Michaels
and Kramer and their respective dependents.
(2) In lieu of any other compensation the Company annually grants options to
purchase 10,000 shares of Common Stock at a purchase price of $1.00 per
share to all members of the Board of Directors for each full year of
service as an active member of the Board. In general options are
exercisable in full upon issuance and may not be exercised after the
expiration of ten years from the date of the grant and are nontransferable
other than by inheritance. (In 1996, the options granted to Messrs.
Michaels and Kramer were extended to be exercisable through May 31, 2006.)
As of the date of this Proxy Statement the Company has granted options
aggregating 120,000 shares to Mr. Michaels and 90,000 shares to Mr. Kramer.
(3) In 1995 the Company granted each of Messrs. Michaels and Kramer options to
purchase 900,000 shares of Common Stock at an average price of $1.50 per
share. Such options were granted pursuant to their employment agreements
described below. Messrs. Michaels and Kramer each exercised their options
during fiscal 1996, at which time the Company's Board of Directors agreed
to issue these shares for services rendered in lieu of payment of the
exercise price. The Company valued these restricted securities at $.25 per
share.
Messrs. Michaels and Kramer entered into employment agreements with the
Company as of January 1995 employing them as President and Senior Vice
President, respectively, until June 2001, subject to their rights to terminate
their agreements on 90 days notice. Their annual salaries were to be equal to
their salaries at the time of execution of the agreements, subject to annual
increases (or in limited cases decreases) at the Board of Directors' discretion.
The agreements also provide for bonuses of from 25% (if the Company's cash flow
is at least $1,000,000) to 75% (if the Company's cash flow exceeds $3,000,000)
of their base salaries. If within 12 months of a change in control (as defined
in the agreements) their employment is terminated other than for cause or if
they resign and their compensation, status, title and/or reporting
responsibilities were diminished after the change in control, they will be
entitled to a payment equal to 36 times their highest monthly salary during the
employment term. (The TiNV1 transactions described under "Proposed Increase in
Authorized Common Stock" below will not result in such a change in control.) In
<PAGE>
12
addition, upon a change of control which effects a change in incumbent
management they will have the right to purchase a number of shares of Common
Stock at a price of $.05 per share equal to 5% of the Company's outstanding
Common Stock prior to giving effect to the exercise of the option, and the
Company will pay them an amount equal to their taxes in connection with such
exercise. Substantially all of the Company's obligations under the agreements
continue if there is a termination of the employees as a result of disability.
Options and Stock Appreciation Rights
- -------------------------------------
The following table provides information relating to options granted to
those persons named in the "Summary Compensation Table" above during fiscal
1998.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
% of Total
Number of Securities Options/SARs
Underlying Options/ Granted to Exercise
SARS Employees or Base Expiration
Name Granted(4) in Fiscal Year Price($/Sh) Date
---- ---------- -------------- ----------- ----
<S> <C> <C> <C> <C>
Christopher D. Michaels(1)... 10,000 20% $ 1.00 May 31, '08
Jeffrey S. Kramer(1)......... 10,000 20% $ 1.00 May 31, '08
</TABLE>
__________
(1) See footnote (2) to the "Summary Compensation Table" for the terms of the
options.
The following table sets forth certain information with regard to option
exercises during fiscal 1998 by each of the executive officers named in the
"Summary Compensation Table" above:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number Of Unexercised Value Of Unexercised
Securities Underlying In-The-Money
Options/SARS Option/SARs
Shares Acquired at May 31, 1998 At May 31, 1998
On Exercise Value Exercisable/ Exercisable/
Name (#) Realized Unexercisable Unexercisable
---- --- -------- ------------- -------------
<S> <C> <C> <C> <C>
Christopher D.
Michaels...... 0 0 120,000/0 --
Jeffrey S. Kramer 0 0 90,000/0 --
</TABLE>
<PAGE>
13
Certain Relationships and Related Transactions
- ----------------------------------------------
During fiscal 1997 and 1998 the Company borrowed funds from Jeffrey S.
Kramer, an officer and Director of the Company. As of October 19, 1998 Mr.
Kramer had loaned the Company an aggregate of $714,000 which was evidenced by
promissory notes payable in January 1999 bearing interest at the rate of 8.0%
per annum. On October 20, 1998 $500,000 principal amount of the notes and
accrued interest thereon were canceled in exchange for 583,200 shares of the
Company's Common Stock. (On October 20, 1998, the market price for the Company's
Common Stock was approximately $.83 per share.)
During fiscal 1997, 1998 and 1999 the Company borrowed funds from Joe C.
Rude, a Director of the Company, and his wife, Dr. Carolyn Rude. Such loans were
generally for a period of one year and provided for interest at a rate of 10%
per annum. Certain of such loans were non-recourse and were collateralized by
shares of the Company's Common Stock. (Drs. Rude have the right to vote such
shares.) If such non-recourse loans are not paid when due, Drs. Rude are
entitled to keep the collateral in repayment of the loans. The total amount of
loans made by Drs. Rude from fiscal 1997 to date is $307,000. As of October 31,
1998, non-recourse loans aggregating $82,000 of the $307,000 loaned to the
Company had not been paid when due, as a result of which Drs. Rude retained the
128,000 shares of Common Stock which collateralized said loans. The remaining
loans are due from March 1999 to September 1999 and are secured by 317,392
shares of Common Stock. The market value of the collateral securing non-recourse
loans at the time such collateral was pledged exceeded the amount of the loans,
in general ranging from approximately two to eight times the amount of the
loans. Because Drs. Rude have supported the Company a multitude of times during
the Company's history, both through their personal time and making funds
available to the Company, from late June to early July 1998 the Company
requested Drs. Rude to purchase 1,500,000 shares of Common Stock from the
Company for $95,000 in order to provide funds to the Company so that the
Company's Brazilian timber activities could remain in operation. On the dates of
purchase, the market price of Common Stock ranged from approximately $.19 to
$.31 per share.
During fiscal 1998, the Company repaid loans and interest aggregating
$545,000 to Christopher D. Michaels, an officer and Director of the Company. On
October 20, 1998, Mr. Michaels purchased 929,500 shares of the Company's
restricted Common Stock and issued in exchange therefor a promissory note in the
amount of $278,850 (which bears interest at the prime rate plus 1%) and is due
October 20, 2003. (On August 17, 1998, the date of the Board action approving
the stock purchase, the market price for the Company's Common Stock was
approximately $.48 per share.) While Mr. Michaels has the right to vote the
929,500 shares, he cannot dispose of shares unless he applies at least 80% of
the sales proceeds to repayment of the promissory note.
Board of Directors and Committee Information
- --------------------------------------------
The Board of Directors met ten times during fiscal 1998. The Board of
Directors has a compensation committee which reviews and approves the Company's
executive compensation and administers grants of stock and stock options to the
Company's Directors, executives and employees. This committee, currently
consisting of Joe C. Rude III, William E. Wilson and Jeffrey S. Kramer, held
three meetings during fiscal 1998. The Company does not have standing audit or
nominating committees.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and certain officers and persons who own more than 10%
of the Company's Common Stock to file with the Securities and Exchange
Commission reports of ownership and of changes in beneficial ownership of Common
Stock and other equity securities of the Company and to provide the Company with
copies of such reports. To the Company's knowledge, based solely on its review
of the copies of the forms received by it, or written representations from
certain reporting persons that no Forms 5 were required for those persons, the
Company believes that for fiscal 1998 all reports were timely filed except three
late filings of Form 4 (which have now been made) by Joe C. Rude III, a Director
of the Company.
<PAGE>
14
PROPOSAL TO CHANGE THE COMPANY'S NAME
The Company's Board of Directors believes that it is in the Company's best
interests to change its name from Terra Natural Resources Corporation to Nevada
Manhattan Group, Incorporated. In May 12, 1998 the Company's name was changed
from Nevada Manhattan Mining Incorporated to Terra Natural Resources Corporation
because the use of the term "mining" did not reflect the importance of the
Company's non-mining operations. Since such name change, however, a number of
the Company's stockholders (including TiNV1) have indicated that they believe
that the name "Terra Natural Resources Corporation" is too generic and is not as
familiar and distinctive as "Nevada Manhattan Group, Incorporated." In addition,
the Company believes that the name "Nevada Manhattan Group, Incorporated" is a
better name in the international markets in which the Company does business.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO CHANGE THE
NAME OF THE COMPANY TO NEVADA MANHATTAN GROUP, INCORPORATED.
PROPOSED INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has approved and deems advisable an amendment to
Article V of the Company's Articles of Incorporation which would increase the
number of authorized shares of Common Stock from 49,750,000 to 250,000,000. The
amendment will not increase or otherwise affect the number of authorized shares
of Preferred Stock which may be issued by the Company.
As of record date for the Annual Meeting, in addition to the 41,365,836
shares of Common Stock issued and outstanding, an additional 2,244,164 shares of
Common Stock were reserved for issuance upon exercises of stock options and for
conversions of Preferred Stock. (The foregoing does not give effect to any
Common Stock which may be issued upon conversion of the Company's convertible
debentures as described under "Voting Securities.") Therefore, as of the record
date, excluding any Common Stock issuable upon conversion of the Company's
convertible debentures, there were a total of 43,610,000 shares of Common Stock
either issued and outstanding or reserved for issuance out of a total of
49,750,000 authorized shares of Common Stock, leaving only 6,140,000 shares of
Common Stock available for subsequent issuance or reservation. Authorizing the
Company to issue more shares than currently authorized by the Articles of
Incorporation will not affect any substantive rights, powers or privileges of
holders of Common Stock, except to the extent such holders are diluted, pro
rata, by the issuance of additional shares of Common Stock. Current holders of
the Company's Common Stock presently own 100% of the outstanding Common Stock;
if the proposed amendment to Article V to the Company's Articles of
Incorporation is approved and if all shares available thereunder are issued,
then the percentage ownership of the current holders of the Company's Common
Stock would be reduced to approximately 17% of the outstanding Common Stock.
Holders of Common Stock do not have any preemptive rights with respect to future
issuances of Common Stock.
On September 2, 1998, after discussions were initiated by TiNV1, TiNV1
and the Company entered into a Subscription Agreement and a letter agreement,
each dated as of August 28, 1998 (collectively, the "Purchase Agreements"),
pursuant to which TiNV1 purchased 5,500,000 shares of the Company's Common Stock
from the Company for $500,000. The Schedule 13D indicates that the source of the
funds used to purchase the stock was capital contributions to RDI from personal
funds of Movdy Gakayev, TiNV1's ultimate owner, and in turn as capital
contributions from RDI to SYMIC to TiNV1. Prior to entering into the Purchase
Agreements, TiNV1 had no affiliations with the Company. At the time the purchase
was being negotiated, the Company's Common Stock was trading at approximately
$.25 per share. The Board of Directors believed that the TiNV1 purchase was in
the best interests of the Company since the Company had pressing financial
needs, with no significant cash resources available to it at the time and a
substantial working capital deficit. Such pressing financial needs included (a)
the necessity of funding fees and expenses relating to the lawsuits referred to
<PAGE>
15
under "Voting Securities" above (in that regard the Company believed it needed a
minimum of $250,000 to fund such fees and expenses) and (b) paying the Company's
short-term payables which were approximately $300,000 at a time when the Company
had less than $50,000 in its bank accounts. The Board of Directors'
determination that the Purchase Agreements and the Option Agreement referred to
below were fair was based upon the following factors, among others: (a) the
Company had attempted to raise money from a variety of sources, including
capital providers known to the Company and banks, most of which indicated they
were not willing to commit any funds to the Company regardless of the terms; (b)
the only entities which indicated they might be willing to commit funds required
the issuance of convertible debt instruments of the type which the Company
believed was responsible for the serious decline in the Common Stock's trading
value in 1997 and 1998; (c) the Common Stock to be issued to TiNV1 was not
registered under the Securities Act of 1933, as amended, and therefore was
subject to significant resale restrictions, necessitating a sale price
significantly less than the price of freely-tradable Common Stock; and (d) the
belief that TiNV1 could assist the Company in locating a number of valuable
acquisitions. In that regard, while TiNV1 is not required to locate acquisitions
for the Company, Tetsuo Kitigawa, Hironao Mutoh and Richard Izumi, who are
affiliated with TiNV1, indicated that they believed, and management concurred,
that TiNV1 could assist the Company in locating a number of valuable
acquisitions, certain of which they have already identified to the Company,
which acquisitions would not have been available to the Company if the TiNV1
investment was not made. Such potential acquisitions include a Russian company
involved in timber and mining operations, Japanese trading companies and
companies with Russian resource-based technologies. The 5,500,000 shares
represents approximately 13% of the Company's outstanding Common Stock as of
October 23, 1998. The Purchase Agreements provide that the Company's Board of
Directors will be expanded to seven and that three designees of TiNV1 will be
elected to the Board of Directors. As a condition to its investment, TiNV1
required that it be granted three of the seven Board seats. While such
representation is disproportionate to TiNV1's present holdings in the Company,
it is less than TiNV1's relative ownership in the Company if TiNV1 exercises the
option referred to below. In addition, TiNV1 refused to make an investment in
the Company unless TiNV1 was granted the three Board seats. Subject to certain
exceptions provided for in the Purchase Agreements, including exceptions arising
on sales of the Company's Common Stock by TiNV1, the Company has also agreed
that three designees of TiNV1 will be included in each management slate of
nominees for the Board of Directors and that the Company will use its continuing
best efforts to cause such nominees to be elected to the Board. (Messrs.
Kitagawa, Mutoh and Lewis are TiNV1's nominees.) The Purchase Agreements provide
that all acquisitions and divestitures by the Company which require Board
approval and any issuances of securities to the Company's debentureholders must
be approved by a supermajority of the Company's Board of Directors (initially at
least five of the seven directors).
The Company has agreed to use its best efforts to create a class of
preferred stock (the "New Preferred Stock") automatically convertible into
Common Stock on a public sale with attributes no less favorable than those
comprising the shares purchased by TiNV1. The New Preferred Stock voting as a
class will be entitled to elect three Directors (except as provided in the
Purchase Agreements), and the Company has the right to exchange the New
Preferred Stock for the Common Stock acquired by TiNV1.
If TiNV1's nominees are not elected to the Board of Directors in
accordance with the Purchase Agreement, TiNV1 will have the right to sell any of
the Common Stock purchased by it (or New Preferred Stock issued in exchange
therefor) to the Company at a price equal to the greater of the purchase price
therefor and the average price established by an independent valuation by two
major accounting firms (the "Put Price"). The Purchase Agreements provide that
TiNV1 shall have certain other rights if its designees are not so elected in the
event that the Company does not have legally sufficient funds to repurchase its
stock (among other things, to have legally available funds the Company's assets
must exceed its liabilities), including selling the stock to a third party, with
the Company being responsible for the difference between the Put Price and the
sale price.
<PAGE>
16
Simultaneously with the execution of the Purchase Agreements, the
Company entered into an option agreement (the "Option Agreement") with TiNV1,
which Option Agreement is subject to stockholder approval (see "Grant of
Authority Regarding TiNV1 Option" below), including approval of an amendment to
the Company's Articles of Incorporation to increase the number of authorized
shares of Common Stock to 250,000,000. The Option Agreement allows the optionee
to purchase, on or before September 1, 2005, up to 70,000,000 shares of the
Company's Common Stock at a purchase price of $.335 per share, which was the
market price of the Company's Common Stock on August 28, 1998, the date of the
Option Agreement. (The 70,000,000 shares, together with the 5,500,000 shares
presently held by TiNV1, would represent approximately 68% of the Company's
presently outstanding Common Stock on a pro forma basis as of October 23, 1998.)
If the required stockholder approval is not obtained within 150 days of August
28, 1998, then the Option Agreement will be void. TiNV1 has advised the
Company's Board of Directors that TiNV1 plans to transfer a portion of the
options evidenced by the Option Agreement to Christopher Michaels and Jeffrey
Kramer, the Company's two principal executive officers, to induce them to remain
with the Company for an extended period. While the number of options which may
be transferred has not been specified, it is anticipated that it may be in the
range of 3,500,000 to 7,000,000 of the options (five to ten percent) for such
executives in the aggregate.
In the event the Company does not obtain the aforesaid stockholder
approval within the 150 day period, then TiNV1 may elect to rescind the Purchase
Agreements and receive a refund of the purchase price or obtain from Messrs.
Michaels and Kramer for no consideration all of the Company securities owned by
them with the exception of stock options, which will then be canceled.
The Board believes that the increased number of authorized shares of
Common Stock contemplated by the proposed amendment is desirable to enable the
Company to issue Common Stock under the TiNV1 option as described under "Grant
of Authority Regarding TiNV1 Option" and to make additional shares of Common
Stock available for issuance or reservation without further stockholder action.
THE BOARD STRONGLY BELIEVES THAT NOT HAVING THE SHARES AVAILABLE FOR ISSUANCE
WILL BE EXTREMELY DETRIMENTAL TO THE COMPANY'S GROWTH. The Board believes that
having additional shares authorized and available for issuance or reservation
will allow the Company to have greater flexibility in considering potential
future actions involving the issuance of stock which may be necessary or
desirable to accommodate the Company's growth plan, including capital raising
transactions and acquisitions. Such purposes might include, without limitation,
the issuance and sale of Common Stock (i) as part or all of the consideration
paid for purchases of businesses or other assets and/or for finders and other
consulting fees relating to such purchases (in that regard the Company is
actively considering the possibility of various such purchases), (ii) in public
or private offerings as a means of obtaining additional capital, (iii) to
satisfy any current or future obligations of the Company, whether or not
relating to financings, (iv) in connection with the exercise of options,
warrants, rights or the conversion of convertible securities of the Company, (v)
as part or all of the consideration to repay or retire any debt of the Company
or to serve as collateral for such debt, (vi) in connection with stock
dividends, or (vii) with respect to existing or new employee benefit or stock
ownership plans or employment agreements. Except as described above and as
described under "Grant of Authority Regarding TiNV1 Option," the Company has no
current commitment to issue any additional shares of Common Stock or any shares
of Preferred Stock. The Company does not presently contemplate seeking
stockholder approval for any future issuances of capital stock unless required
to do so by an obligation imposed by applicable law or a regulatory authority.
In addition, the flexibility vested in the Company's Board of Directors
to authorize the issuance and sale of authorized but unissued shares of Common
Stock could enhance the Board of Directors' bargaining capability on behalf of
the Company's stockholders in a takeover offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities or the
removal of incumbent management, even if such a transaction were favored by the
holders of the requisite number of the then outstanding shares. Accordingly,
stockholders of the Company might be deprived of an opportunity to consider a
takeover proposal which a third party might consider if the Company did not have
authorized but unissued shares of Common Stock. The Company is not aware of any
<PAGE>
17
present efforts to gain control of the Company or to organize a proxy contest.
If such a proposal were presented, management would make a recommendation based
upon the best interests of the Company's stockholders.
Accordingly, the Board of Directors has proposed that the first
paragraph of Article V of the Company's Articles of Incorporation be amended to
increase the Company's authorized Common Stock. As so amended, the first
paragraph would read as set forth below:
"This corporation is authorized to issue two classes of stock
to be designated, respectively, 'Common Stock' and 'Preferred Stock.'
The total number of shares which the corporation is authorized to issue
is 250,250,000, of which 250,000,000 shares shall be Common Stock, par
value $.01 per share, and 250,000 shares shall be Preferred Stock, par
value of $1.00 per share."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO APPROVE
THE PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED COMMON STOCK.
GRANT OF AUTHORITY REGARDING TiNV1 OPTION
As indicated above, the Company has entered into the Option Agreement
with TiNV1, which Option Agreement is subject to stockholder approval, including
approval of the increase in authorized Common Stock as provided above. The
Option Agreement allows the optionee to purchase, on or before September 1,
2005, 70,000,000 shares of the Company's Common Stock at a purchase price of
$.335 per share, which was the approximate price of the Company's Common Stock
on the date when TiNV1 first began to fund the Company. (The 70,000,000 shares,
together with the 5,500,000 shares presently held by TiNV1, would represent
approximately 68% of the Company's presently outstanding Common Stock on a pro
forma basis as of October 23, 1998.) If the required stockholder approval is not
obtained within 150 days of August 28, 1998, then the Option Agreement will be
void. TiNV1 has not advised the Company whether TiNV1 plans to vote the
5,500,000 shares of the Company's Common Stock it purchased in September 1998 on
this proposal. While stockholder approval of the Option Agreement is not
required under Nevada law, the Board of Directors believed that the Option
Agreement should be submitted to the Company's stockholders for their approval
because of the magnitude of the number of shares covered by the Option Agreement
and because exercise of the Option Agreement would enable TiNV1 to control the
Company.
In the event the Company does not obtain the aforesaid stockholder
approval within the 150 day period, then TiNV1 may elect to rescind its
agreements with the Company and receive a refund of the $500,000 purchase price
paid by it for the 5,500,000 shares of Common Stock or obtain from Messrs.
Michaels and Kramer for no consideration all of the Company securities owned by
them with the exception of stock options, which will then be canceled.
TiNV1 has advised the Company's Board of Directors that TiNV1 plans to
transfer a portion of the options evidenced by the Option Agreement to
Christopher Michaels and Jeffrey Kramer, the Company's two principal executive
officers, to induce them to remain with the Company for an extended period.
While the number of options which may be transferred has not been specified, it
is anticipated that it may be in the range of 3,500,000 to 7,000,000 of the
options (five to ten percent) for such executives in the aggregate. In addition,
exercises of the Option Agreement, whether by TiNV1 or Messrs. Michaels and
Kramer, will increase the number of shares of Common Stock Messrs. Michaels and
Kramer may purchase on a change in control of the Company as described under
"Election of Directors" above.
It is the opinion of the Board of Directors that it is in the best
interest of the Company's stockholders for them to authorize the Board of
Directors to grant options to purchase up to 70,000,000 shares of Common Stock
<PAGE>
18
to TiNV1 as provided above. Messrs. Kitigawa, Mutoh and Izumi, who are
affiliated with TiNV1, have indicated that they believe, and the Board of
Directors concurs, that TiNV1 can assist the Company in locating a number of
valuable acquisitions, certain of which they have already identified to the
Company, which acquisitions will not be available to the Company if the TiNV1
Option is not approved. Such potential acquisitions include a Russian company
involved in timber and mining operations, Japanese trading companies and
companies with Russian resource-based technologies. Furthermore, since the
affiliation of TiNV1 with the Company was announced, the per share price of the
Company's Common Stock has increased from $.335 on the trading day prior to the
announcement of the agreements with TiNV1 to $.83 on October 20, 1998, an
increase of over 147%. Finally, the Board of Directors believes that (a) if
TiNV1 elects to rescind its agreements with the Company, the Company would have
difficulty repaying the $500,000 purchase price and (b) if TiNV1 elects to
acquire the Company securities and cause the cancellation of outstanding stock
options held by Christopher Michaels and Jeffrey S. Kramer, the Company's
principal executive officers, such officers will no longer have the same
incentives as they presently have to maximize stockholder value.
The Company had net operating loss carryforwards amounting to
approximately $25,000,000 as of the end of fiscal 1998, which will expire if not
utilized starting in 2002. In general, federal income tax law imposes an annual
limitation on the use of net operating loss carryovers (the "Annual Limitation")
if there has been more than a 50 point increase in the percentage of the value
of a corporation's stock owned by its 5% stockholders over a three-year period
(an "Ownership Change"). An option is generally not treated as exercised unless
the option is issued for an abusive principal purpose. An abusive principal
purpose is a purpose to postpone the time of an ownership change while giving
the holder the benefit of ownership currently or by allowing the corporation to
earn income to absorb its losses before the ownership change occurs. Although
the Company believes that the TiNV1 option should not be deemed exercised, there
is a risk that the Internal Revenue Service will successfully take the position
that the option is deemed exercised resulting in an Ownership Change. If the
option is not deemed exercised, an Ownership Change would occur if the option is
exercised within three years of TiNV1's original purchase of its shares or the
occurrence of other sufficient increases in ownership by 5% stockholders. On an
Ownership Change, the Annual Limitation, in general, will be an amount equal to
the long-term tax-exempt rate times the value of the corporation's stock
immediately before the Ownership Change. Currently the value of the Company's
stock is approximately $30,000,000 and the long-term tax-exempt rate is
approximately 5%, so that the Annual Limitation if an Ownership Change occurred
currently would be approximately $1,450,000. Accordingly, approval of the TiNV1
option could result in a loss of the Company's net operating loss carryforwards.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A "FOR" VOTE TO AUTHORIZE
THE BOARD OF DIRECTORS TO GRANT OPTIONS TO TiNV1 TO PURCHASE UP TO 70,000,000
SHARES OF COMMON STOCK ON THE TERMS DESCRIBED ABOVE. The Board of Directors
believes that approval of the Option Agreement is in the best interests of the
stockholders because, among other things, the Board of Directors believes that
TiNV1 can assist the Company in locating valuable acquisitions, as described
above, which acquisitions will not be available to the Company if the TiNV1
Option is not approved. Furthermore, if the Option Agreement is not approved,
the Board of Directors believes that (a) if TiNV1 elects to rescind its
agreements with the Company, which TiNV1 has the right to do, the Company would
have difficulty repaying the $500,000 purchase price and (b) if TiNV1 elects to
acquire the Company securities and cause the cancellation of outstanding stock
options held by Christopher Michaels and Jeffrey S. Kramer, the Company's
principal executive officers, such officers will no longer have the same
incentives as they presently have to maximize stockholder value.
<PAGE>
19
RATIFICATION OF AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
appointed Merdinger, Fruchter, Rosen & Corso, P.C. as independent auditors to
audit the consolidated financial statements of the Company for the fiscal year
ending May 31, 1999. Representatives of Merdinger, Fruchter, Rosen & Corso, P.C.
will be present at the Annual Meeting and will be afforded the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
On July 7, 1998, the Company hired Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's new independent auditors, replacing Jackson & Rhodes P.C.
While Jackson & Rhodes P.C. performed to the Company's satisfaction, the
decision to change accountants, which was approved by the Board of Directors of
the Company, was based in part on the fact that Merdinger, Fruchter, Rosen &
Corso, P.C. has a Los Angeles office and is a larger firm than Jackson & Rhodes
P.C.
In connection with Jackson & Rhodes P.C.'s audits of the Company's
financial statements for fiscal 1996 and 1997, there were no disagreements with
such firm on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedures which, if not resolved to
the satisfaction of Jackson & Rhodes P.C., would have caused Jackson & Rhodes
P.C. to make reference to the matter in such firm's report. Jackson & Rhodes
P.C.'s report on the Company's financial statements for each period for which
Jackson & Rhodes P.C. performed an audit of the Company's financial statements
contained no adverse or disclaimer of opinion and was not modified or qualified
as to uncertainty, audit scope or accounting principles.
GENERAL INFORMATION
Other Business
Management of the Company does not intend to present any business at
the Annual Meeting other than as set forth in the attached Notice of Annual
Meeting of Stockholders, and it has no information that others will present any
other business at the Annual Meeting. However, if any other matters are properly
raised, the persons named in the accompanying Proxy intend to vote in accordance
with their judgment on such matters.
Stockholder Proposals
- ---------------------
Any proposals that stockholders of the Company desire to have included in
the Company's proxy statement for the 1999 Annual Meeting must be received by
the Secretary of the Company no later than the close of business on July 5,
1999. Any other proposals that stockholders desire to present at the 1999 Annual
Meeting must be received by the Secretary of the Company, in accordance with the
Company's Bylaws, not later than the earlier of (a) the close of business on the
fifteenth day following the date on which notice of the 1999 Annual Meeting or
the record date thereof is first publicly announced and (b) October 15, 1999.
Additional Information
- ----------------------
Additional copies of the Company's Annual Report on Form 10-KSB for fiscal
1998, excluding certain of the exhibits thereto, may be obtained by Stockholders
without charge by writing to Jeffrey S. Kramer, Secretary of the Company, at
5038 North Parkway Calabasas, Suite 100, Calabasas, California 91302.
By Order of the Board of Directors
By Jeffrey S. Kramer
Secretary
<PAGE>
20
Common Stock Proxy
TERRA NATURAL RESOURCES CORPORATION (dba NEVADA MANHATTAN)
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher D. Michaels and Jeffrey S.
Kramer, and each of them, proxies with power of substitution each, for and in
the name of the undersigned to vote all shares of Common Stock of TERRA NATURAL
RESOURCES CORPORATION, a Nevada corporation (the "Company"), that the
undersigned would be entitled to vote at the Company's Annual Meeting of
Stockholders (the "Meeting") to be held on December 9, 1998, and at any
adjournments thereof, upon the matters set forth in the Notice of Annual
Meeting, hereby revoking any proxy heretofore given. The proxies are further
authorized to vote in their discretion upon such other business as may properly
come before the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 5.
1. Election of Directors. [ ] For all nominees [ ] Withhold Authority to vote
listed below for all nominees listed
below
Nominees: Christopher D. Michaels, Jeffrey S. Kramer, Joe C. Rude III, William
E. Wilson, Tetsuo Kitagawa, Hironao Mutoh, Neil H. Lewis
For, except vote withheld from the following nominee(s):________________________
2. Proposed amendment to Articles of Incorporation to change the Company's
name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposed amendment to the Articles of Incorporation to increase the
authorized Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Authorization for Board of Directors to grant options to purchase up to
70,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Ratifying the appointment of independent accountants for fiscal year
ending May 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
<PAGE>
21
(Please sign and date below)
The undersigned hereby ratifies and confirms all that the Proxy Holders, or any
of them, or their substitutes, shall lawfully do or cause to be done by virtue
hereof and hereby revokes any and all proxies heretofore given by the
undersigned to vote at the Annual Meeting.
Dated:____________________________
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
(Please date this Proxy and sign above as your name(s)
appear(s) on this card. Joint owners each should sign
personally. Corporate proxies should be signed by an
authorized officer. Executors, administrators, trustees,
etc. should give their full titles.)
I(We) will will not attend the meeting in person.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
APPROVAL OF BOTH AMENDMENTS TO THE ARTICLES OF INCORPORATION, FOR AUTHORIZATION
FOR BOARD TO GRANT UP TO 70,000,000 OPTIONS, FOR RATIFICATION OF THE APPOINTMENT
OF MERDINGER, FRUCHTER, ROSEN & CORSO, P.C. AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
<PAGE>
22
Preferred Stock Proxy
TERRA NATURAL RESOURCES CORPORATION (dba NEVADA MANHATTAN)
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher D. Michaels and Jeffrey S.
Kramer, and each of them, proxies with power of substitution each, for and in
the name of the undersigned to vote all shares of Preferred Stock of TERRA
NATURAL RESOURCES CORPORATION, a Nevada corporation (the "Company"), that the
undersigned would be entitled to vote at the Company's Annual Meeting of
Stockholders (the "Meeting") to be held on December 9, 1998, and at any
adjournments thereof, upon the matters set forth in the Notice of Annual
Meeting, hereby revoking any proxy heretofore given. The proxies are further
authorized to vote in their discretion upon such other business as may properly
come before the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1 THROUGH 5.
1. Election of Directors. [ ] For all nominees [ ] Withhold Authority to vote
listed below for all nominees listed
below
Nominees: Christopher D. Michaels, Jeffrey S. Kramer, Joe C. Rude III, William
E. Wilson, Tetsuo Kitagawa, Hironao Mutoh, Neil H. Lewis
For, except vote withheld from the following nominee(s):________________________
2. Proposed amendment to Articles of Incorporation to change the Company's
name.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposed amendment to the Articles of Incorporation to increase the
authorized Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Authorization for Board of Directors to grant options to purchase up to
70,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Ratifying the appointment of independent accountants for fiscal year
ending May 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign and date on reverse side)
<PAGE>
23
(Please sign and date below)
The undersigned hereby ratifies and confirms all that the Proxy Holders, or any
of them, or their substitutes, shall lawfully do or cause to be done by virtue
hereof and hereby revokes any and all proxies heretofore given by the
undersigned to vote at the Annual Meeting.
Dated:____________________________
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
__________________________________
(Please Print Name)
__________________________________
(Signature of Stockholder)
(Please date this Proxy and sign above as your name(s)
appear(s) on this card. Joint owners each should sign
personally. Corporate proxies should be signed by an
authorized officer. Executors, administrators, trustees,
etc. should give their full titles.)
I(We) will will not attend the meeting in person.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED ABOVE, FOR
APPROVAL OF BOTH AMENDMENTS TO THE ARTICLES OF INCORPORATION, FOR AUTHORIZATION
FOR BOARD TO GRANT UP TO 70,000,000 OPTIONS, FOR RATIFICATION OF THE APPOINTMENT
OF MERDINGER, FRUCHTER, ROSEN & CORSO, P.C. AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
