SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File No.
January 31, 1996 0-20722
WAREHOUSE AUTO CENTERS,INC.
---------------------------
(Debtor-in-Possession)
Delaware 16-1400479
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
NewGold Inc.
5190 Neil Road, Ste. 320
Reno, Nevada 89502
(Address of principal executive offices)
(702) 823-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Units, consisting of one share of Common Stock, OTC Bulletin Board
$.005 par value, one Redeemable Class A Common
Stock Purchase Warrant and one Redeemable Class B
Common Stock Purchase Warrant
Common Stock, $.005 par value OTC Bulletin Board
Redeemable Class A Common Stock Purchase Warrants OTC Bulletin Board
Redeemable Class B Common Stock Purchase Warrants OTC Bulletin Board
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
------ ------
Indicate by check mark if disclosure of delinquent in response pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
-----
Registrant's gross revenues for its most current fiscal year were $2,818,004.
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $197,951 as of November 21, 1996.
As of November 21, 1996, Registrant had 3,299,191 shares of Common Stock, par
value $.005, issued and outstanding.
Documents Incorporated by Reference
Parts of the Exhibits filed with Registrant's Registration Statement on Form
SB-2 (File No. 33-49920), and Amendments thereto, declared effective on October
15, 1993.
THE REGISTRANT HEREBY AMENDS THIS REPORT FOR THE SOLE PURPOSE OF THE ELECTRONIC
FILING OF EXHIBITS WHICH WERE PREVIOUSLY FILED IN PAPER FORMAT. THE PORTIONS OF
THIS REPORT OMITTED FROM THIS AMENDMENT AND PREVIOUSLY FILED WITH THE SECURITIES
AND EXCHANGE COMMISSSION ARE INCORPORATED BY THIS REFERENCE.
<PAGE>
ITEM 13: EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
2 Plan of Reorganization
3.1 Certificate of Incorporation of Registrant(1)
3.1(a) Amendment to Certificate of Incorporation of Registrant
3.2 By-Laws of Registrant (1)
10.1 Contract of Sale for Relief Canyon Mine
10.2 Agreement for Lease, Purchase and Sale of Property re:
the Mission Mine
10.3 Lease Agreement for Office Space in Reno, Nevada
23 Consent of Ciaccia & Catarisano, LLP, independent
public accountants for the Registrant
(b) Reports on Form 8-K. None
- ----------
(1) Incorporated by reference: Exhibits filed with Registrant's Registration
Statement on Form SB-2 (File No. 33-49920), and Amendments thereto,
declared effective on October 15, 1993.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEWGOLD, INC., a Delaware corporation
Date: Jan 21,1997 By: /s/
------------- -----------------------------------
Arthur Scott Dockter, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of Registrant and in
the capacities and on the dates indicated.
Signature Title Date
/S/ President, Chief Executive Officer and 1/21/97
- -------------------- Director -----------
Arthur Scott Dockter
/S/ Chief Financial Officer and Director Jan 21, 1997
- -------------------- ------------
Robert W. Morris
/S/ Secretary/Treasurer and Director 1/21/97
- -------------------- ------------
Edward Mackay
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description of Exhibit
------- ----------------------
2 Plan of Reorganization
3.1 Certificate of Incorporation of Registrant(1)
3.1(a) Amendment to Certificate of Incorporation of Registrant
3.2 By-Laws of Registrant (1)
10.1 Contract of Sale for Relief Canyon Mine
10.2 Agreement for Lease, Purchase and Sale of Property re:
the Mission Mine
10.3 Lease Agreement for Office Space in Reno, Nevada
23 Consent of Ciaccia & Catarisano, LLP, independent
public accountants for the Registrant
- ----------
(1) Incorporated by reference: Exhibits filed with Registrant's Registration
Statement on Form SB-2 (File No. 33-49920), and Amendments thereto,
declared effective on October 15, 1993.
<PAGE>
EXHIBIT 2
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
In re: ) CHAPTER 11
)
WAREHOUSE AUTO CENTERS, INC., ) Case No. 95-21279
)
Debtor. )
- ---------------------------------------)
ORDER CONFIRMING PLAN
The plan under Chapter 11 of the Bankruptcy Code filed by Warehouse
Auto Centers, Inc., on November 4, 1996, or a summary thereof, having been
transmitted to creditors and equity security holders; and
It having been determined after hearing on notice that the requirements
for confirmation set forth in 11 U.S.C. Section 1129(a) have been satisfied;
IT IS ORDERED THAT:
The plan filed by Warehouse Auto Center, Inc. on November 4, 1996, is
confirmed.
IT IS FURTHER ORDERED that the debtor shall, with in 90 days after the
date of the entry of this order; (1) file a report of substantial consummation
and final report; or (2) take appropriate action to amend the plan. Failure to
comply with these requirements may result in conversion of the case.
IT IS FURTHER ORDERED that all fees payable to the United States
Trustee pursuant to 28 U.S.C. Section 1930 shall be paid within 10 days of the
entry of this order.
IT IS FURTHER ORDERED that the reorganized debtor or the disbursing
agent under the plan shall be responsible for timely payment of quarterly fees
incurred pursuant to 28 U.S.C. ss.1930(a)(6) until the case is dismissed,
converted or closed by the court with a final decree (whichever is first). After
confirmation, said party shall file with the court and serve on the United
States Trustee a monthly financial report for each month (or portion thereof)
the case remains open in a format prescribed by the UST and provided to the
debtor by the UST. Said report shall set forth all disbursements of the
reorganized debtor so that quarterly fee amounts can be determined; and
1
<PAGE>
IT IS FURTHER ORDERED that the proceeds of the Debtor Certificates held
in escrow by Smith & Lyons, Barristers and Solicitors of Toronto, Canada, may be
released to the debtor in accordance with the terms of the Plan of
Reorganization; and
IT IS FURTHER ORDERED that all warrants and options of Warehouse Auto
Service, Inc. are cancelled pursuant to the terms of the Plan of Reorganization.
IT IS FURTHER ORDERED that the Escrow Bank Accounts held by the debtor
at First National Bank of Rochester may be released to the debtor to effectuate
the Plan of Reorganization; and
IT IS FURTHER ORDERED that pursuant to Bankruptcy Rules 2002(a)(7) and
2002(i)&(m), Notice of Hearings on all applications for approval of compensation
and/or reimbursement of Professional Persons employed under Bankruptcy Code
ss.ss.327 or 1103, whose retention has been approved by prior Order of this
Court, shall be deemed good and sufficient for all purposes if served more than
20 days prior to the date of the entry of this Order or the hearing date set
hereafter thereupon, by regular mail by any party upon the Counsel retained by
the Official Unsecured Creditors' Committee appointed herein pursuant to 11 USC
ss.1102, on Counsel for the Debtor, on the Office of the United States Trustee,
and on all persons appearing and requesting service; and
IT IS FURTHER ORDERED, that fees and disbursements requested in Lacy,
Katzen, Ryen and Mittleman, LLP's first application filed herein on July 25,
1996, are hereby allowed in the amount of $12,843.25 plus $587.72 in
disbursements and that fees and disbursements requested in its second
application filed herein are hereby allowed in the amount of $8,498 plus the sum
of $600.00 for 2.4 hours expended by said firm in reviewing the ballots of
Claimants, assisting creditors in voting and appearing in the prior applications
pending before this Court plus $581.71 in disbursements being a total of
$21,941.25 in fees and $1,175.43 in disbursements on all applications for a
total final award $23,110.68; and
IT IS FURTHER ORDERED, that Howard, Solochek, Nashban and Weber is
hereby allowed, subject to further review on appropriate notice, a fee in the
amount of $17,710.50 together with disbursements in the amount of $1,872.59 for
acting as Lead Counsel to the Official Unsecured Creditors' Committee for a
total final award of $19,583.09; and
2
<PAGE>
IT IS FURTHER ORDERED, that the Debtor shall forthwith pay or cause to
be paid, in cash all fees and disbursements due Counsel for the Committee
approved in this Order, provided, however, that Howard, Solocheck, Nashban and
Weber and Lacy, Katzen, Ryen & Mittleman, LLP shall be liable to disgorge all or
any part of their fees awarded hereby, if upon hearing after notice as required
above, the Court shall for good cause shown, modify this award of fees and
disbursements.
Dated: November , 1996
---------------------------
U.S.B.J.
Approved as to Form
Lacy, Katzen, Ryen & Mittleman, LLP
By: _______________________________
Stephen P. Mayka, Esq.
Approved as to Form
U.S. Trustee
By: _______________________________
Trudy A. Nowak
3
<PAGE>
Warehouse Auto Centers, Inc
2452 West Henrietta Road
Rochester, New York 14623
November 1, 1996
Re: Chapter 11 Plan of Reorganization and Ballot For Approval
Dear Creditor:
As you are aware, Warehouse Auto Centers, Inc., was put into
involuntary bankruptcy by a group of creditors on June 25,1995, in the United
States Bankruptcy Court for the Western District of New York. The company tried
to reorganize itself; but this did nothing but deplete what little assets it had
left and increase it's losses. Many attempts were made to raise additional funds
but to no avail and on August 28, 1996, the company sold its remaining assets to
a group of investors led by it's former President for $375,000.00 cash.
The company is a publicly held corporation with over 300 shareholders
and almost 3 million shares of issued and outstanding stock. The stock is
currently traded on the NASDAQ Bulletin Board. Because of this, the group of
investors were able to locate a company who was searching for a publicly traded
shell, New Gold Inc., a gold mining company whose headquarters is located in
Reno, Nevada.
This has resulted into the two companies entering into a merger
agreement to take the company out of bankruptcy. To this end, (1) The
administrative creditors, which consists of post petition debt and professional
fees will be paid one share of common stock in the new reorganized company for
each dollar of debt; (2) The Class 4, unsecured creditors will receive one share
of common stock in the newly organized company for each $42.00 dollars of debt
and (3) Current shareholders of Warehouse Auto Centers, Inc. will receive one
share of stock in the newly formed company for each 65 shares of Warehouse stock
they possess.
We would like the plan to be accepted by the creditors of every class
of impaired claims, ie. a claim that is not paid in full. To be accepted by a
class of claims, the plan must be accepted by more than one-half of the
creditors in the class and by creditors holding at least 2/3 of the total dollar
amount of claims in the class. YOUR VOTE ON THE ACCEPTANCE OR REJECTION OF THE
PLAN IS IMPORTANT.
Enclosed with this letter are the following:
1. An official ballot for you to cast your vote of acceptance
or rejection of the plan. This ballot must be properly
completed and filed with the Clerk of the Bankruptcy Court,
located at 100 State Street, Rochester, New York 14614 by
<PAGE>
November 18, 1996. We strongly encourage you to vote to accept
our plan. Please fill out this ballot and return it to the
Clerk of the Bankruptcy Court at the above address in time for
your vote to be counted.
2. Notice of Hearing
3. Debtor's Disclosure Statement with Exhibits.
4. Debtor's Plan of Reorganization
5. New Gold, Inc. description of properties and Financial
Statement. Please review all of these enclosed materials
carefully.
Very truly yours,
Warehouse Auto Centers, Inc.
<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF NEW YORK
In Re:
Case No. 95-21279
WAREHOUSE AUTO CENTERS, INC.
Debtor (s) Chapter 11
BALLOT FOR ACCEPTING OR REJECTING PLAN FILED
BY THE ABOVE DEBTOR ON SEPTEMBER, 26. 1996
The Plan referred to in this Ballot can' be confirmed by the Court and
thereby made binding upon you if it is accepted by the holders of two-thirds in
amount and more than one-half in number of claims in each class and the holders
of two-thirds in amount of equity Security interests in each class voting on the
Plan. In the event the requisite acceptances are not obtained, the Court may
nevertheless confirm the Plan if the Court finds that the Plan accords fair, and
equitable treatment to the class rejecting it. To have your vote count, you must
complete and return this Ballot.
1. The Undersigned, a holder of a claim against the Debtor in the unpaid
Principal Amount of $______________________.
2. The undersigned, the holder of ___________________ shares of common
stock of the above-named debtor, represented by Certificate(s) No.___________(or
held in my/our brokerage account no.)______________at (name of broker-dealer)
________________________
(Check one box)
_____________Accepts __________Rejects
------------------
November ,1996 Print or Type Name
-------------- ------------------
Signature
------------------
Address
RETURN THIS BALLOT TO: Clerk, U.S. Bankruptcy Court
ON OR BEFORE U.S. Courthouse
NOVEMBER 18, 1996. 100 State Street
Rochester, New York 14614
.
<PAGE>
WESTERN DISTRICT OF NEW YORK
UNITED STATES BANKRUPTCY COURT
In re:
Case No.95-21279
WAREHOUSE AUTO CENTERS, INC.,
Debtor(s).
COMBINED ORDER TO SHORTEN TIME, AND APPROVING DISCLOSURE
STATEMENT AND FIXING TIME FOR FILING ACCEPTANCES AND REJECTIONS
OF PLAN COMBINED WITH NOTICE THEREOF
A Disclosure Statement and Plan of Reorganization under Chapter 11 of
the Bankruptcy Code having been filed by Warehouse Auto Centers, Inc., the
debtor herein, on September 26, 1996; a Hearing on Notice having been had on
October 31, 1996 and it having been determined that the disclosure statement
contains adequate information; and the debtor having applied to the Court at the
hearing for an order shortening time for the hearing on confirmation, the filing
of acceptances or rejections of the plan, and the Court having approved the
combined order to shorten time, it is
ORDERED and NOTICE is hereby given, that;
A. That the Amended Disclosure Statement filed by Warehouse Auto Centers,
Inc., the debtor, is approved;
B. Ballots accepting or rejecting this plan may be filed with the Clerk,
United States Bankruptcy Court, Room 1220, 100 State Street, Rochester, New York
14614 at any time before the confirmation hearing or any continuation thereof;
and
C. Within five (5) days after the entry of this Order, the plan, the
disclosure statement and a ballot shall be mailed to creditors, equity security
holders and other parties in interest and shall be transmitted to the United
States Trustee as provided by the Federal Rule of Bankruptcy Procedure 3017(d);
D. That time is shortened so that November 21, 1996 at 10:30 a.m., is fixed
for the hearing on confirmation of the plan to be held at United States
Bankruptcy Court, Room 2300, 100 State Street, Rochester, New York 14614;
E. November 18. 1996 is fixed as the last date for filing and serving
written objections to confirmation of the plan, pursuant to Federal Rule of
Bankruptcy Procedure 3020(b)(1).
Dated: November 1, 1996 /S/
BY THE COURT
<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF NEW YORK
IN RE: BK # 95-21279
WAREHOUSE AUTO CENTERS, INC.
AFFADAVIT OF MAILING
Debtor(s).
STATE OF NEW YORK)
COUNTY OF MONROE ) SS:
I, LEONARD RELIN, being sworn says that: I am over 18 years of age and
reside at Rochester, New York. On October 10, 1996, I served the ORDER
SHORTENING TIME AND FIXING DATES, TIMES AND PLACES OF HEARING TO CONSIDER
APPROVAL OF THE DISCLOSURE STATEMENT PURSUANT TO RULES 2002(b) and 9006 (c)(1)
and ORDER AND NOTICE FOR HEARING ON DISCLOSURE STATEMENT TO THE DEBTOR, ITS
CREDITORS AND OTHER PARTIES IN INTEREST by either hand delivery, U.S. Postal
Service addressed to each of the following persons at their last known addresses
as follows and as per the attached matrix:
Trudy Nowak, Esq., U.S. Trustee's Office, 100 State Street, Room 609, Rochester,
New York 14614
Warehouse Auto Centers, Inc., 2452 West Henrietta Road, Rochester, New York
14623
Stephen P. Mayka, Esq., Lacy, Katzen, et al., 130 East Main Street, 3rd Floor,
Rochester, New York 14604
Albert Solochek, Esq., Howard, Solochek & Weber, S.C., 324 E. Wisconsin Avenue,
Suite 1100, Milwaukee, WI 53202
Internal Revenue Service, Attn: Matthew Root, Esq., Suite 500, Guaranty
Building, 28 Church Street, Buffalo, New York 14202
Elaine Zipp Cole, Esq., NYS Dept. of Taxation & Finance, 259 Monroe Avenue, 3rd
Floor, Rochester, New York 14607
United States Attorney General's Office 100 State Street, Room 609, Rochester,
New York 14614
/S/
LEONARD RELIN
Sworn to before me this 23 day of October, 1996.
/S/
Notary Public
<PAGE>
Leonard Relin
1 East Main Street
Rochester, New York 14614
(716) 454 4336
Attorney for Debtor
UNITED STATES BANKRUPTCY COURT FOR THE
WESTERN DISTRICT OF NEW YORK
In re ) Case No. 95-21279
WAREHOUSE AUTO CENTERS, INC. ) Debtor's Disclosure Statement
-----------------------------
) Chapter 11
) Date: November 21, 1996
Debtor ) Time: 10:30 A.M.
)
- -----------------------------
DEBTOR'S DISCLOSURE STATEMENT
Warehouse Auto Centers, Inc., the Debtor, provides this Disclosure
Statement (hereinafter "Statement") to all its known creditors in order to
disclose that information deemed by the Debtor to be material, important and
necessary for the Debtor's creditors and equity holders to arrive at a
reasonably informed decision in exercising their right to vote on the Plan of
Reorganization (hereafter "The Plan") presently on file with the Bankruptcy
Court. A copy of the Plan accompanies this Statement.
Creditors and equity holders may vote on the Plan by filling out and
mailing the accompanying ballot to the Bankruptcy Court, or may attend such
hearing and present the ballot in person at that time. As a Creditor your vote
is important The Plan can be confirmed by the Court if accepted by the holders
of two-thirds in amount and more than one-half in number of claims of each class
voting on the Plan. In the event the requisite acceptances are not obtained, the
Court may, never-the-less, confirm the Plan if the Court finds that the Plan
accords fair and equitable treatment to the class rejecting.
No representations concerning the Debtor particularly as to its future
business operations, value of property, or the value of any Promissory notes, or
equity instruments to be issued under the Plan, other than as set forth in this
Statement are authorized by the Debtors. Any representations or inducements to
secure acceptance which are other than that contained in this Statement should
not be relied on by you in arriving at your decision: and. any such additional
representations and inducements should be reported to counsel for Debtor.
Leonard Relin or the U. S. Trustee. who. in turn, shall deliver such information
to the Bankruptcy Court for such action as may be deemed appropriate.
THE INFORMATION CONTAINED HEREIN HAS NOT BEEN SUBJECT TO A CERTIFIED AUDIT.
DEBTOR WARRANTS THAT TO THE BEST OF ITS KNOWLEDGE THE INFORMATION CONTAINED
HEREIN IS TRUE AND ACCURATE.
<PAGE>
TABLE OF CONTENTS
TO
DEBTOR'S DISCLOSURE STATEMENT
Outline of Plan of Reorganization Page 4
Description of Exhibits Page 5
Description of Debtor's Business History Before Filing Page 5
Description of Debtors Business History After Filing Page 6
Description of Newgold, Inc. Page 6
Gold Mining Industry Economics Page 6
Competition Page 7
Suppliers and Materials Used Page 8
Property, Plant and Equipment Page 8
Employees Page 8
Description of Insider Transactions Page 8
Market for Reorganized Company's stock Page 8
Post Petition and Current Operations Page 9
Creditor's Committee Page 9
Present Assets Page 10
Description of Pending Litigation Page 10
Regulatory Issues Page 10
Recent Legislative and Regulatory Changes Page 11
Debts Page 11
Financial Condition of the Debtor Following Confirmation Page 11
Officers and Directors of the Successor Company Page 12
Classification and Treatment of Claims Page 14
Status and Resale of the Securities to be Issued Under the Plan Page 15
Federal Income Tax Consequences to Creditors of the Debtors Page 16
<PAGE>
TABLE OF CONTENTS
TO
DEBTORS DISCLOSURE STATEMENT
(Continued)
Alternatives to the Plan Page 17
Liquidation Analysis Page 17
Risk Factors Page 18
Other Page 19
Signatures Page 20
Exhibits
<PAGE>
Outline of Plan of Reorganization
As more fully set forth hereinafter, the Debtor has: (1) (i) paid its
secured debts in full in cash; (ii) proposes to pay its unsecured trade debts
and other unsecured liabilities in full with stock in the reorganized Debtor's
successor; (iii) to pay Section 364 loans and Debtor Certificate holders
according to their tenor and to offer them the opportunity to convert their debt
to equity in the reorganized Debtor's successor as payment, (iv) to pay
Administrative Claims incurred during the Bankruptcy proceedings in stock ; (v)
to merge with Newgold, Inc., a gold mining company, by acquiring 100% of the
outstanding shares of Newgold's stock in exchange for shares of stock in the
reorganized Debtor; (vi) to dilute existing shareholders through a reverse split
of pre-petition stock; (vii) appoint a new Board of Directors and management in
the reorganized Debtor, and; (2) the Company ceased operating its auto parts
business and redirected its business by becoming engaged in the natural resource
industry--namely gold mining and processing.
The Debtor has ceased to be in the auto parts business. The Debtor proposes
to issue stock and warrants in the corporation to creditors and dilute existing
equity holders by a 1:65 reverse split of pre-petition stock. In addition, The
Debtor proposes to acquire and/or merge with Newgold, Inc., a gold mining
company, with proven and probable gold reserves valued at approximately
$50,000,000 by exchanging stock in the reorganized Debtor for 100% of the
outstanding stock in Newgold, Inc. Newgold, Inc. has significant cash reserves
and an operating gold mine located in Relief Canyon near Lovelock, Nevada. The
Debtor further proposes to offer Section 364 lenders the opportunity to convert
their loans/Certificates of Indebtedness to equity in the reorganized successor
to the Debtor.
The agreement to acquire and/or merge with Newgold, Inc. will become
effective only if the Debtor's proposed Plan of Reorganization is confirmed by
the Court. Confirmation of the Plan of Reorganization is a condition precedent
to the acquisition and/or merger with Newgold, Inc.
<PAGE>
Description of Exhibits
A. Most recent "Monthly Operating Report" submitted to the US Trustee
B. Treatment of Classes and Interests under the Plan
C. Cash Flow Projections for the Reorganized Debtor for the Period January
1, 1997 through December of 2003
D. Pro Forma Balance Sheet assuming Plan confirmation
E. Liquidation Analysis
F. Summary of Merger/Acquisition Agreement between Newgold, Inc. and Debtor
(the full agreement has been filed with the Court).
G. Summary of Engineering Reports and Independent Evaluations of Newgold,
Inc.'s gold reserves (the actual reports have been filed with the Clerk of
the Bankruptcy Court and may be viewed there. The reports are too
voluminous to include with this Disclosure Statement).
H. Unaudited financial statements of Newgold, Inc.
Description of Debtors Business History Before Filing
The Debtor opened its first Auto Parts Store in 1994 at Rochester, New York
with the intent of developing a chain of Warehouse Automotive Parts and
Accessory Superstores. The Debtor opened its first store in Rochester, New York
in 1994 and a second store in Cleveland, Ohio in January of 1995.
The Company was filed in a Chapter 11 proceeding, involuntarily, by certain
of its unsecured creditors on June 29, 1995 as a result of its inability to
timely meet its financial obligations.
Description of Debtor's Business History After Filing
Since the Chapter 11 filing, the Debtor has closed its Cleveland store and
Rochester executive offices and moved its corporate offices into the Rochester
store. However, the Debtor continued to sustain losses aud to deplete its
inventories. Recently, on August 28,1996, the Bankruptcy Court granted Debtor's
motion to sell all of its assets for the cash sum of $375,000, which has been
used to pay the following Creditors: (1) Rent on the Debtor's premises in the
amount of $77,199.21; (2) DIP lenders in the amount of $200,000; and (3) Secured
Creditors in the amount of $69.326.42 leaving a cash balance of $28,287.65 in
escrow.
<PAGE>
Description of Newgold, Inc.
Newgold, Inc. ("Newgold") was incorporated in the state of Nevada in 1993.
In August 1994, it adopted a plan to review, acquire and develop mining
opportunities currently available in the U.S. mining environment.
None of the prior management of Warehouse Auto Centers, Inc. including
Brian Thomas the founder, are or will be involved as an officer, director or
manager of Newgold, Inc.
Newgold's goal has been to acquire small to medium sized precious metals
mines which have drill indicated reserves and little or no permitting
requirements prior to the commencement of production. The ultimate goal of the
organization is to become a junior sized gold production organization
diversified in various aspects of the mining industry.
For many years, companies in the mining industry have focused their efforts
on the large-scale, long term mining targets. This effort has left a substantial
number of properties that did not meet with the long term goals and large
corporate overheads of these companies. Newgold has seen this as an opportunity
to develop a broad based multi- project mining company.
Newgold is currently reactivating its Relief Canyon Mine in Lovelock,
Nevada, and has acquired two other properties. It is anticipated that Newgold
operations will have annual production of 60,000 troy ounces of gold by the end
of 1997 and will be operating profitably. Revenue projections for the year 1996
are $10.2 million. Growth is projected to be 33% to 100% annually through the
year 2000. Newgold has current proven and probable reserves of $50,000,000.
The Relief Canyon Mine is owned 50% by Newgold, Inc. and 50% by Casmyn
Corp., a Colorado corporation which is publicly traded on the NASDAQ Bulletin
Board. Casmyn Corp. purchased its 50% interest for $1,398,000, of which $773,000
has been paid to date.
Gold Mining Industry Economics
In 1995 a total of 73.8 million troy ounces (there are 12 troy ounces to a
pound) of gold were produced worldwide. Of this amount the United States
produced 10.5 million troy ounces or 14.3% of the worlds gold production. Of
this amount, 6.76 million troy ounces were produced in the State of Nevada which
represents 9.1% of the total worlds gold production. The United States
<PAGE>
ranks fourth in gold production behind South Africa, Australia and the
Commonwealth of Independent States (the former Soviet Union).
The bulk of the U.S. gold production is now being conducted using the
cyanide heap leaching technique. The technique recovers disseminated gold which
is microscopic in size and not visible to the naked eye. Ore is blasted, crushed
and agglomerated with cement and lime. The gold bearing ore is then placed on
slightly inclined plastic lined pads and leached with a cyanide solution. The
cyanide solution (aqua regia) converts the microscopic gold to a solution which
then flows into a "pregnant pond". The solution from the pregnant pond is then
pumped through carbon columns where the gold is collected on the carbon. The
solution, sans the gold, is then returned to a barren pond where it is
reinvigorated and re-pumped back over the heaps--thus creating a continuos
closed leaching circuit.
The collecting carbon (which is manufactured from coconut shells) has an
affinity for gold similar to steel or iron attaching itself to a magnet. The
carbon columns are then flushed with heated cyanide which returns the gold back
into a solution and which is then pumped into electrowinning cells where the
final gold product is collected on steel wool through electroplating. The gold
laden steel wool, in turn, is fired in a furnace which converts the microscopic
gold collected into a dore (or miners) bar. This dore bar is then sold to a
refinery (such as Engelhardt) which completes the process of refining the gold
into a .999 fine gold bar.
Currently the national average cash cost for heap leach gold recovery is
$220 per troy ounce. Gold is currently selling in the $380 to $390 per troy
ounce range.
Competition
Upon reorganization, the Debtor's successor will be subject to competition
from a number of companies within the gold mining industry which may have
greater financial resources and experienced management than the reorganized
successor to the Debtor. Further, the economic success of the reorganized
Debtor's successor will be subject to the fluctuations of gold prices which
cannot be forecast with any degree of accuracy.
<PAGE>
Suppliers and Materials Used
The reorganized Debtor's successor uses various mining related supplies. It
is not dependent on any one supplier for any of the various gold mining
materials used.
Property, Plant and Equipment
The Debtor currently owns no property. On August 28, 1996, pursuant to the
Court's Order, the Debtor sold all of its assets for $375,000 in cash.
Employees
The Debtor currently has no employees.
Description of Insider Transactions
On August 28, 1996, a group of investors led by Richard Dale, former
President of Warehouse Auto purchased the inventory, furniture, fixtures and
equipment for $375,000 in cash. From these proceeds the D.I.P. Loan of $200,000
was repaid certain officers and directors including Richard Dale, Eugene
O'Donovan, Nathan Morton and W. John Devine.
Under the Plan, any and all outstanding options, warrants or other rights
or commitments by Debtor to issue any securities or pay any benefits to any
person or business entity shall be canceled and rendered null and void.
With respect to insiders of Newgold, Scott Dockter, the President and
Chairman of the Board, received 6,701,358 shares of Newgold Common Stock as
consideration for services and contributions of cash and assets in the
approximate sum of $500,000. Mr. Edward Mackay received 3,800,000 shares of
Newgold Common Stock for capital contributions to Newgold in the approximate
amount of $1,500,000.
Market for Reorganized Debtor's Stock
The Debtor's stock is currently traded on the NASDAQ Electronic Bulletin Board
under the symbol WHAC. The Debtor's stock transfer agent is American Stock
Transfer located at 40
<PAGE>
Wall Street, New York, N.Y. 10005. The reorganized Debtor intends to continue
market making activities under the reorganized Debtor's new name of Newgold,
Inc.
Post Petition and Current Operations
The Debtor continued to operate in the normal course of business but
recognized a serious erosion of its assets and cash flow and losses over the
year in which it has been under the protection of the Court. The Debtor
determined that it could not continue to operate as a going concern in the auto
parts business without a significant infusion of new capital. The Debtor was
unable to obtain such new capital and in August 1996 sold all of its tangible
assets for $375,000 in cash.
Creditor's Committee
The Creditor's Committee was appointed on August 1, 1995. Albert Solochek
of the firm of Howard, Solochek & Weber, S.C. and Stephen Mayka, Esq. of the
firm of Lacy, Katzen, Ryen & Mittleman were appointed as Co-Counsel to the
Committee and actively participated in the case representing the unsecured
creditors.
The Debtor has preserved its rights to investigate and pursue any claims
and causes of action it may have as against third party creditors, insiders and
all other persons and entities subsequent to confirmation, except for accounts
receivables which were previously sold. It has designated the official Unsecured
Creditors Committee as its agent to investigate and bring such claims, solely
for the benefit of holders of allowed unsecured claims. Any sums collected from
the prosecution of such claims shall be applied first to the cost of
investigation and suit, thereafter to any fees due the court and the Office of
the United States Trustee on account of such actions or proceedings and then
distributed, pro rata, to unsecured creditors holding allowed unsecured claims.
The Debtor does not believe that there are any preferences by the Debtor in
significant amount which may be recovered. Virtually all the trade creditors had
suspended shipments on credit substantially before the filing of the involuntary
petition and, most, if not all, purchases were being made on a C.O.D. basis.
Further, the Debtor knows of no voidable transfers or claims against insiders or
third parties or entities which may be pursued without significant investigation
and significant trial cost. Since the Debtor lacks funds to bring these actions
it has assigned the
<PAGE>
same to the Creditor's Committee as its agent.
The Committee currently has no funds with which to pursue such actions but
will attempt to sell such claims or find counsel who is willing to undertake the
same strictly on a contingency fee basis and who will advance all cost and
disbursements including court fees and fees due the United States Trustee in
order to bring such cases. In the event the Committee cannot do so or obtain
alternative funding for such actions, the Committee may, without liability to
any party and in the exercise of its sole discretion, abandon the same. The
Committee is continued in existence until it disbands itself for the purposes of
bringing these actions.
Present Assets
All of the assets of the Debtor were sold pursuant to a Court Order by the
U. S. Bankruptcy Court on August 28,1996 for $375,000 in cash. The Debtor
currently has no assets other than $28,287.65 cash on deposit..
Description of Pending Litigation
Debtor is not aware of any litigation against it, either threatened or
pending.
Newgold is currently involved as a plaintiff in litigation to establish its
property interest in certain mining claims situated in Inyo County, California.
None of the claims in the case seek to impose liability on liability or threaten
its assets.
Regulatory Issues
The Reorganized Debtor (i.e. Newgold, Inc.) is not aware of any recent or
proposed legislative or regulatory changes which may have any impact on its
future operations. The Reorganized Debtor will be operating in the mining
industry and will be subject to regulation by the following government agencies:
Local Government (Counties): Special Use Permits
Building Permits
Air Quality Permits
Landfill Permits
Environmental Protection: Zero Discharge Permit
Bureau of Land Management: Plan of Operations Permit
<PAGE>
Forest Service: Plan of Operations Permit
Department of Wildlife: Notification
Mine Safety and Health: Notification of Start Up
State Fire Marshall: Fire
Health Department: Septic and Water Systems
Each regulatory agency will require at least application or consideration
by each of these governmental agencies. Therefore, in the selection process each
property will require an evaluation of lead time and completion of permits to
start up. The Reorganized debtor will be subject to future control by these
governmental agencies, which may promulgate new regulations in the future which
may have an adverse effect on its mining operations.
Recent Legislative and Regulatory Changes
The Reorganized Debtor (i.e. Newgold, Inc.) is not aware of any recent or
proposed legislative or regulatory changes which may have an impact on its
future operations.
Debts
As of June 29, 1995, the Debtor had approximate unsecured scheduled debts
amounting to $2,392,967. 19. During the pendency of this case, the Court
approved DIP loans in the amount of $200,000. These DIP loans were repaid from
proceeds of a sale of the Debtor's assets which was approved by the Court on
August 28, 1996. On September 25, 1996, the Court agreed to allow the Debtor to
sell Debtor Certificates pursuant to Section 364 of the Code in the maximum
amount of $5,000,000. The funds will be used as fresh start capital which
contemplates a change in business direction and strategy by the acquisition
and/or merger of the Debtor with Newgold, Inc.
Financial Condition of the Debtor Following Confirmation
See Exhibit D attached to this Disclosure Statement.
THE ATTACHED FINANCIAL PROJECTIONS REPRESENT AN ESTIMATE OF FUTURE EVENTS THAT
MAY OR MAY NOT OCCUR. IT IS PROBABLE THAT SOME OF THE ASSUMPTIONS ON WHICH THE
FINANCIAL PREDICTIONS ARE BASED WILL NOT
<PAGE>
MATERIALIZE AND THAT UNANTICIPATED EVENTS AND CIRCUMSTANCES WILL OCCUR.
THEREFORE, THERE CAN BE NO ASSURANCE, NOR REPRESENTATIONS MADE, THAT THE
FINANCIAL PROJECTIONS OR RELATED ASSUMPTIONS WILL CONSTITUTE AN ACCURATE
REFLECTION OF THE ACTUAL OPERATING CASH FLOW OF THE REORGANIZED OR SUCCESSOR
COMPANY DURING THE PERIOD INDICATED. THE FINANCIAL PROJECTIONS SHOULD NOT BE
RELIED UPON TO INDICATE THE ACTUAL RESULTS THAT WILL BE OBTAINED.
The Debtor is not now current in its reporting to the Securities and
Exchange Commission. Newgold, Inc. has agreed to compensate the accounting firm
of Ciaccia & Catarisano LLP to bring the Debtors books and records current and
to complete the Debtor's 10-K for the year ending January 31, 1996, as well as,
the requisite 10-Q's and federal, state and local tax returns which are due or
will be due up to the date of Confirmation of the Plan. Additionally, Newgold,
Inc. has commissioned its independent accountants, Burnett Umphress & Kilgur, to
audit and certify its books and records. It is anticipated that by the Effective
Date, the Reorganized Debtor's books and records (i.e. for both the Debtor and
Newgold) will be certified so as to facilitate the accounting merger of the two
entities for SEC and NASDAQ purposes.
Officers and Directors of the Successor Company
Following confirmation of the Plan of Reorganization, the following
individuals will constitute the directors, executive officers and significant
employees of the reorganized successor company:
Name Address Age Position
- -------------------- -------------------- --- -------------------
Arthur Scott Dockter 5190 Neil Road, #320 40 President, CEO
Reno, NV. 89502 Director
Robert W. Morris 5190 Neil Road, #320 56 CFO, Director
Reno, NV. 89502
Edward Mackay 5190 Neil Road, #320 43 Secretary, Director
Reno, NV. 89502
Michael Morrison 1025 Ridgeview Dr. 50 Director
Suite#400
Reno, NV. 89509
A Biography of each follows:
<PAGE>
Arthur Scott Dockter is the founder, Chairman of the Board and President of
Newgold, Inc., a privately held Nevada corporation since 1993 and has supervised
the development of three gold mining properties. He is also founder of
Riverfront Development Corporation, a privately held corporation which is
currently in the process of refurbishing a 152,000 sq. ft manufacturing facility
on 71 acres near Sacramento, California. Prior to 1993, Mr. Dockter was a
self-employed general engineering contractor specializing in dams, levies and
mining projects.
Robert W. Morris has been a Certified Public Accountant for 30 years with
13 years in public accounting including six years with Arthur Anderson & Co.,
and 17 years as a treasurer and controller for private corporations. Mr. Morris
graduated from Indiana University in 1961 with a B.S. Degree in Accounting.
Edward Mackay has been an independent real estate developer since 1980. He
is a member of the Rural Builders Council of California and the Council for
Rural Housing and Development. During his many years in the development field,
Mr. Mackay has interfaced closely with federal, state and local governmental
agencies, as well as syndicators, tax credit agencies, financial lenders,
architects, engineers and others. Mr. Mackay has acquired land, developed,
designed, constructed, syndicated and managed multi-family and elderly housing
projects totaling more than $59,300,000; and successfully syndicated over
$30,000,000 through public and private investment partnerships. He attended
Stanford University at Palo Alto, California; Oregon State University at
Corvallis, Oregon, and graduated from Eastern Oregon College in 1978, obtaining
his Bachelor of Arts Degree in General Studies.
Michael Morrison has been a licensed practicing attorney in Reno, Nevada
for 20 years specializing in the areas of corporate, business and securities
laws. Mr. Morrison is also admitted to practice in the States of California and
the District of Columbia. He serves as an officer and director of several public
and private corporations. He graduated from McGeorge School of Law, University
of Pacific, in 1976 with a J.D. Law Degree, and from the U.S. Air Force Academy
in 1968 with a B.S. Degree in Science, Engineering Management.
Stock Ownership of Officers, Directors, Key Personnel and Control Persons of
the Reorganized Company After Confirmation
Name Position Stock Percentage
Arthur Scott Dockter President, CEO 6,492,324 54%
Director
Edward Mackay Secretary/Treas. 2,644,293 18%
Director
Michael J. Morrison Director 12,500 less than 1%
<PAGE>
Classification and Treatment or Claims
Payment of Administrative Claims
--------------------------------
Payment of Secured, Unsecured and Equity Holders Claims
-------------------------------------------------------
Class 1 Claims consisting of allowed administrative expenses, including
attorney and accountant fees of the kind specified in Code Section 507 (a) (1)
approved salaries of officers, and trade payables arising after commencement of
the Case and commissions owed for the sale of Debtor Certificates, shall be paid
in full by the Reorganized Debtor in cash on the effective date of the Plan or
in stock in the reorganized Debtor at a ratio of one (1) share of stock for each
$1 owed the Creditor. The Class 1 Claimants will have the right to "Put" to
Newgold, Inc. or its Assignee, the stock for 15 days from the effective date of
the Plan for $1.00 in cash for each share of new stock issued.
Class 2 Administrative claims consisting of Priority Debtor Certificate
holders in the approximate amount of $5,000,000. The holders of allowed claims
in Class 2 shall be paid by the Reorganized-Debtor as originally agreed and such
holders shall retain their respective security interests. Class 2 claimants, at
their exclusive option, shall be allowed to exchange their claims for one (1)
share of Common Stock of the Reorganized Debtor for each $1 of indebtedness. The
common stock being offered will be set aside in trust for Class 2 claimants who
shall have ninety (90) days from the date of confirmation of the Plan of
Reorganization to exercise the conversion of their debt to equity. The
Reorganized Debtor shall retain the right to sell said stock , from time to
time, to non claimants with the proceeds to be paid to the Class 2 Claimants who
opt not to convert. Any difference realized in the sale of equity in excess of
the principal sum owed Class 2 Debtor Certificate holders, plus interest
thereon, shall be retained by the Reorganized Debtor for working capital. Debtor
Certificate holders shall be issued promissory notes bearing interest at 10% per
annum. These notes must be surrendered by Debtor Certificate holders who elect
to convert their debt to equity. Those who do not choose to convert shall be
paid their principal and all accrued interest two years from the anniversary of
the date of confirmation of this Plan. Class 2 will not be impaired under the
Plan.
Class 3 Administrative Claims consisting of Priority Unsecured New York
State Sales Tax owed of approximately $30,000, U. S. Trustee's fees, Court Fees
and State of Delaware Franchise Tax Fees, owed of approximately $2,653.00 for
1995 taxes and State of Ohio Sales tax of $1,826.95 and any 941 IRS taxes owed
by the Debtor. Said claims shall be paid in cash on the Effective Date of the
Plan.
<PAGE>
Class 4 Claims consist of 327 unsecured creditors with aggregate Claims
amounting to approximately $2,392,967. Class 4 Creditors shall receive one (1)
share of Common Stock in the Reorganized Debtor for each $42 of debt.
Approximately 56,975 shares in the aggregate shall be issued to Class 4
claimants. Class 4 will be impaired under the Plan.
Class 5 Claims consist of approximately 321 shareholders of record holding
3,299,191 shares of common stock which represents 100% of the total outstanding
and issued shares of common stock of the Debtor. There are no other equity
securities issued by the Debtor other than the one class of common stock.
Existing Class 5 claimants will have their interest diluted by a factor of 1:65.
In other words, existing shares shall be reverse split by a factor of 65 or 65
Shares shall be reduced to one (1) share of post-petition stock in the
Reorganized Debtor. Existing Equity holders will be reduced on a pro-rata basis
to a total of 50,000 shares in the aggregate. However, in no event will any
existing shareholder of the Debtor hold less than two (2) shares after the
reverse split. Shareholders shall be obligated to surrender their shares of
stock to the Reorganized Debtor's transfer agent within six months of the
effective date of the Plan. Any shares not surrendered within the time period
shall be canceled and the shareholder who fails to surrender his shares shall
have no further rights or recourse against the Reorganized Debtor as an equity
holder. As of the date of the Plan accompanying this Disclosure Statement, the
book value of the Debtor's shares is $0.00. Under the proposed Plan, existing
shareholders of the Debtor, after dilution, will be $0.58 per share book value.
Thus, Class 5 claimants will not be impaired under the Plan.
Status and Resale of Securities to Be Issued
Under the Plan
Under Bankruptcy Code Section 1145, the original issuance of the successor
company's Common Stock (hereinafter the "securities") under the Plan, will be
exempt from the registration requirements of the Securities Act of 1933 and
applicable state or local laws, rules or regulation requiring registration of
securities.
Resales of securities by a claimant or shareholder receiving the same
directly under the Plan, will also be exempt. provided the claimant or
shareholder is not an underwriter. Generally a claimant or shareholder is not an
underwriter if he (1) has not become a claimant or debtor with a view to
distribution of any securities to be received in exchange for claims under the
Plan, (2) has not offered to sell the securities from others where that offer is
with a view to distribution and
<PAGE>
under an agreement made in connection with the Plan, (3) has not offered to buy
the securities from others where that offer is with a view to distribution and
under an agreement made in connection with the Plan, and (4) is not a control
person of the Debtor as that term is used in the Securities Act of 1933. The
determination of whether a particular claimant or shareholder would be deemed to
be an underwriter is necessarily an individual one, and any claimant or
shareholder considering reselling Securities received under the Plan should
consult a securities advisor to determine whether he would be considered an
underwriter and, therefore, ineligible for the exemption described above.
Section 1145 of the Bankruptcy Code does not provide the only means for
reselling bankruptcy related securities, and it does not eliminate or otherwise
affect the availability of any other exemption for resale under the Securities
Act of 1933.
THE FOREGOING IS INTENDED AS GENERAL INFORMATION ONLY, AND ANY PERSON
DESIRING TO RESELL ANY SECURITIES RECEIVED PURSUANT TO THE PLAN IS URGED TO
CONSULT A SECURITIES ADVISOR FOR THE AVAILABILITY OF ANY REGISTRATION EXEMPTION.
THE COMMON STOCK ISSUED UNDER THE PLAN ARE NOT NOW READILY
TRANSFERABLE. NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR
SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN WHICH MAY ACCRUE TO
SHAREHOLDERS. UNDER BANKRUPTCY CODE SECTION 1145, THE ORIGINAL ISSUANCE OF THE
REORGANIZED DEBTOR'S EQUITIES, OR EQUITY SECURITIES OF A SUCCESSOR TO THE DEBTOR
(I.E. NEWGOLD, INC.) WILL BE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS REQUIRING REGISTRATION OF
SECURITIES. ADDITIONALLY NO FEDERAL, STATE OR LOCAL TRANSFER TAX CAN BE IMPOSED
ON SECURITIES ISSUED UNDER THIS PLAN.
Federal Income Tax Consequences to Creditors of the Debtor
The tax consequences of the implementation of the Plan, to a claimant
receiving reorganized or successor to the Debtors securities, will depend in
part on whether the Claimant's present debt claim constitutes a "Security" for
federal income tax purposes. The determination as to whether the claim of any
particular claimant constitutes a "Security" for federal income tax purposes is
complex, and depends on the specific facts and circumstances surrounding the
original nature of the claim. Generally, claims arising out of the extension of
trade credit have been held to be securities, while corporate debt obligations
evidenced by written instruments with maturities, when issued, of ten years or
more, have generally been held to be securities. The Debtor expresses no
<PAGE>
view with respect to whether the claims of any particular Creditor constitutes a
"Security" for federal income tax purposes and urges each Creditor to consult
his own tax advisor.
A Creditor who exchanges his existing claim for the securities of the
reorganized or successor Debtor may recognize income or loss in respect of
consideration received on account of accrued interest attributable to his
existing claim, and gain or loss on the exchange of the principal of the claim
for the reorganized or successor to the Debtor's securities.
The Bankruptcy Tax Act of 1980 reversed prior law by providing that income
attributable to accrued, but unpaid interest, will be treated as ordinary
income, regardless of whether the Creditor's existing claims are capital assets
in his hands and the exchange is pursuant to a tax reorganization.
THE FOREGOING IS A GENERALIZATION OF THE FEDERAL TAX CONSEQUENCES TO
CREDITORS RECEIVING SECURITIES UNDER THE DEBTOR'S PLAN AND IS NOT TO BE RELIED
UPON. CREDITORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX TREATMENT TO THEM OF SECURITIES ISSUED BY THE REORGANIZED COMPANY.
Alternatives to the Plan
The Debtor believes that the Plan provides its Creditors and Equity Holders
with the earliest and greatest possible value that can be realized on their
claims. The alternatives to confirmation of the Plan are the submission of an
alternative plan of reorganization by the Debtor or any other party in interest,
or the liquidation of the Debtor's estate.
Liquidation Analysis
The Debtor has performed an analysis to determine whether Creditors and
Equity Holders will receive more under the proposed Plan than such Creditors
would receive under a Chapter 7 liquidation. In Chapter 7, all post-petition
administrative claims and debts, taxes, costs of liquidation and all allowed
professional fees and secured creditors claims would have to be paid prior to a
distribution to general unsecured creditors. Additionally, all Section 364
lenders and "Debtor Certificate" holders would have to be paid in full prior to
any administrative or unsecured Creditors, as they hold a blanket lien on all
assets of the Debtor pursuant to Section 364 (d) of the Bankruptcy Code.
<PAGE>
The Debtor believes that a Chapter 7 liquidation would yield no funds to
any unsecured creditors and only partially pay Administrative creditors. By
contrast, the Debtor's proposed Plan will result in Creditors and Equity Holders
receiving securities in the reorganized successor to the Debtor. The Plan,
therefore, provides a greater return to Creditors and Equity Holders than the
return which would result from conversion of this case under Chapter 7. See
Exhibit E.
Risk Factors
The transactions contemplated by the Plan may have tax consequences upon
interested parties. Nothing contained in the Plan or this Disclosure Statement
should be construed as advice with respect to the income tax consequences of
acceptance or rejection of the Plan. Each party should review such tax
consequences with a tax advisor.
Creditors and Equity Holders are cautioned that while there is and will be
a public market for the successor to the reorganized Debtor's equity securities,
the equity securities being issued under the Plan will be a "designated security
" under Securities & Exchange Commission Rules. It will be a major goal of the
new management of the reorganized Successor to the Debtor to seek listing on a
nationally recognized exchange so as to eliminate the 'designated security"
status of the equity securities being issued under the Plan. However, the Debtor
makes no representations that the reorganized successor to the debtor will ever
achieve listing equity securities issued on any public stock market exchange
Claimants are further cautioned that there are no assurances regarding the
performance or value of securities issued pursuant to the Plan. The future price
of the securities will be subject to numerous factors, none of which can be
accurately forecast since economic activity may fluctuate depending upon the
general condition of the economy and future business of the reorganized
successor to the Debtors.
Claimants should also be aware that Debtor Certificate holders could
require cash payments at the time of confirmation of the Plan. This is due to
the fact that Note holders are administrative claimants and are therefore
entitled to be paid in full in cash unless they agree otherwise. If some or all
of the Debtor Certificate holders insist on taking cash rather than stock as
payment it would substantially impact the projections and operations of the
successor to the Debtor. The Debtor believes, based upon personal conversations
that Debtor Certificate holders will exchange their administrative expense claim
for stock in the successor to the reorganized Debtors. However, Debtor
Certificate holders are not legally obligated to do so.
<PAGE>
Other
Certificates of Indebtedness. Prior to the filing of the Plan of Reorganization
and Disclosure Statement the Debtor moved the Bankruptcy Court to authorize it
to sell $5,000,000 in Code Section 364 Certificates of Indebtedness ("Debtor
Certificates"). The motion to allow the sales of the Debtor Certificates was
granted on September 11, 1996 and an order signed on September 25, 1996.
Finders Fees. The Debtor has agreed to issue to David Rinker and Christina
Nichols, 5.000 shares each of Common Stock in the Reorganized Debtor as a
finders fee . They were instrumental in bringing about the transactions
involving the assets being acquired under the Plan of Reorganization.
Additionally, the Debtor has agreed to issue 1,000 shares as a finders fee to
Steve Nichols who introduced the parties to the Debtor.
Consulting. The Reorganized Debtor has agreed to pay $10,000 in cash and issue
7,500 shares of the Reorganized Debtor's Common Stock to Dan-Com, Inc, for
consulting services rendered. Dan-Corn, Inc. is a firm which specializes in
coordinating mergers of solvent businesses into public companies which are under
protection of Chapter 11 of the Bankruptcy Code.
Change of Corporate Name, The Reorganized Debtor will change its name to
Newgold, Inc. and recapitalize at 50,000,000 shares of Common Stock authorized,
.001 par value.
Michael J. Morrison. The Debtor has agreed to issue 12,500 shares of Common
Stock in the Reorganized Debtor to Michael Morrison, ESQ. as a finder's fee.
Asset Acquisition. The Reorganized Debtor will issue a total of 12,000,000
shares of its Common Stock to existing shareholders of Newgold, Inc. and thus
acquire 100% of the outstanding new shares of Newgold, Inc. and, therefore, its
assets described in the Disclosure Statement.
Other Corporate Matters. The Board of Directors of the Reorganized Debtor shall
be authorized to take whatever actions are necessary in order to bring the
Reorganized Debtor into conformance with securities laws and regulations
including, but not limited to, amending the Reorganized Debtor's by-laws and
Articles of Incorporation.
<PAGE>
RESPECTFULLY SUBMITTED
/s/ Leonard Relin
- ------------------------------
Leonard Relin, Attorney at Law
WAREHOUSE AUTO CENTERS, INC.
Debtor in Possession
/s/ Nathan P. Morton
- -----------------------------
Nathan P. Morton, Chairman
Board of Directors
EXHIBIT A
United States Bankruptcy Court
Eastern District of New York
In re Warehouse Auto Centers, Inc.
MOST RECENT "MONTHLY OPERATING REPORT"
SUBMITTED TO THE US TRUSTEE
Cash Flow Statement of Chapter 11 Debtor-In-Possession for the Period June 1
through June 30, 1996
Beginning cash balance (from previous report) . ($32,347)
Receipts
Sales receipts, net of sales tax ..... $ 89,542
Sales tax collected .................. 5,543
--------
$ 95,085
Disbursements
Store operations
Merchandise purchases ................ $ 52,917
Payroll and related taxes ............ 23,406
Rent ................................. 1,500
Insurance ............................ 8,308
Utilities ............................ 1,672
Lease payments ....................... 1,591
Advertising .......................... 500
Bank charges ......................... 1,566
Other ................................ 1,396
---------
Total store operations ..................... $ 92,856
Total store cash flow ...................... $ 2,229
Home office
Payroll and related taxes ............ $ 8,646
---------
Total home office .......................... $ 8,646
Store and home office cash flow ............ ($ 6,417)
Write-off of outstanding checks ............ 27,705
---------
Consolidated net cash flow, less adjustments $ 21,288
Ending cash balance ........................... ** ($11,059)
=========
**Includes deposits and checks outstanding at June 30, 1996, but
excludes balance retained in the DIP Escrow Account (pursuant to the DIP Loan).
<PAGE>
EXHIBIT B
TREATMENT OF CLASSES AND INTEREST UNDER THE PLAN
<TABLE>
<CAPTION>
Reconciliation of bank accounts to Warehouse Auto records at June 30, 1996
Fleet Fleet M&T Cash
Checking Credit Cds Payroll On Hand Total
<S> <C> <C> <C> <C> <C>
Balance per bank statement $1,093 $1,982 $4,127 $3,000 $10,202
Deposits in transit at month end 4,725 2,401 7,126
Checks outstanding at month end 21,741 6,646 28,387
Balance per Warehouse Auto records ($15,923) $4,383 ($2,519) $3,000 ($11,059)
</TABLE>
<PAGE>
EXHIBIT C
CASH FLOW PROJECTIONS FOR THE REORGANIZED DEBTOR
FOR THE PERIOD
JANUARY 1, 1997 THROUGH DECEMBER 2003
WAREHOUSE AUTO CENTERS, INC.
COMMON STOCK DISTRIBUTION UNDER PLAN OF REORGANIZATION
Number of Shares of Percent
Description of Class Stock to be Distributed
Class 1 - Administrative 250,000 1,436%
Class 2 - Debtor Certificates 5,000,000 28.756%
Class 3 - Priority Tax Claims 0 0.000%
Class 4 - Unsecured Creditors 56,975 0.328%
Class 5 - Equity Holders 50,000 0.288%
Newgold Acquisition 12,000,000 69.013%
Holders 23,500 0.135%
Consulting 7,500 0.043%
--------- --------
Total 17,387,975 100.000%
<PAGE>
EXHIBIT D
PRO FORMA BALANCE SHEET ASSUMING PLAN CONFIRMATION
<TABLE>
<CAPTION>
NEWGOLD, INC.
PRO FORMA INCOME STATEMENT
FOR YEARS ENDING DECEMBER 31,
Note 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C>
Production 60 117 117 117 117
Gold ounces (000's)
Gross Revenue (000's) 1 $23.400 $45,630 $45,630 $45,630 $45,630
Smelter charges 2 234 456 456 456 456
NSR royalties 3 390 761 761 761 761
-------- -------- -------- -------- --------
Net revenue 22,776 44,413 44,413 44,413 44,413
Mining costs 4 13,200 25,740 25,740 25,740 25,740
Gross profit 9,576 18,673 18,673 18,673 18,673
Administrative costs 5 2,640 5,148 5,148 5,148 5,148
Income before taxes 6,936 13,525 13,525 13,525 13,525
Income taxes 6 2,771 5,407 5,407 5,407 5,407
Net income $4,164 $8,118 $8,118 $8,118 $8,118
======== ======== ======== ======== ========
Income per share 7 $0.24 $0.48 $0.48 $0.48 $0.48
======== ======== ======== ======== ========
</TABLE>
Notes:
1 Assumes production ounces sold at an average $390 per ounce.
2 Assumes smelter processing charges at 1% of market value.
3 Assumes 2.5% NSR royalty payable on 2/3 of production.
4 Assumes mining cost of $220 per ounce of production.
5 Assumes administrative costs budgeted at 20% of mining costs.
6 Assumes combined federal and state tax rate of 40% on
income over $335,000 plus $131,000. See Note 7 of pro
forma 12/31/96 balance sheet, loss carry forwards not
applied to 1997-2001.
7 Assumes 17,000,000 shares outstanding for pro forma period.
<PAGE>
EXHIBIT D
NEWGOLD, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
<TABLE>
<CAPTION>
ASSETS Notes
<S> <C> <C>
CURRENT ASSETS
Cash 350,000
Cash investments 4,409,438
Total Current Assets 7 4,759,438
OTHER ASSETS
Reclamation bonds posted 600,000
INVESTMENTS
Cerro Gordo property 1 200,000
Golden Asset mine 622,945
Relief Canyon Ltd. 2 1,500,000
Washington Gulch mine 3,000,000 5,322,942
--------- ---------
Total Assets 10,682,380
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 3 700,000
Accrued payroll 4 22,075
-------
Total Current Liabilities 722,075
SHAREHOLDERS' EQUITY
Common Stock - Authorized, 50,000,000 shares
Issued and outstanding, 17,000,000 shares 6 9,400,305
Plus retained earnings 5 560,000
---------
Total Shareholders' Equity 9,960.305
10,682,380
==========
See notes next page
</TABLE>
<PAGE>
EXHIBIT D
NEWGOLD, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
Notes
1 Purchase of Cerro Gordo property renegotiated to $100,000 cash plus 100,000
shares of stock.
2 Drill program capitalized
3 Thirty days operating costs
4 One week payroll
5 Does not reflect accumulated deficits of Warehouse Auto Parts which may be
available as loss carry forwards against future income. Therefore, no
income tax provision made for 1996 only.
6 Reconciliation of common stock capital
Common Stock issued 6/30/96 3,687,805
Subscription capital received 5,000,000
Shares issued for Cerro Gordo property 100,000
Capital from private placement in September 600,000
Shares issued to holder of paid in capital 12,500
-------
9,400,305
7 Cash Reconciliation
Subscription 5.000,000
Private placement 600,000
Balance from Casmyn 623,000
---------
Total investment cash 6,223,000
Net income from 5,000 ounces at $112 per ounce 560,000
Less liabilities paid and amounts capitalized (2,023,562)
Cash on hand 12/31/96 4,759,438
<PAGE>
EXHIBIT E
<TABLE>
<CAPTION>
LIQUIDATION ANALYSIS
Warehouse Auto Centers, Inc Exhibit E
LIQUIDATION ANALYSIS
ASSETS BALANCE SHEET ADJUSTMENTS LIQUIDATED VALUE
<S> <C> <C> <C>
CASH(1) $20,000 $20,000
RECEIVABLES $0 $0
OTHER ASSETS $0 $0 $0
------ ------ ------
TOTAL $20,000 $0 $20,000
LIABILITIES
POST PETITION
COST OF AUCTION $0
ACCOUNTS PAYABLE $0
ADMINISTRATIVE EXPENSES $250,000 $250,000
REPAY DEBTOR CERTIFICATES $0 $0
INTEREST ON DEBTOR CERTIFICATES $0 $0
SECURED DEBT $0 $0 $0
------ ------ ------
TOTAL $250,000
NET VALUE FOR PRE-PETITION DEBT ($230,000)
PRE-PETITION DEBT $2,437,759 ($2,437,759)
AVAILABLE FOR DISTRIBUTION $0
</TABLE>
Notes
(1) Includes remaining case in escrow
from sale of assets per Court Order of
August 28, 1996
<PAGE>
EXHIBIT F
MERGER/ACQUISITION AGREEMENT BETWEEN NEWGOLD, INC. AND DEBTOR
Not Included
<PAGE>
EXHIBIT G
SUMMARY OF ENGINEERING REPORT & INDEPENDENT
EVALUATIONS OF NEWGOLD, INC.'S GOLD RESERVES
(Copies of Reports which are too voluminous have been
filed with the Clerk of the U.S. Bankruptcy Court
where they can be reviewed)
Proving up gold mining properties consists of a number of steps which
are performed by professional geologists. The following steps are required to be
taken to verify gold reserves:
1) Geological mapping of the mining claims to determine
favorable rocks for hosting the gold deposits.
2) Rock chip samples are collected by geologists, and then
analyzed to determine gold and silver content.
3) Geophysical surveys may also be performed to assist with
determining the extent of gold mineralization. Electrical,
magnetic and density properties of rocks are determined in
these surveys.
4) Data from all initial phases are analyzed by the geologists
and targets are selected for testing and definition of
potentially mineralized areas.
5) Drill rigs, either core or percussion, are deployed.
Samples of the drilled rock materials are collected
systematically from the drilled holes, and sent to
laboratories for analyses of gold, silver and other elements.
6) Mining engineers and geologists study the resultant data,
applying economic constraints to determine the profitability
of the mining operation. A mine plan is designed, based on the
limits of profitable operation defined ("orebodies").
7) Permits are obtained from Federal, State and local agencies
once the profitable operating parameters are identified. Bonds
are posted with the pertinent agencies upon approval of the
permits.
8) Mining commences on the identified orebodies.
Terminology for defining the types of gold ore reserves are as follows:
1) Proved Ore Reserves: stated in terms of minable tons or
volumes and accompanying grades in which the corresponding economic gold
mineralization has been defined with strong degree of assurance in three
dimensions by excavation or drilling.
<PAGE>
2) Probable Ore Reserves: sampled by drill holes, excavations
and/or underground openings at locations too widely spaced to ensure continuity
but close enough to give a reasonable indication of continuity and where
geoscientific data are known with a reasonable level of reliability.
3) Inferred Mineral Resources: inferred from drill holes,
underground excavations, or other geoscientific evidence where the lack of data
is such than continuity cannot be predicted with confidence and where
geoscientific data may not be known with strong degree of certainty.
Newgold, Inc. has four mining properties. Its Relief Canyon Mine is
located in Pershing County, Nevada and is in reactivational status of former
operations. Newgold, Inc. purchased the mine on January 10, 1995. Newgold has
spent the past ten months permitting the project and is currently extending heap
leaching pads for newly discovered ore. The Relief Canyon Mine is scheduled to
recommence operations and gold productions in October, 1996.
An evaluation of the project was performed by the engineering firm of
Watts, Griffis and McOust, and an initial positive feasibility report was issued
on February 28, 1996. The Report delineates 310,000 oz gold contained in 13.5
million tons of ore in proven reserve category, with additional reserves
established in the probable and inferred category. These latter reserves will be
augmented and upgraded to proven reserve category following the supplemental
Fall 1996 drilling program.
<PAGE>
EXHIBIT H
UNAUDITED FINANCIAL STATEMENTS OF
NEWGOLD, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash $909
Note receivable 38,074
Due from officer 26,939
Prepaid expenses 2,150
-------
Total Current Assets 68,072
INVESTMENTS
Golden Asset mine 602,942
Relief Canyon mine 1,216,071 1,819,013
---------
TOTAL ASSETS $1,887,085
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $209,277
Accrued payroll 5,656
Payroll taxes payable 49,529
Payable to affiliated companies 307,935
Notes payable to individuals 1,189,305
Notes payable-Investments 456,407
----------
Total Current Liabilities 2,218,109
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock - Authorized, 1,000 shares 1,000
Issued and outstanding, 100 shares
----------
Less accumulated deficit ($332,024)
----------
Shareholders' Deficit (331,024)
----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $1,887,085
==========
See Notes to Financial Statements
<PAGE>
EXHIBIT H
NEWGOLD, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
FOR SIX MONTHS ENDING DECEMBER 31, 1995
INCOME
Sales of gold and silver $40,773
EXPENSES
Assay and refining expenses 2,000
Accounting fees 4,655
Vehicle expenses 723
Bank service charges 2,578
Vendor service charges 9,049
Dues and subscriptions 53
Interest expense 15,419
Legal and professional 3,343
Licenses and permits 4,727
Travel 3,014
Meals and entertainment 494
Office supplies 2,270
Postage 645
Printing 212
Outside services 5,368
ADP fees 662
Laboratory fees 818
Miscellaneous 850
Equipment rental 1,605
Equipment fuel and oil 1,545
Repairs and maintenance 572
Supplies 5,168
Wages 35,255
Payroll taxes 4,215
<PAGE>
Exhibit H (cont'd.)
Telephone 3,447
Engineering fees 6,500
----------
Total Expenses 115,187
NET LOSS (74,415)
Accumulated Deficit - December 31, 1994 (257,609)
----------
Accumulated Deficit - December 31, 1995 ($332,024)
----------
See Notes to Financial Statements
<PAGE>
EXHIBIT H
NEWGOLD, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDING DECEMBER 31, 1995
Cash Flows from Operating Activities
Net Income (Loss) ($74,415)
Adjustments to reconcile Net Loss to
Net Cash Used by Operating Activities
(Increase) in Note receivable (38,074)
Decrease in Due from officer 20,871
(Increase) in Prepaid expenses (2,150)
Increase in Accounts payable 97,642
Increase in Accrued payroll 5,656
Increase in Payroll taxes payable 48,615
Increase in payable to affiliated companies 234,077
----------
Total adjustments 366,637
----------
Net cash provided by Operating Activities 292,222
Cash Flows from Investing Activities
Net Cash Payments on purchase of Relief Canyon (1,112,306)
Cash Flows from Financing Activities
Cash borrowings from individuals 866,805
Payments on Notes Payable for Golden Asset (52,500)
----------
Net Cash Provided by Financing Activities 814,305
----------
Net Increase (Decrease) in Cash (5,779)
Cash at Beginning of the Year 6,688
----------
Cash at End of Year $909
==========
See Notes to Financial Statements
<PAGE>
NEWGOLD, INC.
Notes to Financial Statements
For The Year Ending December 31, 1995
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
Business Activity - Newgold, Inc. (the Company) was
incorporated in the State of Nevada on September 1, 1993 and
began operations on May 16, 1994. The Company is engaged in
the acquisition of inactive mining properties that have
potential to be reopened as productive gold mines. The Company
uses drill data of others to determine areas of proven
reserves and engages engineers and geologists to review
geological formations to define target areas to implement
drill programs that will establish additional areas for mining
gold and silver bearing ore.
Income and Expense Recognition - The Company uses the accrual
method of accounting where income is recognized when earned
and expenses are recorded as they are incurred.
As Relief Canyon property and equipment had not been placed
into service as of the balance sheet date, all expenditures
exceeding gold revenues from clear water tests of the
equipment, have been capitalized.
Investments - Investments are stated at cost and represent the
leasehold cost of mineral rights and costs incurred for
equipment and its refurbishment. Maintenance and repairs to
equipment in production are charged to expense as incurred.
Income Taxes - The Company has filed to be treated as a
partnership under Subchapter S of the Internal Revenue Code;
therefore, no income tax provision has been made in the
financial statements.
Note 2 - Related Party Transactions
--------------------------
At December 31, 1995, the Company is 100% owned by Arthur
Scott Dockter.
In lieu of wages, the shareholder has been paid advances by
the Company. There is an account receivable from Mr. Dockter
of $26,939 as of December 31, 1995.
A former officer and shareholder sold his 30% interest in the
Company to Mr. Dockter as of June 30, 1995. There is a note
receivable from the former shareholder for $38,074 for
repayment of advances paid to him in lieu of salary. The note
bears interest at 12% per annum.
The Company has an account payable of $307,935 to Riverfront
Development Corporation, an affiliated company. Of this
balance at December 31, 1995 $250,000
<PAGE>
represents used material and equipment sold to Relief Canyon
to refurbish the mine's processing building and equipment. The
remainder represents cash advances and expenses paid by
Riverfront Development for the benefit of the Company.
Note 3 - Notes Payable - Individuals
---------------------------
The Company has borrowed funds from 19 individuals under
Investor's Agreements which promises repayment of the
principle plus net profit percentage interest (NPI) in the net
income of each mine. The total borrowed from individuals for
the Golden Asset mine is $382,500 and the lenders have been
granted a total NPI of 46% of net income generated by this
mine. The total borrowed from individuals for the Relief
Canyon mine is $806,805 and they have been granted a total NPI
of 59.5% in the net income generated by this mine.
Note 4 - Notes Payable - Investments
---------------------------
In the acquisition of the Golden Asset mine, the Company
assumed total debt of $572,642. Alta Gold Corporation sold its
interests to the Company for $322,642. The Company paid a
deposit of $200,000 and has made two of the $10,000 monthly
payments through March 1995. The balance payable at December
31, 1995 was $102,642. The Company agreed to pay $250,000 to
Christiansen Company for earthwork at the mine prior to
purchase by the Company. Christiansen has agreed to delay
payment of this debt until the Company has the mine in full
operation.
The processing building, leach ponds and mineral rights of
Relief Canyon mine were acquired from Welsh & Associates for
the sum of $500,000. The contract required a down payment of
$100,000 and twelve monthly payments of $35,166 including
interest at 10%. The balance due of $103,765 at December 31,
1995 represents the last three monthly principal payments.
Note 5 - Operating Rents
---------------
The mineral rights lease for Golden Asset mine requires future
annual minimum lease payments to the landowner of $10,000 in
lieu of 2.5% royalty on Net Smelter Return for gold purchased
by a smelter.
A mineral rights lease for Relief Canyon mine requires future
annual minimum lease payments of $13,125 to Santa Fe Pacific
Gold Corporation for 800 acres of land and $12,500 minimum
royalty in lieu of 2.5% royalty on Net Smelter Return for gold
purchased by smelter. There are 39 unpatented claims on land
owned by the Federal government. These claims require a
minimum annual rent of $3,900 payable to the Bureau of Land
Management to remain active as claims of the Company.
<PAGE>
Note 6 - Contingencies
-------------
Payroll Taxes - Payroll taxes payable of $49,529 represent
delinquent amounts. Payments have been made subsequent to the
balance sheet date. However, there will be additional interest
and penalties. At this time, the Company is unable to estimate
the additional amounts due.
Liens - A vendor who did earthwork for the Company at Golden
Asset has filed a lien against the property for $95,534. At
this time, the Company is unable to estimate when the vendor
will be paid.
<PAGE>
EXHIBIT I
NEWGOLD, INC.
BALANCE SHEET
JUNE 30, 1996
ASSETS
CURRENT ASSETS
Cash $24,273
Due from officer - Note 2 56,969
Prepaid expenses 16,573
-----------
Total Current Assets 97,815
INVESTMENTS
Cerro Gordo property - Note 7 611,000
Golden Asset mine 622,942
Relief Canyon Ltd - Notes 2 and 8 1,398,000
Washington Gulch mine 3,000,000 5,631,942
-----------
TOTAL ASSETS $5,729,757
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $215,159
Accrued payroll due officer - Note 2 83,259
Payroll taxes payable - Note 6 42,605
Payable to affiliated companies - Note 2 622,397
Notes payable to individuals - Note 3 517,500
Notes payable-Investments-Current - Note 4 422,642
-----------
Total Current Liabilities 1,923,562
LONG TERM LIABILITIES
Notes payable-Investments - Note 4 500,000
-----------
Total Liabilities 2,423,562
SHAREHOLDERS' EQUITY
Common Stock - Authorized, 50,000,000 shares 3,687,805
Issued and outstanding, 11,440,958 shares
Additional paid-in capital 12,500
Less accumulated deficit ($394,110)
-----------
Total Shareholders' Equity 3,306,195
-----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $5,729,757
===========
See Notes to Financial Statements
<PAGE>
NEWGOLD, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
FOR SIX MONTHS ENDING JUNE 30, 1996
INCOME
Option income $100,000
EXPENSES
Vehicle expenses 1,073
Fees and service charges 577
Premium to redeem notes to individuals 27,500
Insurance 1,992
Legal and professional 14,488
State fees 10,285
Travel and entertainment 5,465
Office supplies and postage 935
Outside services 1,050
Rent 10,000
Equipment rental 23,925
Computer expense 1,550
Supplies 1,720
Wages 37,253
Payroll taxes 3,790
Telephone 448
Note receivable write off 19,037
-----------
Total Expenses 161,087
-----------
NET LOSS (61,087)
Accumulated Deficit - December 31, 1995 (333,023)
-----------
Accumulated Deficit - June 30, 1996 ($394,110)
===========
See Notes to Financial Statements
<PAGE>
NEWGOLD, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDING JUNE 30, 1996
Cash Flows from Operating Activities
Net Income (Loss) ($61,087)
Adjustments to reconcile Net Loss to
Net Cash used by Operating Activities
Decrease in Note receivable 38,074
(Increase) in Due from officer (31,030)
(Increase) in Prepaid expenses (14,423)
Increase in Accounts payable 5,882
Increase in Accrued payroll 77,603
(Decrease) in Payroll taxes payable (6,925)
Increase in Notes payable to individuals 27,500
Increase in payable to affiliated companies 314,462
-----------
Total adjustments 411,143
-----------
Net cash provided by Operating Activities 350,056
Cash Flows from Investing Activities
Cash Payments to purchase Cerro Gordo property (21,000)
Cash Payments on Golden Asset mine (20,000)
Cash Payments on Relief Canyon mine (181,929)
-----------
Net Cash Payments on Investment Activities (222,929)
Cash Flows from Financing Activities
Net cash payments on Investment Notes Payable (103,765)
-----------
Net Increase (Decrease) in Cash 23,362
Cash at Beginning of the Period 911
-----------
Cash at End of Period $24,273
===========
See Notes to Financial Statements
<PAGE>
NEWGOLD, INC.
Notes to Financial Statements
For Six Months Ending June 30, 1996
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
Business Activity - Newgold, Inc. (the Company) was
incorporated in the State of Nevada on September 1, 1993 and
began operations on May 16, 1994. The Company is engaged in
the acquisition of inactive mining properties that have
potential to be reopened as productive gold mines. The Company
uses drill data of others to determine areas of proven
reserves and engages engineers and geologists to review
geological formations to define target areas to implement
drill programs to establish additional gold and silver bearing
ore areas.
Income and Expense Recognition - the Company uses the accrual
method of accounting where income is recognized when earned
and expenses are recorded as they are incurred.
Investments - Investments are stated at cost and represent the
leasehold cost of mineral rights, expenditures for equipment
or refurbishment and reclamation bonds posted. Maintenance and
repairs to equipment in production are charged to expense as
incurred.
Note 2 - Related Party Transactions
--------------------------
In lieu of wages through May 31, 1996, Scott Dockter,
President, was paid advances by the Company. There is an
account receivable from Mr. Dockter of $56,969 as of June 30,
1996. The account receivable will be offset against $83,259 in
accrued salary when paid.
The Relief Canyon mine was transferred at a cost of $1,398,000
to a Limited Liability Company on April 26, 1996 in exchange
for 50% ownership of Relief Canyon, Ltd. Casmyn Corp. owns the
other 50% of the LLC in exchange for $775,000 in cash and a
commitment to pay an additional $623,000 after Relief Canyon
Ltd. posts a reclamation bond with the U.S. Bureau of Land
Management. In a Subsequent Event (Note 8), the Company
acquired the interests of Casmyn Corp. in the Relief Canyon
mine.
The Company has an account payable of $287,901 to Riverfront
Development Corporation, an affiliated company. Of this
balance $250,000 represents used material and equipment sold
to Relief Canyon in 1995 to refurbish the mine's processing
building and equipment. The remainder is accumulated cash
advances by Riverfront Development Corp. The Company has
account payable to Relief Canyon Ltd. of $334,496 at June 30,
1996.
<PAGE>
Note 3 - Notes Payable - Individuals
---------------------------
The Company had borrowed $1,189,305 from 19 individuals under
Investor's Agreements. The Investor's Agreements have been
replaced by a Common Stock issue and other notes payable to
three individuals.
One individual received stock for a portion of his loan and
was given a note payable for $215,000. The note is due
September 30, 1996 and bears interest at 8% per annum. Two
individuals owed $275,000 chose not to exchange their notes
payable for shares of stock. They are to be paid 110% of the
amount loaned within 90 days. The note redemption premium of
$27,500 has been accrued in notes payable and has been charged
to expense.
Note 4 - Notes Payable - Investments
---------------------------
In the acquisition of the Golden Asset mine, the Company
assumed total debt of $572,642 Alta Gold Corporation sold its
interests to the Company for $322,642. The Company paid a
deposit of $200,000 and has made two of the $10,000 monthly
payments through March 1995. The balance payable at June 30,
1996 was $102,642. The Company agreed to pay $250,000 to
Christiansen Company for earthwork at the mine prior to
purchase by the Company. Christiansen has agreed to delay
payment of this debt until the Company has the mine in full
operation.
The Cerro Gordo property was acquired from the owner on May
24, 1996 for $600,000. Another $16,000 was paid to geologists
and attorneys for work relating to the property. The property
was purchased with a $10,000 option payment, $90,000 payable
within one year and lump sum payments of $250,000 each in 1998
and 1999.
Note 5 - Operating Rents
---------------
The mineral rights lease for Golden Asset mine requires future
annual minimum lease payments to the landowner of $10,000 in
lieu of 2.5% royalty on Net Smelter Return for gold purchased
by a smelter.
A mineral rights lease for Relief Canyon mine requires future
annual minimum lease payments of $13,125 to Santa Fe Pacific
Gold Corporation for 800 acres of land and $12,500 minimum
royalty in lieu of 2.5% royalty on Net Smelter Return for gold
purchased by smelter. There are 39 unpatented claims on land
owned by the Federal government. These claims require a
minimum annual rent of $3,900 payable to the Bureau of Land
Management to remain active as claims of the Company.
<PAGE>
Note 6 - Contingencies
-------------
Payroll Taxes - Payroll taxes payable of $42,605 represent
delinquent amounts. There will be additional interest and
penalties. At this time, the Company is unable to estimate the
additional amounts due.
Liens - A vendor who did earthwork for the Company at Golden
Asset has filed a lien against the property for $95,534. At
this time, the Company is unable to estimate when the vendor
will be paid.
Note 7 - Litigation
----------
The former owner of the Cerro Gordo property had executed a
one year minerals lease in 1995 with another organization. As
the lessee did not make the required monthly lease payments,
the former owner advised the lessee that the lease had been
terminated. The lessee has refused to give up the lease rights
and the former owner has filed suit to terminate the lease. It
is the opinion of counsel that the former owner will prevail.
Note 8 - Subsequent Events
-----------------
The Company has leased patented claims (personally owned) in
the Cerro Gordo area and unpatented claims of the Mission mine
in southern California. The gold reserves in these two
properties more than equate to the reserves of the Cerro Gordo
Unpatented Property (See Note 7).
Casmyn Corp. has agreed to sell its interests in Relief Canyon
Ltd. to the Company for $900,000 plus one million shares of
restricted Newgold, Inc. stock. Casmyn Corp. purchased its
interests in Relief Canyon Ltd. for $775,000 in cash plus a
note for $623,000 which is canceled under the repurchase
agreement (See Note 2).
<PAGE>
EXHIBIT I
CLOSING STATEMENT
ASSET SALE OF WAREHOUSE AUTO CENTERS, INC.
August 29, 1996 - BK Case No. 95-21279
Purchase Price of Assets $375,000.00
PAYOFFS
1. Quality Automotive Company 23,209.00
2. Standard Electronics, Inc. 320.16
3. General Automotive Specialty Corp. 11,500.13
4. Interstate Tire Company 15,675.13
5. Michelin Tire Corp. 6,412.00
6. Crown Tire 5,000.00
7. Yokohama Tire 7,210.00
8. Gianniny Associates - Rent 77,199.21
9. Nathan Morton - Dip Lender 60,000.00
10. Richard Dale - Dip Lender 25,000.00
11. John Devine - Dip Lender 90,000.00
12. Eugene O'Donovan - Dip Lender 25,000.00 200,000.00
-------------
TOTAL PAYOFFS $346,525.63
EXPENSES PAID
1. Record UCC-3's with Monroe $ 52.00
County Clerk
2. Record UCC-3's with Department $ 56.00
of State
3. Advanced Quickprinting for copies $ 63.72
4. U.S. Postmaster for Postage $ 15.00
-------------
TOTAL EXPENSES $ 186.72
Purchase Price $375,000.00
Less Payoffs 346,525.63
Less Expenses 186.72
------------
BALANCE IN ESCROW ACCOUNT $ 28,287.65
============
<PAGE>
Leonard Relin
1 East Main Street
Rochester, New York 14614
(716) 454 4336
Attorney for Debtor
UNITED STATES BANKRUPTCY COURT FOR THE
WESTERN DISTRICT OF NEW YORK
In re ) Case No. 95.21279
)
WAREHOUSE AUTO CENTERS, INC. ) Debtor's Plan of Reorganization
) -------------------------------
)
) Chapter 11
)
) Date: November 21, 1996
Debtor ) Time: 10:30 A.M.
)
- --------------------------------------------
TABLE OF CONTENTS
TO
DEBTOR'S PLAN OF REORGANIZATION
Article I
Definitions and Interpretations Page 3
Article II
Classification of Administrative Expenses
and Priority Unsecured Tax Claims Page 8
Article III
Classification of Claims Page 8
Article IV
Classes of Claims or interests Not Impaired Under the Plan Page 9
1
<PAGE>
Article V
Classes of Claims or Interest Impaired Under the Plan Page 10
Article VI
Title to Property; Discharge of Claims Page 10
Title to Property to be brought into the Estate Page 11
Retention of Claims Page 11 Notices Page 11
Record Dates for Determining Holders of Claims and Interest Page 11
Jurisdiction Page 11
Article VII
Means of Execution and Implementation of the Plan Page 13
Article VIII
The Effective Date of the Plan Page 13
Article IX
Cram Down Provisions Page 14
Article X
Modification of the Plan Page 14
Article XI
Compliance with Section 1 123(a)(6) Page 14
Article XII
Abandonment of Certain Claims Page 14
Article XIII
Voting Page 16
Article XIV
Miscellaneous Page 16
Article XV
Other Page 18
Signature Page Page 19
2
<PAGE>
UNITED STATES BANKRUPTCY COURT FOR THE
WESTERN DISTRICT OF NEW YORK
In re ) Case No. 95.21279
)
WAREHOUSE AUTO CENTERS, INC. ) Debtor's Plan of Reorganization
) -------------------------------
)
) Chapter 11
) Date:
Debtor ) Time:
- -----------------------------------)
Debtor's Plan of Reorganization
The above referenced Debtor hereby proposes the following Plan of
Reorganization ("Plan") pursuant to the provisions of Chapter 11 of the United
States Bankruptcy Code.
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1. For purposes of the Plan, the following terms shall have the respective
meanings hereinafter set forth (such meanings to be equally applicable to both
the singular and plural forms of such tern's defined). A term used in the Plan
and not defined herein but that is defined in the Bankruptcy Code has the
meaning set forth in the Bankruptcy Code.
3
<PAGE>
a "Administrative Expenses or Claim" shall mean any Allowed Claim which
is a cost or expense of administration in connection with this Chapter 11 case
having priority in accordance with Section 503(b), Section 330 and/or Section
507(a)(l) of the Bankruptcy Code, including but not limited to any actual and
necessary expenses of operating or liquidating the business of the
Debtor-in-Possession, and all allowances of compensation or reimbursement of
expenses to the extent allowed by the Bankruptcy Rules, including
Post-Confirmation Expenses.
b. "Allowed Claim" shall mean a scheduled non-disputed Claim that has been
timely filed with the Clerk of the Bankruptcy Court by the Holder of the Claim
within the applicable period of limitation fixed by Bankruptcy Court order, as
to which Claim no written objection to the allowance thereof has been interposed
within the period of time fixed by the Bankruptcy Court, or as to which Claim an
objection to the Claim has been resolved by the Bankruptcy Court
c. "Allowed Secured Claim" shall mean an Allowed Claim secured by a lien,
security interest or other charge against or interest in property in which the
Debtor has an interest, or which is subject to setoff under Section 553 of the
Code, to the extent of the value, determined in accordance with Section 506(a)
and (b) of the Code, of the interest of the Holder of such Allowed Claim in the
Debtor's interest in such property, or to the extent of the amount subject to
such setoff, as the case may be, and reduced by such further amount or amounts,
if any, as may be determined by the Bankruptcy Court after notice and a hearing
to be reasonable and necessary costs and expenses of preserving and disposing of
such asset(s) pursuant to Section 506(c) of the Bankruptcy Code.
d. "Claim" shall mean any claim as defined by Section 101(4) of the Code
and any other debt or obligation of whatever character of the Debtor through Bar
Date.
e. "Plan Payments" shall mean the payments made by the Debtor pursuant to
the Reorganization Plan.
f. "Claimant" shall mean any holder of a claim against the Debtor that
arose on or before the petition date or a Claim against the Debtor's estate of a
kind specified in Section 502(g), (h)or (i) of the Bankruptcy Code.
g. "Class" shall mean a category of Claims or interests, the holders of
which hold substantially similar Claims or interests.
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h. "Code" shall mean Title I of Public Law No. 95-598, as codified in Title
11 of the United States Code and any amendments thereto.
i. "Confirmation Date" shall mean the date upon which the Confirmation
Order is entered by the Court and becomes a Final Order.
J. "Confirmation Order" shall mean the order entered by the Bankruptcy
Court confirming the Plan.
k. "Consummation Date" shall mean the date one business day after the
Debtor's Plan has been fully completed and all claims disposed of in accordance
with the terms of the Plan.
l. "Court" shall mean the United States Bankruptcy Court for the Western
District of New York in which the Debtor's Chapter 11 case, pursuant to which
the Plan is proposed, is pending including any Bankruptcy Judge thereof, and any
Court having competent jurisdiction to review Orders of, or to hear appeals from
said Bankruptcy Court and Judge(s) thereof. "Court" shall also mean, to the
extent any proceedings have been referred to the above Bankruptcy Court by the
United States District Court for the Western District of New York, to that
District Court.
2. "Creditors Committee" shall mean the official committee of unsecured
creditors of the Debtor appointed by the Court pursuant to Section 1102 of the
Bankruptcy Code, as constituted from time to time.
a. "Creditor's Rights" shall mean all claims, suits, dam ages, actions,
causes of action, allowances and claims in equity possessed by the Debtor and
whether direct or indirect, absolute or contingent, liquidated or unliquidated,
whether arising prior to or subsequent to the filing of the petition and entry
of the Order for Relief which could be enforced by the Debtor in possession
including but not limited to, all claims under 11 USC sections 510, 544, 547,
548, 549 & 550 and all like states statutes, including, but not limited to,
Article 10 of the New York Debtor and Creditor Law except accounts receivables
which have previously been sold.
b. "Debtor" and "Debtor-in-Possession" shall mean Warehouse Auto Centers,
Inc. or any successor Corporation or entity of Warehouse Auto Centers, Inc.
5
<PAGE>
c. "Debtor's Assets" shall mean all the property, rights, claims and
interests of the Debtor and/or Debtor-in- Possession, real or personal, tangible
or intangible, and the proceeds thereof.
d. "Disputed Claim" shall mean a Claim to which written objection to the
allowance or classification thereof, in whole or part, has been timely filed by
any party in interest and as to which no Final Order or Judgment sustaining or
denying such objection or allowing or disallowing such Claim, in whole or in
part, has been entered by the Court
e. "Effective Date" shall mean the 10th day after confirmation date of the
Plan.
f. "Final Order of Judgement" shall mean an order of judgement of the
Court:
i. As to which the time to appeal, petition for centiorari , or seek
reargument, rehearing or de novo review has expired and to which
no appeal, reargument, centiorari petition, rehearing, or de novo
review is pending, or
ii. if an appeal, reargument, certiorari, rehearing or de novo review
thereof has been sought, the order of the Court has been affirmed
by the highest Court to which the order was appealed or from
which the reargument, rehearing, or de novo review was sought, or
certiorari has been denied, or the appeal is dismissed or
rendered moot, and the time to take any further appeal or to seek
certiorari or further reargument, rehearing or de novo review has
expired.
g. "Holder" of a Claim or interest shall mean the person holding a Claim or
interest which was listed or filed with the Court, or the person to whom such
Claim or interest was last transferred by the Final Order or Judgment of the
Court substituting the transferee for the prior Holder thereof.
h. "Insider" shall mean an insider as defined in Section 101(30) of the
Bankruptcy Code.
i. "Newgold" shall mean Newgold, Inc. a corporation which proposes to merge
with the Debtor.
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<PAGE>
j. "Person" shall mean an individual, corporation, partnership, joint
venture, trust, estate, unincorporated organization or governmental unit, or any
agency or political subdivision of a government unit.
k. "Plan" shall mean this Plan of Reorganization and any duly authorized
amendment(s) thereto and modification(s) thereof.
1. "Post-Confirmation Expense" shall mean all expenses reasonably incurred
subsequent to the Confirmation Date in consummating the Plan.
m. "Priority Claim" shall mean all Unsecured Claims entitled to priority
under 11 U.S.C. Section 507(a), (1), (3), (4), (5), (6), or (7), unless further
specified.
n. "Pro Rata", with respect to any creditor, shall mean in the proportion
that the amount of the Allowed Claim of such creditor in any class as provided
in Article II bears to the aggregate amount of all claims of creditors in such
class, including in such aggregate amount both the Allowed Claims and any then
unresolved Disputed Claims which may apply to that class of claims as of the
date of any distribution payment pursuant to this Plan.
o. "Reorganized Debtor" means Newgold, Inc. which company is merging with
the Debtor and which name (Newgold, Inc.) shall be the corporate name of the
Debtor after reorganization.
p. "Unsecured Claim" shall mean all unsecured Allowed Claims, including,
but not limited to:
i. claims of creditors under executory contracts and unexpired
leases that have heretofore been rejected by the Debtor under
this Plan, and that may be rejected by the Debtor under this
Plan, and that may be rejected by the Debtor prior to the
Confirmation Date;
ii. claims of general trade creditors;
iii.loss and damage claims, overcharge claims, personal injury claims,
liability claims;
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iv. claims for monies paid to the Debtor by mistake and belonging to
others, claims for C.O.D. monies collected by the Debtor that
should have been paid over to others, insurance and surety bond
c1aims, worker's compensation claims; and
v. other obligations, liabilities, damages and claims of and against
the Debtor of every type and nature whatsoever, incurred on or
before the date of filing of the Chapter 11 Petition (June 6,
1995), including all claims arising from the rejection of leases
and other executory contracts effective on June 6, 1995. as
provided in this Plan and by Section 365 and Section 1123(b)(2)
of the Code.
ARTICLE II
Classification of Administrative Expenses and
Priority Administrative Claims
2.01 Class 1. Allowed administrative expenses, including attorney's and
accountant fee's of the kinds specified ill Code Section 507(a)(l), approved
salaries of officers and commissions owed for the sale of Debt Certificates.
2.02 Class 2. Claims Consisting of Code Section 364 Priority Debtor Certificate
holders in the approximate amount of $5,000,000.
2.03 Class 3. Administrative claims consisting of Priority Unsecured New York
State Sales Tax Claims in the approximate amount of $30,000, fees owed the U. S.
Trustee's Office of the kind specified in Code Section 507(a)(1), Court fees,
Franchise Tax Fees owed the State of Delaware for 1995 taxes of approximately
$2,653.00 and State of Ohio Sales Tax of $1,826.95.
ARTICLE III
Classification of Claims
3.01 Class 4. Claims consisting of approximately 327 unsecured creditors in
the approximate amount of $2,392.967.
8
<PAGE>
3.02 Class 5. Claims consisting of approximately 321 equity holders of the
debtor holding 3,299,191 shares of common stock in the Debtor.
ARTICLE IV
Classes of Claims Not Impaired Under the Plan
4.01 Classes 1, 2, 3 and 5 will not be impaired under the Plan.
Class 1 Claims consisting of allowed administrative expenses, including
attorney and accountant fees of the kind specified in Code Section 507 (a) (1)
approved salaries of officers, and trade payables arising after commencement of
the Case and commissions owed for the sale of Debtor Certificates, shall be paid
in full by the Reorganized Debtor in cash on the effective date of the Plan or
in stock in the Reorganized Debtor at a ratio of one (1) share of stock for each
$1 owed the Creditor. The Class 1 Claimants will have the right to "Put" to
Newgold, Inc. or its Assignee, the stock for 15 days from the effective date of
the Plan for $1.00 in cash for each share of the new stock issued.
Class 2 Claims consisting of Priority Debtor Certificate holders in the
approximate amount of $5,000,000. The holders of allowed claims in Class 2 shall
be paid by the Reorganized-Debtor as originally agreed and such holders shall
retain their respective security interests. Class 2 claimants, at their
exclusive option, shall be allowed to exchange their claims for one (1) share of
Common Stock of the Reorganized Debtor for each $1 of indebtedness. The common
stock being offered will be set aside in trust for Class 2 claimants who shall
have ninety (90) days from the date of confirmation of the Plan of
Reorganization to exercise the conversion of their debt to equity. The
Reorganized Debtor shall retain the right to sell said stock ,from time to time,
to non claimants with the proceeds to be paid to the Class 2 Claimants who opt
not to convert. Any difference realized in the sale of equity in excess of the
principal sum owed Class 2 Debtor Certificate holders, plus interest thereon,
shall be retained by the Reorganized Debtor for working capital. Upon
confirmation of the Plan of Reorganization, Debtor Certificate holders shall be
issued promissory notes bearing interest at 10% per annum. These notes must be
surrendered by Debtor Certificate holders who elect to convert their debt to
equity. Those who do not choose to convert shall be paid their principal and all
accrued interest two years from the anniversary of the date of confirmation of
this Plan.
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Class 3 Administrative claims consisting of Priority Unsecured New York
Sales Tax claims owed approximately $30,000, U.S. Trustee fees, Court fees and
State of Delaware Franchise Tax fees, owed of approximately $2,653.00 for 1995
taxes and State of Ohio Sales Tax of $1,826.95 and any 941 IRS taxes owed by the
Debtor\. Said claims shall be paid in cash on the Effective Date of the Plan.
Class 5 Claims consisting of approximately 321 shareholders holding
3,299,191 shares of common stock which represents 100% of the total outstanding
and issued shares of common stock of the Debtor. There are no other equity
securities issued by the Debtor other than the one class of common stock.
Existing Class 5 claimants will have their interest diluted by a factor of 1:65.
In other words existing shares shall be reverse split by a factor of 65 or, for
each 65 shares of pre-petition stock, such 65 shares shall be exchanged for one
(1) share of post- petition stock in the Reorganized Debtor. Existing equity
holders will be reduced on a pro-rata basis to a total of 50,000 shares in the
aggregate. However, in no event will any existing shareholder of the Debtor hold
less than two (2) shares after the reverse split. Shareholders shall be
obligated to surrender their shares of stock to the Reorganized Debtor's
transfer agent within six months of the effective date of the Plan. Any shares
not surrendered and exchanged within the time period shall be cancelled and the
shareholder who fails to surrender his shares shall have no further rights or
recourse against the Reorganized Debtor as an equity holder.
ARTICLE V
Classes of Claims or Interest Impaired Under the Plan
5.01 Classes 4 will be impaired under the Plan.
Class 4 Claims consist of 327 unsecured creditors with aggregate claims
amounting to approximately $2,392,967. Class 4 Creditors shall receive one (1)
share of Common Stock in the Reorganized Debtor for each $42 of debt.
Approximately 56,975 shares of Common Stock shall be issued to Class 4
claimants.
ARTICLE VI
6.01 Title to Property; Discharge of Claims
Except as otherwise provided in the Plan or the Confirmation Order, upon
completion of all actions required by the Plan to be taken on or before the
Confirmation Date, all property of the
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estate wherever situated, shall vest in the Reorganized Debtor, free and clear
of all claims and interest of creditors and equity holders of the Debtor. Any
property that the Debtor abandons pursuant to the Bankruptcy Code and the
approval of the Court would be deemed to vest in the Reorganized Debtor free and
clear of all claims and interests of creditors immediately prior to abandonment.
6.02 Title to Property to be Brought into the Estate.
Assuming Plan confirmation as a condition precedent, the Reorganized Debtor
will acquire the assets of Newgold Inc. which are described in the Disclosure
Statement accompanying this Plan.
6.03 Retention of Claims. Each claim or interest belonging to the Debtor of
every kind and description shall be retained and shall be vested in the
Reorganized Debtor, upon confirmation, and the reorganized successor to the
Debtor may enforce, settle or adjust any such Claim or Interest.
6.04 Notices. Unless otherwise specifically provided in the Plan or the
Bankruptcy Rules, any notice required or contemplated by any provision of the
Plan shall be in writing and shall be sent by First Class Mail, postage prepaid,
to the address of the person or entity entitled thereto, as it appears on the
matrix list filed in connection with the service of the Disclosure Statement in
the Case.
6.05 Record dates for Determining Holders of Claims and Interest. The date the
order of the Bankruptcy Court approving the Disclosure Statement is entered
shall be the record date for determining the holders of the Claims and Interests
entitled to vote on the Plan, all in accordance with the provisions of the Bar
Order. The Confirmation Date shall be the record date for determining the
holders of the Claims and Interests which, if allowed, will be entitled to
receive distributions under the Plan, provided, however, that this sentence
shall not vary, affect, or impair the provisions of the Bar Order.
6.06 Retention of Jurisdiction. Following confirmation and prior to the
completion of all actions required to be taken on the Confirmation Date or as
soon as practicable thereafter, the Bankruptcy Court shall retain solely for the
following purposes to which its jurisdiction shall be exclusive:
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(a) to hear and determine any objections to Claims filed, both before and
after Confirmation;
(b) to supervise any distribution of funds or stock pursuant to this Plan;
(c) to hear and determine all applications for compensation of
professionals and reimbursement of expenses under Code Sections 330 and 331
including compensation of professionals employed by the Debtor for services
rendered in connection with the Case, or in connection with the Plan and
incident to the Case;
(d) to hear and determine any and all pending motions for rejection of
executory contracts or unexpired 1eases and the allowance of Claims resulting
therefrom;
(e) to hear and determine all claims and causes of actions arising prior to
Confirmation that may exist in favor of the debtor or its successor or shall
seek such a hearing and determination;
(f) to enter orders enforcing and implementing the Plan and to resolve
disputes arising under or in connection with the Plan;
(g) to correct any defect, cure any omission or reconcile any inconsistency
in the Plan, the Confirmation Order or any document executed in connection
therewith, as may be necessary to carry out the purposes and intent of the Plan;
and
(h) to consider the modification of this Plan after confirmation pursuant
to the Bankruptcy Code and Rules; and
(i) Except as otherwise provided in the Plan, to make any determinations
and to issue any orders to enforce, interpret or effectuate the Plan; and
(j) to determine all questions and disputes regarding title to assets of
the estate, and determination of all causes of action, controversies, disputes
or conflicts, between the Debtor, the Creditors' Committee and any third party,
including but not limited to, any right of the Debtor, or the provisions of the
Code or applicable state or federal law; and
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(k) to enter and Order concluding and terminating this Case; and
(l) to determine such other matters as may be provided for in the Order of
the Court confirming the Plan; and
(m) to grant extensions of any deadline set herein; and
(n) to enter and implement such orders as may be appropriate in the event
that the Confirmation Order for any reason is stayed, reversed, revoked,
modified or vacated, and;
(o) to enforce all discharge provisions under the Plan, and;
(p) to make such order(s) or give such direction(s) as may be appropriate
under Sections 364,1109,1129,1141,1142 and 1145 of the Code.
ARTICLE VII
Means of Execution and Implementation of the Plan
7.01 Means of Execution. Remaining funds and funds generated from the sale of
Certificates of Indebtedness and funds generated from the operation of the
successor to the Debtor will be used to fund payment under the Plan other than
the issuance of equity of the successor to the Debtor as specified herein.
ARTICLE VIII
The Effective Date of the Plan
8.01 Effective Date of the Plan. The effective date of the Plan shall be ten
days after the Order of Confirmation becomes final, However, immediately upon
confirmation of the Plan, the new management described in the accompanying
Disclosure Statement shall take over management of the Reorganized Debtor.
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ARTICLE IX
Cram Down Provisions
9.01 Cram Down Provisions. In the event that any class of creditors is deemed
impaired by the Plan of Reorganization, and the requisite majorities of such
class or classes fail to approve the Plan, then the Debtor intends to confirm
its Plan over the objection of any such dissenting class by the use of the
provisions of the United States Bankruptcy Code, Section 1111, and any other
provisions relating to the cram down of dissenting classes.
ARTICLE X
Modification of the Plan
10.01 Modification of the Plan. This Plan may be amended or modified by the
proponents at any time prior to the Confirmation Date upon such notice as the
Court may require. After the Confirmation Date, the proponents may, with the
approval of the Court and so long as it does not materially and adversely affect
the interests of creditors, remedy any defects or omissions or reconcile any
inconsistencies in the Plan or in the Confirmation Order in such manner as may
be necessary to carry out the purposes and intent of the Plan.
ARTICLE XI
Compliance with Section 1123(a)(6)
11.01 Compliance with Section 1123(a)(6). The Debtor shall within sixty (60)
days after the Confirmation Date, cause a provision to be inserted in its
corporate charter prohibiting it from issuing non-voting equity securities.
However, the Debtor may issue a convertible debenture convertible to Common
Stock, which Common Stock bears the right to vote. The Debtor presently has no
class of securities possessing voting power other than its Common Stock.
ARTICLE XII
Abandonment of Certain Claims
12.01 Abandonment of Certain Claims. The Debtor herewith reserves to itself the
right to collect and enforce all Creditor Rights except accounts receivables
that have been previously sold which it could have brought as Trustee under
Title 11 Section 101 et seq. and expressly reserves
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the right to bring the same subsequent to the entry of an Order of Confirmation
herein as if such Order had not been entered but in no event subsequent to the
period of limitations prescribed by 11 USC Sections 546 & 549. The Debtor
designates the Official Unsecured Creditors Committee appointed herein as agent
for the purposes of enforcing such Creditors Rights in its name and stead with
full powers of substitution. Such actions may be brought in the name of the
Debtor or in the name of the Official Unsecured Creditors Committee. Debtor
agrees to cooperate with the Unsecured Creditors Committee in the prosecution of
such actions and to render such assistance as may be reasonable at the time,
without cost to the Official Unsecured Creditors Committee.
All sums recovered by the Creditors Committee in the enforcement of the
Creditors Rights shall be retained in escrow by counsel to the Committee and
applied, first to the cost of prosecuting such actions, including all reasonable
attorneys fees, costs and disbursements incurred; second to the payment of any
fees due the court and the Office of the United States Trustee on account of the
bringing or prosecution of such actions. The net proceeds remaining, if any,
shall be distributed by the Committee solely to general unsecured creditors on
the allowed unsecured claim of each, pro rata.
The Official Unsecured Creditors Committee shall remain in existence until
such time as counsel for the Committee shall notify the Court in writing that it
has disbanded itself and abandoned the attempt to collect such Creditors Rights.
The Debtor shall have no liability for any counsel fees, costs or
disbursements incurred in the investigation or prosecution of any Creditors
Rights by the Committee. The Committee shall be free to investigate and pursue
none, some or all the Creditors Rights claims which may be available to the
Debtor. It is acknowledged that the Debtor made few if any preferential
transfers which could be recovered under I USC Section 547 to third party
creditors herein having virtually suspended payments well in advance of the
involuntary filing. It is further acknowledged that claims against insiders may
be difficult to investigate and prosecute and that there are no funds currently
available to pay the costs of such in the litigation or prosecution. Therefore,
the Committee may abandon all such Creditors Rights without action at any time
it deems investigation or pursuit of the same diseconomic.
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ARTICLE XIII
VOTING
1 3.01 Claimants Entitled to Vote are those whose claims are "impaired" by the
Plan. A claim to which the legal, equitable, or contractual rights are altered,
or an interest that is adversely affected, is impaired. Only Class 4 interests
are impaired under the Plan; therefore, it is important that you vote. If you
fail to vote, your rights may be jeopardized.
13.02 Impaired Claimants may vote to accept or reject the Plan by indicating
their acceptance or rejection on the appropriate ballot.
13.O3 EXECUTED BALLOTS MUST BE RECEIVED PRIOR TO 5:00 PM. (Eastern Daylight
Time) ON:_________________________ Ballots should be mailed to: U. S. Bankruptcy
Clerk of the Court, 100 State Street, Rochester, New York 14614. ANY BALLOTS
RECEIVED AFTER THAT DATE MAY NOT BE INCLUDED IN ANY CALCULATION TO DETERMINE
WHETHER THE CREDITORS HAVE VOTED TO ACCEPT OR REJECT THE PLAN.
13.04 A Class of Claims will have accepted the Plan if it is accepted by
creditors holding at least two-thirds in amount and more than one-half in number
of the holders of allowed claims that actually vote on the Plan. Only those
votes received will be counted.
ARTICLE XlV
Miscellaneous
14.01 Notices. All notices required or permitted to be made in accordance with
the Plan shall be in writing and shall be delivered personally or by fax or
other telegraphic means or mailed by registered or certified mail, return
receipt requested:
(a) If to Debtor: Warehouse Auto Centers, Inc. % Leonard Relin
2452 West Henrietta Road
Rochester, New York 14623
(b) With copies to:
Leonard Relin, Esq.
One East Main Street
Rochester. New York 14614
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and
Albert Solochek, Esq.,
Attorney for Creditors Committee
Howard, Solochek & Weber, S.C.
324 E. Wisconsin Avenue, #1100
Milwaukee, WI 53202
(c) If to a holder of an Allowed Claim or Allowed Interest, at the
address set forth in its allowed proof of claim or proof of
interest, or, if none, at its address set forth in the schedules
prepared and filed with the Court pursuant to Rule 1007(b).
(d) Notice shall be deemed given when received. Any person may change
the address at which it is to receive notices under the Plan by
sending written notice pursuant to the provisions of this Section
to the person to be Charged with the knowledge of such change.
14.02 Effective Date. For purposes of all determinations to be made pursuant to
the Code in respect of the Plan or any Claims or Interests, the "Effective Date"
of the Plan shall be 10 days after Confirmation of the Plan.
14.03 Written Objections. The Debtor or any other party in interest may file
with the Court confirmation of the Plan, a written objection to the allowance of
any Claim. This provision is not intended to abridge the right of the Debtor to
modify the Plan pursuant to Bankruptcy Code 1127.
14.04 Reporting Company Representation. The Company represents that it is a
reporting company under Section 13 and 15(d) of the Securities and Exchange Act
of 1934 and will be in continued compliance with the applicable requirements for
the continuing of trading in the Security on the date the Debtor offers or sells
the securities to the investors.
14.05 Implementation of the Plan. The Plan is to be implemented consistent with
the terms of the Bankruptcy Code. The Plan shall be implemented beginning on the
effective date of the Plan by the distribution of stock by the Debtor in
accordance with the provisions of the Plan. The debtor agrees to use its best
efforts to fully implement and consummate the Plan.
14.06 Complete Satisfaction, Discharge, and Release. The payments, distributions
and other treatments provided in respect of each Allowed Claim in this Article
shall be in complete Satisfaction. discharge, and release of such Allowed Claim.
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ARTICLE XV
Other
15.01 Certificates of Indebtedness. Prior to the filing of the Plan of
Reorganization and Disclosure Statement the Debtor moved the Bankruptcy Court to
authorize it to sell $5,000,000 in Code Section 364 Certificates of Indebtedness
("Debtor Certificates"). The Court approved the Debtor's motion to sell Debtor
Certificates on September 25, 1996.
15.02 Finders Fees. The Debtor has agreed to issue to David Rinker and Christina
Nicho1s 5,000 shares each of Common Stock in the Reorganized Debtor as a finders
fee. Additionally, the Debtor has agreed to issue 1,000 shares as a finders fee
to Steve Nichols who introduced the parties to the Debtor and to issue 12,500
shares of Common in the Reorganized Debtor to Michael Morrison, ESQ. as a
finder's fee. Said parties were instrumental in bringing about the transactions
involving the assets being merged under the Plan of Reorganization.
15.03 Consulting. The Reorganized Debtor has agreed to pay $10,000 in cash and
issue 7,500 shares of the Reorganized Debtor's Common Stock to Dan-Com, Inc. for
consulting services rendered. Dan-Com, Inc. is a firm which specializes in
coordinating mergers of solvent businesses into public companies which are under
protection of Chapter 11 of the Bankruptcy Code.
15.04 Change of Corporate Name. The Reorganized Debtor will change its name to
Newgold, Inc. and recapitalize at 50,000,000 shares of Common Stock authorized,
.001 par value.
15.05 Asset Acquisition. The Reorganized Debtor will issue a total of 12,000,000
shares of its Common Stock to existing shareholders of Newgold, Inc. and thereby
acquire 100% of the outstanding shares of Newgold. Inc. and its assets described
in the Disclosure Statement. A detailed description of Newgold. Inc. can be
found in the accompanying Disclosure Statement.
15.06 Other Corporate Matters. The Board of Directors of the Reorganized Debtor
shall take whatever actions are necessary in order to bring the Reorganized
Debtor into conformance with securities laws and regulations including, but not
limited to, amending the Reorganized
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Debtor's by-laws and Articles of Incorporation.
Respectfully submitted this 4 day of November, 1996.
WAREHOUSE AUTO CENTERS, INC.
By: /S/ Nathan P. Morton
Nathan P. Morton, Chairman
Board of Directors
DEBTOR
By: /S/ Leonard Relin
Leonard Re1in, Esq.
ATTORNEY FOR DEBTOR
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EXHIBIT 3.1(a)
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
WAREHOUSE AUTO CENTERS, INC.
The undersigned, being the President and Secretary of the corporation,
Warehouse Auto Centers, Inc., hereby declare that the original Articles of the
corporation were filed with the Secretary of State of the State of Delaware on
June 6, 1991.
Based upon a Plan of Reorganization approved by the U.S. Bankruptcy Court
in the Western District of New York on November 25, 1996 and the majority vote
of the stockholders holding 100 % of the outstanding shares in the corporation;
and pursuant to 242 of Delaware General Corporation Law, the undersigned hereby
amend the Articles of Incorporation of Warehouse Auto Centers, Inc. as follows:
FIRST:
The name of the Corporation is NEWGOLD INC.
FOURTH:
The total numbers of shares of stock which the Corporation shall have
the authority to issue is 50,000,000 shares of Common Stock, par
value $.001 per share.
THE UNDERSIGNED, being the President and Secretary of Warehouse Auto
Centers, Inc. hereby declare and certify that the facts herein stated are true,
and , accordingly have hereunto set their hands this 26th day of November, 1996,
/S/
---------------------------
A. Scott Dockter, President
/S/
---------------------------
Edward Mackay, Secretary
STATE OF NEVADA )
) SS
COUNTY OF WASHOE )
On this 26th day of November, 1996, before me, a Notary Public, personally
appeared A. Scott Dockter, who acknowledged to me that he is the President of
Warehouse Auto Centers, Inc. and Edward Mackay, who acknowledged to me that he
is the Secretary of Warehouse Auto Centers, Inc. and that they know the contents
of and executed the above instrument.
RITA SUE DICKSON /S/
Notary Public, State of Nevada Notary Public
Washoe County
Expires Apr. 21, 1997
<PAGE>
EXHIBIT 10.1
CONTRACT OF SALE
----------------
J. D. WELSH & ASSOCIATES, INC., a Nevada corporation, herein called
"Seller,"agrees to sell to NEWGOLD, INC., a Nevada corporation, herein called
"Buyer," and Buyer agrees to purchase from Seller the mining property, located
in Pershing County, Nevada, commonly known as the "Relief Canyon Mine," and more
particularly described in attached Exhibit "A" (the "Property"), including the
equipment described in attached Exhibit "B," on the terms and conditions set
forth in this Agreement.
1. Purchase Price and Payment.
The purchase price for the property shall be the sum of Five
Hundred Thousand Dollars ($500,000.00), payable by Buyer to Seller as follows:
(a) Upon closing, on or before January 10, 1995, Buyer shall pay
Seller $100,000.00;
(b) The balance of the purchase price shall be paid in 12 equal
payments of $35,166.36, which includes interest for one year at 10 percent.
$35,166.36 on February 10, 1995.
$35,166.36 on March 10, 1995.
$35,166.36 on April 10, 1995.
$35,166.36 on May 10, 1995.
$35,166.36 on June 10, 1995.
$35,166.36 on July 10, 1995.
$35,166.36 on August 10, 1995.
$35,166.36 on September 1, 1995.
$35,166.36 on October 10, 1995.
$35,166.36 on November 10, 1995.
$35,166.36 on December 10, 1995.
$35,166.36 on January 10, 1996.
2. Bonds and Santa Fe Lease.
All bonds relating to the operation of the Property will be
transferred to Buyer. In further consideration of the purchase price, Seller
shall assign the Santa Fe Lease which affects the property to Buyer and obtain
Santa Fe's consent to such assignment before November 1, 1994. Upon assignment,
Buyer agrees to make a collateral assignment of said lease to Seller to secure
Buyer's obligation to perform all of the Lessee's obligations under the lease
which accrue after the date of this agreement, and Buyer's obligations under
this agreement.
1
<PAGE>
3. Equipment.
Upon execution of this agreement, Seller shall deliver to Buyer a bill
of sale for the equipment described in Exhibit "B" and Buyer shall execute and
deliver to Seller a security agreement grant to Seller a security interest in
the equipment to secure Buyer's obligations under this agreement.
4. Covenants of Buyer.
4.1. Insurance. Buyer shall at all times keep the property and
improvements on the property insured against loss or damage by fire or other
casualty to the amount of the reasonable value of improvements on the Property
by an insurance company or companies approved by Seller. The insurance policies
shall be made payable, in case of loss, to Seller.
4.2 Taxes. Buyer shall pay when due all taxes and assessments of every
nature, levied, assessed, or accruing on the Property after the execution of
this Contract, and shall timely pay any Proceeds on Minerals Tax attributable to
Buyer's operations at the Property.
4.3 Indemnification. Buyer shall indemnify and save and hold Seller
and its employees, representatives, agents and principals harmless from and
against any and all costs, losses, liabilities, damages, lawsuits, claims and
expenses incurred in connection with or arising out of or resulting from or
incident to the condition of the Property or Buyer's activities on the Property,
which occur or arise after the date of this Contract. Buyer's indemnity shall
include without limitation all reasonable and necessary costs and expenses of
defending any claim arising (and any lawsuit instituted asserting such claim)
with respect to any matter as to which Buyer's indemnity is applicable, and
reasonable attorneys' fees and costs incurred in connection therewith, whether
or not such claim is ultimately defeated, and any amounts paid incident to any
compromise or settlement of any such claim.
4.4 Liens and Encumbrances. Buyer shall pay when due all claims for
labor performed and materials furnished for any construction, alteration, repair
or mining operation upon the Property, and shall comply with all laws affecting
the Property or relating to any alterations or improvements that may be made
thereon. Should any lien or encumbrance be placed against the Property by reason
of any act or thing done by Buyer, then within 30 days of the date of filing or
recording of the lien, Buyer shall cause the same to be discharged or shall
deliver to Seller a corporate surety bond or other security approved by Seller
indemnifying Seller against any loss or damage by reason thereof.
2
<PAGE>
4.5 Notice of Non-Responsibility. Except for work of improvement
resulting from emergency, before any work or improvement is commenced, Buyer
shall give written notice thereof to Seller to enable Seller to record a notice
that Seller is not responsible for such work.
4.6 Protection of Property. Buyer promises to properly care for and
keep the Property in good condition, order and repair; to care for, protect and
repair all buildings and improvements situate thereon; and otherwise to protect
and preserve the Property and the improvements thereon and not commit or permit
any waste or deterioration of the Property.
4.7 Hazardous Waste. Buyer shall comply with all federal, state and
local laws, ordinances, regulations, rules, and orders relating to health,
safety, environmental protection, and storage, discharge or disposal of harmful,
toxic or hazardous waste, and water and air quality with respect to the Property
and Buyer's use of the Property. Buyer shall not cause any deposit, disposal,
release, discharge, treatment, process, work, leakage, spillage, emission of or
pollution by any harmful, toxic, hazardous, or noxious materials or substances
on the Property. Buyer agrees to indemnify and hold Seller and the Property free
and harmless, from and against any and all claims, demands, fines, penalties,
settlements, suits, losses, liabilities, damages, injuries, costs or expenses,
including attorney's fees.
5. Possession and Legal Title.
Buyer shall be entitled to enter into possession of the Property on
the date of this Contract and to continue in possession of the Property sq long
as Buyer is not in default in the performance of this Contract. Seller shall
retain legal title as a security interest in the Property until Buyer has paid
the balance of the purchase price as required by this Contract.
6. Default.
6.1 Events of Default. Buyer shall be in default under this Contract
of Sale in the event that Buyer shall fail, neglect, or refuse to make any
payment at the time provided herein, fail to comply with any of the other
provisions set forth in this Contract of Sale, make a general assignment for the
benefit of creditors, or become insolvent, or upon the filing of a petition by
or against Buyer under any state or federal law relating to the relief of
debtors, to the extent that such law allows a default hereunder resulting from
the filing of such petition.
6.2 Seller's Remedies. In the event of Buyer's default in the
performance of any of the provisions contained in this Contract of Sale, then
Seller may at any time thereafter, without limiting Seller in the exercise of
any right or remedy which Seller
3
<PAGE>
may have by reason of such default, exercise any or all of the following
remedies:
6.2.1 Buyer agrees that all moneys paid to Seller by virtue of this
Contract of Sale shall immediately become the property of Seller. In
the event of Buyer's default in the performance of any of the
provisions contained in this Contract of Sale, and this Contract of
Sale is terminated pursuant to Section 7, then (a) Seller shall be
released from any and all obligations, either at law or in equity, to
transfer the property to Buyer; (b) Buyer shall relinquish all rights
under this Contract of Sale; and (c) all moneys theretofore paid by
Buyer shall be. retained by Seller as liquidated damages for the
breach of this Contract of Sale. The parties agree that in the event
of Buyers default, it would be difficult to fix or estimate the actual
damage to Seller. On the basis of the facts now known to the parties,
the parties agree that the moneys theretofore paid by Buyer to Seller
at the time of Buyer's breach shall compensate Seller for damages
which would accrue by reason of such default.
6.2.2 Seller may, at Seller's option, after the expiration of the 35
day notice described in Section 6.3., below, declare the unpaid
balance of the purchase price immediately due and payable; and Buyer
agrees to immediately pay such amount to Seller.
6.2.3 Seller may institute an appropriate action against Buyer for
specific performance or this Contract of Sale or to terminate Buyer's
rights under this Contract of Sale and for damages sustained by
Seller; including but not limited to all payments required by Buyer
pursuant to this Contract of Sale plus the amount necessary to restore
the property to the condition it was in at the date Buyer received
possession by reason of this Contract of Sale, reasonable use
excepted.
6.2.4. Seller may pursue any other remedy now or hereafter available
to Seller under the laws of judicial decisions of the State of Nevada.
6.2.5 In the event of termination of Buyer's right to purchase by
reason of such default, (a) Buyer will become a tenant at will of
Seller; (b) Buyer will peaceably vacate the Property; and (c) Seller
may re-enter the property and take possession thereof and remove all
persons therefrom, using any and all lawful means to do so, including
the remedies for unlawful detainer pursuant to NRS Chapter 40.
4
<PAGE>
6.2.6. It is understood and agreed that any failure on the part of
Seller to exercise any of Seller's rights or remedies in the event of
default, at any particular time, shall not constitute a waiver of
Seller's option to exercise such rights or remedies at any other time.
7. Default Procedure
In the event of Buyer's default, if Seller shall desire to terminate
the right of Buyer to purchase the property pursuant to this Contract of Sale,
then Seller shall file with the escrow holder designated by Seller, in
duplicate, a notice and demand for termination of the rights of Buyer.
Thereupon, the escrow holder shall promptly mail, by certified or registered
mail, return receipt requested, one copy of such notice to Buyer. Unless the
default is cured within 35 days following the date of mailing of Seller's
notice, then the escrow holder is specifically authorized by Buyer, without
further instructions, to comply with Seller's demand for delivery of the
underlying Quitclaim Deed, and to terminate the escrow upon payment of the
escrow holder's charges for the termination of the escrow. Buyer agrees that
upon, and as a condition to, curing of any default following preparation of
Seller's notice with respect to default, Buyer shall pay or reimburse Seller for
all reasonable costs and expenses, including attorney's fees incurred in
connection with such default, termination of this Contract of Sale or cure of
such default.
8. Quitclaim Deed.
Buyer shall deposit with the escrow holder a Quitclaim Deed executed
by Buyer in favor of Seller for the Property, to be held by the escrow holder
until such time as this Contract of Sale is paid in full by Buyer. At such time
the escrow holder shall return the Quitclaim Deed to the Buyer. In the event,
however, the buyer breaches this contract by nonpayment or any other material
breach, the escrow holder shall at the direction of the Seller deliver the
Quitclaim Deed to Seller in accordance with Section 6 of this Contract.
9. Grant, Bargain, and Sale Deed.
Seller agrees to deposit with escrow holder a Grant Bargain and Sale
Deed executed by Seller to Buyer. It shall be recorded as soon as Seller has
received the payments as herein provided to be made by Seller. Escrow holder is
instructed that in the event of default by Buyer, that said deed shall be
returned to Seller upon demand.
10. Acceleration/Due on Sale.
In the event Buyer shall sell, transfer or convey, or contract to
sell, transfer or convey, the Property, or any portion
5
<PAGE>
thereof, or any interest therein, then, at the option of Seller, the then unpaid
balance of this Contract of Sale shall forthwith become due and payable although
the time of maturity otherwise expressed shall not have arrived. Consent to one
such transaction shall not be deemed to be a waiver of the right to require
consent to future or successive transactions
11. Prepayment.
Buyer reserves the right to prepay this Contract of Sale at any time.
12. Miscellaneous.
12.1. Attorney's Fees. Should any litigation be commenced between the
parties hereto concerning the Property, this Contract, or the rights and duties
of either in relation thereto, the party, Buyer or Seller, prevailing in such
litigation shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for his attorney's fees in such litigation
which shall be determined by the court in such litigation or in a separate
action brought for that purpose.
12.2. Entire Agreement. This instrument contains the entire agreement
between Buyer and Seller respecting the Property, and any other agreement or
representation respecting the Property or the duties of either Buyer or Seller
in relation thereto not expressly set forth in this instrument is null and void.
12.3. Notices. Unless otherwise provided herein, any notice, tender,
or delivery to be given hereunder by either party to the other may be effected
by personal delivery in writing or by registered or certified mail. Mailed
notices shall be addressed as set forth below, but each party may change its
address by written notice in accordance with this paragraph. Notices shall be
addressed as follows:
If to Seller:
Mr. John D. Welsh
J.D. Welsh & Associates, Inc.
331 Freeport Blvd.
Sparks, NV 89431
If to Buyer:
Mr. Scott Docktor
Newgold, Inc.
P.O. Box 230
Clarksburg, CA 95612
6
<PAGE>
12.4. Binding Effect This Agreement shall bind and inure to the
benefit of the respective successors and assigns of the parties.
12.5. Choice of Law. This Contract of Sale shall be governed by the
laws of the State of Nevada.
12.6. Time of Essence. Time is of the Essence for purposes of this
Agreement.
12.7. Additional Documents. Buyer and Seller agree to execute such
additional documents, including escrow instructions , as may be reasonably
required by the escrow holder to carry out the terms of this Contract.
12.8. Corporate Authority. The undersigned president of Seller
represents that Seller corporation has taken all action necessary to authorize
the execution and performance of this agreement.
Execution IN WITNESS WHEREOF, the parties hereto have executed this
Option Agreement the day and year first above written.
SELLER:
J. D. WELSH & ASSOCIATES, INC.
By /S/ JOHN D WELSH 1/10/95
------------------------
JOHN D. WELSH, President
BUYER:
NEWGOLD, INC.
By /S/ SCOTT DOCKTOR 1/10/95
SCOTT DOCKTOR, President
7
<PAGE>
EXHIBIT "A"
A. The following described unpatented lode mining claims situated in Section
18, Township 27 North, Range 34 East, MDB&M, Pershing County Nevada:
Assessor's Parcel No. 15-050-08
NAME OF CLAIM ROLL PAGE BLM NMC
- ------------- ---- ---- -------
L 1 152 220 266846
L 2 152 222 266847
L 3 152 224 266848
L 4 152 226 266849
L 5 152 228 266850
L 6 152 230 266851
L 7 152 232 266852
L 8 152 234 266853
L 9 152 236 266854
L 10 152 238 266855
L 11 152 240 266856
L 12 152 242 266857
L 13 152 244 266858
L 14 152 246 266859
L 15 152 248 266860
L 16 152 250 266861
L 17 152 252 266862
L 18 152 254 266863
L 25 152 268 266870
L 27 152 272 266872
L 29 152 276 266874
L 31 152 280 266876
<PAGE>
B. Those certain unpatented lode mining claims situate in Section 16, Township
27 North, Range 34 East, MDB&M, Pershing County, Nevada:
Assessor's Parcel No. 15-050-10
NAME OF CLAIM ROLL PAGE BLM NMC
- ------------- ---- ---- -------
R 1 141 444 260031
R 2 141 445 260032
R 3 141 446 260033
R 4 141 447 260034
R 5 141 448 260035
R 6 141 449 260036
R 8 141 451 260038
C. Those certain unpatented lode mining claims situate in Section 20, Township
27 North, Range 34 East, MDB&M, Pershing County, Nevada.
Assessor's Parcel No. 15-050-016
NAME OF CLAIM ROLL PAGE BLM NMC
- ------------- ---- ---- -------
PEG #1 194 543 415010
PEG #2 194 544 415011
PEG #3 194 567 415012
PEG #4 194 545 415013
R 17 141 460 260047
R 19 141 462 260049
R 21 141 464 260051
R 23 141 466 260053
R 25 141 468 260055
RF 7 141 478 260065
<PAGE>
APPURTENANT RIGHTS
I. Improvements
All buildings, fixtures, leach pads and other facilities and
improvements now on the unpatented mining claims described in Exhibit
"A" to the Agreement not previously transferred to J.D. Welsh &
Associates, Inc. pursuant to the Reclamation Contract.
II. Water Rights
The water and water rights owned by Sellers under State of Nevada
Appropriation Number 47334.
III. Permits
All permits and approvals held by Sellers with respect to operations
at the Relief Canyon Mine, including all surface disturbance permits,
air quality permits, state mining facilities permits, BLM plans of
operation, water discharge permits, industrial pond permits, dam
safety, reclamation permits or other similar permits or approvals or
applications-for such permits or approvals related to operations at
the mine.
<PAGE>
EXHIBIT B
Relief Canyon Inventory
Installed Pumps
Pump - Allis Chalmers
Serial No. 841-5160-302-1
Motor - U.S. Electric 60 HP
Serial No. R 6308-06-605-S
Pump - Allis Chalmers
Serial No. 841-5160-502-2
Motor - U.S. Electric 60 HP
Serial No. R 6302-05-624-S
Pump - Allis Chalmers
Serial No. 52-11-826-001
Motor - Toshiba 15 HP
Serial No. B0154FLF2U2H
Pump - Allis Chalmers
Serial No. P3821-2
Motor - Dayton 10 HP
Serial No. RB215TTFS8032APL
Pump - Allis Chalmers
Serial No.52288
Motor - Baldor 7.5 HP
Serial No. M3769T
Pump - Allis Chalmers
Serial No. P3346-3 A480L25 1CE
Motor - General Electric 5 HP
Serial No. 26BC02XP
Pump - Armstrong
Serial No.133088 7.75
Motor - Baldar 5 HP
Serial No. JPM3615T
<PAGE>
Relief Canyon Inventory
Installed Pumps (cont'd)
Pump - Fowler Pump
Serial No. F841 11 82
Motor - Teco 3 HP
Serial No. Unknown
Pump - Allis Chalmers
Serial No. P3310-CL80
Motor - U.S. Electric 1.5 HP
Serial No. FA883-00-965 K137R018
Pump - Allis Chalmers
Serial No.841-51603-07-1
Motor - Kingmotor 1 HP
Serial No.13206350505
Pump - Allis Chalmers
Serial No.641-51603-04-1
Motor - U.S. Electric 1 HP
Serial No. F-A876-00-974-K157R05
Pump - U.S. Electric .75 HP (Jet)
Serial No. P55BGT-606
Pumps - 2 Submersible
Extra Motors
U.S. Electric 60 HP
Serial No. 6301/P03N364R0-3GR
American Standard 1.5 HP
Serial No. TH41451F2
Dayton .75 HP
Serial No. 46606372543-2A
Marathon Electric 3 HP
Serial No. RVK 184TTCF7358 ANL
Martin Electric
Serial No. 214116 AA
Reliance Electric
Serial No. 079383-20-T
<PAGE>
Relief Canyon Inventory
Tanks
Alaskan Copper Brass Co.
8 ft x 24 ft.
Stainless Steel
Serial No. Unknown
Manufacture - Unknown
8ft x 8ft
Steel
Serial No. Unknown
Fiber-Dyne Corp
12 ft. x 12 ft
Fiberglass
Serial No. J2046
Poly Cal Plastics Corp.
100 gal.
Serial No. Unknown
Manufacture - Unknown
300 gal.
Plastic
Serial No. Unknown
Mix Tank
300gal.
Mixer Serial No. Unknown
Motor - Westinghouse 2 HP
Serial No. 78-5B752
Tank
16 ft x 16 ft-
Steel
Serial No. Unknown
Equipment
5 7' x 7' Carbon Absorption Columns
2 Tyler Vibrating Screens
Serial No.55-832 and 55-833
<PAGE>
Relief Canyon Inventory
Equipment (cont'd.)
2 - Dewatering Screens
Manufacture - Unknown
Serial No. Unknown
Lighting Mixer 1.5 HP
Mixer Serial No.841217103
Motor Serial No. 5KS182FL233AP
Air Compressor
Receiver Tank
Serial No. TF 129267
Motor - Dayton 5 HP
Serial No. F346 09-E84K09 00014
Boiler- Parker Boiler
Serial No.35115
Water Softener
Manufacture - Water Refining
Serial No. Unknown
Bag House
Ultra-Kleen Corp.
Serial No. BV-36-100
Over-Head heaters
Reznor Co.
Serial No. Unknown
Roll Crusher
Roskamp Corp.
Serial No. K7545
Motor - Dayton 5 HP
Serial No. R92102M831
Water Softening Equipment - Complete
<PAGE>
Relief Canyon Inventory
Equipment (cont'd.)
Jaw Crusher
Morse Brothers, Inc.
Serial No. J04-564
Motor - Baldar 2 HP
Serial No. WM 3558T
Pressure Vessels
Talman Steel Corp.
Serial No. A-5931
Brunner Engineering
Serial No. Unknown
Manufacture - Unknown
Serial No. 200-3311
McCook Butler
Serial No. 85266
Electrical Equipment
Sierra Transformer
Serial No. 500TUL22GE
Toshhiba/Houston Control Panel
Serial No. Unknown
Westinghouse Transformer
Serial No. T64E02942
2 - Transformer Winding Sets
Serial No. M8NL16
Acme Electric Corp. Transformer
Serial No. T-1-53312-3
Asco Delta Pump Control
Serial No. Unknown
Selectric Electric Pump Control
Serial No. Unknown
<PAGE>
Relief Canyon Inventory
Buildings
Butler - Steel
40 ft- x 60 ft. x 12 f:. hgt. (Disassembled)
Butler - Steel/Cinder Block
60 ft. x 90 ft. x 30 ft. hgt
Fully equipped with electrical, water, heating,
ventilation, and Sewage Systems
2 - Wood/Frame Construction
10 ft. x 20 ft.
Single Pitch Roof
2 - Wood/Frame Construction
8 ft. x 10 ft.
Fencing
1920 ft. of chain link with posts, top-rail, and
fittings 4 miles of 5 strand barbed wire and posts
Pipe
2,260 ft. of 6" Yellomine
13,380 ft. of 2" Yellomine
6,480 of 10" HDPE
7,700 ft. of 6" HDPE
3,400 ft of 2" HDPE
1,000 ft. of 10" Steel
500 ft. of 6" Flex Plastic
200 ft- of 2" Rubber/Quick Couplers
Vehicles 1989 Ford F250 VIN FTEF26N1KPB42497
<PAGE>
EXHIBIT 10.2
AGREEMENT FOR LEASE/PURCHASE AND SALE OF PROPERTY
THIS AGREEMENT is made and entered into this 2nd day of September, 1996, by
and between JOEI JAMIESON, and individual, and T.K.M. CORPORATION, with
addresses at 72616 Two Mile Road, Twenty-Nine Palms, California 92277 ("Seller")
and NEWGOLD, INC., a Nevada corporation, with address at 5190 Neil Road, Suite
320, Reno, Nevada 89502 ("Buyer").
W I T N E S S E T H:
This Agreement is made and entered into with reference to the following
facts:
A. Seller is the owner, free and clear of all liens and encumbrances
(except the rights of the U.S. Government as to unpatented mining claims,
generally), of that certain property referred to as the Mission Mine, more
particularly described in Exhibit "A" attached hereto and made a part hereof by
reference ("the Property"), together with all equipment and other personal
property situate thereon, more particularly described in Exhibit "B" attached
hereto and made a part hereof by reference (the "Equipment").
B. Seller desires lease/sell to Buyer, and Buyer desires to lease/purchase
from Seller the Property, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, and other good and valuable consideration, receipt of
which is hereby acknowledged, it is agreed by the parties as follows:
1. Lease/Purchase and Sale of Property. Seller hereby leases/sells the
Property to Buyer subject to the following:
(a) The purchase price shall be paid pursuant to Paragraph 2 hereof.
(b) In the event Buyer fails to tender the purchase price, pursuant to the
terms hereof, this Agreement will be terminated, the Property
surrendered to Seller and all payments made to Seller shall be retained
and deemed full consideration for the rights granted Buyer hereunder.
(c) Buyer shall have exclusive physical possession of the Property, and the
exclusive right to mine the Property, as of the date of this Agreement.
<PAGE>
2.Purchase Price. The total purchase price for the Property shall be the
sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS U.S. ($3,500,000.00), payable
as follows:
(a) $5,113.00 concurrent with the execution of this Lease/Purchase
Agreement;
(b) Beginning September 5, 1996, $5,000.00 per month for the first 90 days
of this Lease/Purchase Agreement;
(c) Beginning December 5, 1996, $8,000.00 per month for an additional 90
days, unless production begins during this second 90-day period, in
which event NSR payments will be payable as set forth below;
(d) At the end of the above 180 days, Buyer will make a one-time payment of
$300,000.00 to Seller for the purchase of the Equipment. This payment
shall be credited to the total purchase price of $3,500,000.00. Upon
such payment, Seller shall deliver a Bill of Sale for such equipment,
free and clear of all liens and encumbrances of whatsoever nature. The
parties waive the bulk sale requirements of the Uniform Commercial
Code.
(e) Beginning March 5, 1997, Buyer will begin to pay Seller the greater of
2.5% NSR1 or minimum monthly payments as follows: $10,000.00 per month
through February, 1998; $20,000.00 per month through February, 1999;
$30,000.00 per month through February, 2000; $40,000.00 per month
through February, 2001; $50,000.00 per month through February, 2002;
$60,000.00 per month through February, 2003; and $70,000.00 per month
through February, 2004, until the aggregate purchase price of
$3,500,000.00 has been paid in full. All lease/purchase payments will
be credited to the total purchase price.
(f) Amounts of monthly 2.5% NSR payments exceeding the minimum monthly
payments will be applied against the monthly payment of the final (7th)
year until paid in full, then to the monthly payments of the sixth year
until paid in full, etc., except as provided in Paragraph 2(g) below.
- --------
1 The term NSR (net smelter returns) from sales of gold, as used herein,
means the amount of earned revenues, as the term earned revenues is used in
accordance with generally accepted accounting principles, payable to Buyer by
any smelter or other purchaser of gold contained in ores, minerals, mineral
substances and concentrates produced therefrom mined from the Property, less all
assaying, sampling, transportation and smelting charges. In the event such
minerals are treated or smelted at facilities owned or controlled, in whole or
in part, by Buyer, the term NSR from sales of gold shall mean the amount of
earned revenues, as the term earned revenues is used in accordance with
generally accepted accounting principles, which would have been payable to Buyer
from a bona fide purchaser of gold produced from the Property, less all
assaying, sampling, transportation and smelting charges.
<PAGE>
(g) In the event of Force Majeure (Paragraph 11(m)) and Buyer is forced to
reduce or discontinue mining activities, the scheduled lease/purchase
payments in the second through seventh year will be reduced to a
minimum monthly payment of $10,000.00. Upon resumption of mining
activities, the minimum monthly payments shall resume as if unreduced
and excess 2.5% NSR will be credited against the prior minimum monthly
payments until paid current.
(h) All payments due hereunder shall be deemed delinquent if not received
by Seller within ten (10) days of the date due and shall incur a late
fee of $100.00 per day until paid in full.
3.Warranties of Seller. Seller represents and warrants to Buyer as follows:
(a) That Seller has not entered into any other contracts to sell, transfer,
mortgage, or assign the Property or the Equipment.
(b) During the Lease/Purchase Period, Seller will not take any action to
adversely affect the rights of Buyer hereunder.
(c) As of the date of Closing, the Property shall be free and clear of all
liens, encumbrances, chattel mortgages or conditional sales contracts,
except for claims of the U.S. Government as to unpatented mining
claims.
(d) That Seller has taken all action necessary to lease/sell the Property
and sell the Equipment and has full power and authority to do so.
(e) That the area covered by the subject unpatented mining claims, and each
of them, has been and is properly and validly located under the mining
laws of the United States of America and the State of California; that
assessment work on the mining claims, and each of them, has been
performed at the time, in the manner, and to the extent required by
law, or annual payments have been made as required by law; that the
mining claims are all in good standing, subsisting and valid as of the
date hereof, and are free and clear of all liens, encumbrances, leases
and claims of third parties, except only rights reserved to the United
States in respect of unpatented mining claims generally.
4.Warranties of Buyer. Buyer represents and warrants to Seller as follows:
(a) That prior to August 30 of each year during the Lease/Purchase Period
herein, Buyer will give Seller 45 days' advance written notice
<PAGE>
of payment of annual BLM maintenance fees and assessment fees and taxes
due to Riverside County and will provide to Seller a copy of a receipt
evidencing payment of same within 60 days of said payment.
5. Condition of Property. Buyer acknowledges that it has inspected the
Property and the Equipment.
6. Closing and Conditions to Closing. Closing shall occur on the date the
purchase price of $3,500,000.00 is paid in full by Buyer. The period between the
date hereof and Closing shall be deemed the Lease/Purchase Period. Closing shall
take place at the offices of Buyer in Reno, Nevada, at a time mutually
convenient to both Seller and Buyer. Prior to closing, the following conditions
must be satisfied:
(a) Buyer must have completed a favorable due diligence study on the
Property and be satisfied as to the titles and status thereof.
(b) All payments due hereunder, including any late charges, annual
assessment fees, or other charges of whatsoever nature due and payable
by Buyer, shall be paid in full.
7. Obligations Upon Closing. At the Closing:
(a) Seller shall execute and deliver to Buyer a Quit Claim Deed as to the
unpatented mining claims in a form mutually deemed appropriate to legal
counsel for Buyer and Seller. The Quit Claim Deed shall be good and
sufficient to convey to Buyer the fee simple of the said mining claims,
warranting that the area covered by the said mining claims and each of
them is properly and validly located under the mining laws of the U.S.
and the State of California and are free and clear of all liens,
encumbrances, leases and claims of third parties, except rights
reserved by the United States in respect of unpatented mining claims
generally.
8. Indemnity by Seller. Seller shall indemnify Buyer against any loss,
damage, cost or expense that Buyer shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Seller herein and for the benefit of Buyer.
9. Indemnity of Buyer. Buyer shall indemnify Seller against any loss,
damage, cost or expense that Seller shall incur or suffer as a result of the
breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or
representation made by Buyer herein to and for the benefit of Seller.
<PAGE>
10. Broker's /Finder's Fees. The parties warrant to and with each other
that the transaction evidenced by this Agreement was initiated, negotiated and
completed by the parties hereto directly, as principals, and without the
intervention of any broker, dealer, agent or finder, except as otherwise
provided herein. Each party agrees to indemnify and hold the other party
harmless from and against any loss, damage, cost or expense, including without
limitation, attorneys' fees and litigation expenses, resulting from any breach
or breaches of the foregoing warranty.
11. Risk of Loss. Risk of loss, damage, or destruction of the Property and
Equipment shall remain with Seller until the Closing, as to the Property, and
until delivery of the Equipment and a Bill of Sale, as to the Equipment, which
times risk of loss, damage or destruction of the Property/Equipment shall pass
to Buyer.
12. Buyer's Rights During Lease/Purchase Period. During the Lease/Purchase
Period hereunder, Buyer shall have the following rights and obligations:
(a) Buyer, acting through its employees, agents or representatives, or any
of them, may visit, inspect and examine the Property and by means of
pumping, re-timbering, re- excavating, or otherwise drain and
rehabilitate the mine shafts, tunnels, drifts and stopes.
(b) Buyer may, by means of diamond drilling, trenching, tunneling, or
otherwise by physical or chemical means, test and explore the ore
reserves contained therein, providing it has received prior approval
for same from the Bureau of Land Management.
(c) Buyer may mine ore materials and minerals and remove, ship, treat, sell
and dispose of the same and retain any proceeds therefrom for Buyer's
own use only after payment to Seller of the lease/purchase payments
and/or NSR payments due under Paragraph 2 hereof. Buyer may mine, assay
and mill samples for assaying and mill sampling purposes and such
samples shall be excluded from the operation of this provision up to an
amount not exceeding ten tons.
(d) Buyer agrees to pay all taxes levied and assessed upon the Property, or
any part thereof, including taxes measured on production and also
including taxes levied and assessed on improvements placed upon the
Property by Buyer during the Lease/Purchase Period, commencing with
taxes for the current year, and to make payment thereof, as required by
the statutes of the State of California so that no default in taxes on
the Property shall occur, and to deliver to Seller, upon request, the
original or duplicate tax receipts for payments made. Should Buyer be
in possession of the Property,
<PAGE>
under this Agreement, for only a portion of a year, the tax for that
year shall be prorated between Seller and Buyer on the basis of taxes
for the last preceding year.
(e) Buyer shall keep accurate books of account showing the operations, and
particularly showing ores mined and milled, or mined and shipped by
Buyer, and permit Seller to examine such accurate information in
response to any reasonable request in regard to the condition of
underground workings of said Property, or any part thereof, or as to
the general quality and quantity of ore exposed therein, and allow
Seller to enter upon and into all parts of said premises from time to
time, and at all reasonable times and hours, for the purpose of
inspecting and surveying the same or taking samples of ore therefrom.
(f) Buyer shall assume all responsibility in case of accident to any and
all persons employed on the mining claims pursuant to this Agreement
and shall comply with all provisions of the Workmen's Compensation laws
of the State of California, as now existing, or as hereinafter amended.
In addition, until the Closing and throughout the period covered by
this Lease/Purchase Agreement, Buyer shall provide Seller with evidence
of liability insurance on the Property and Workmen's Compensation
insurance on all persons employed.
(g) Buyer shall be responsible for the maintenance, repair and/or
replacement of any and all mining machinery, equipment, tools and
facilities now or subsequently installed or placed on the Property
which it may desire to use in connection with its operations hereunder.
(h) Buyer shall not, by any act or omission, permit or suffer any liens,
encumbrances or legal process to be incurred or levied upon the
Property, and Buyer shall serve, post and maintain such notices of
non-responsibility as may be required by law to prevent liens from
attaching to the Property.
(i) Buyer shall pay all property taxes levied or assessed on any
structures, equipment, materials, supplies, facilities or personal
property which are owned by Buyer and placed upon the Property, whether
such taxes are levied or assessed to Seller or Buyer.
(j) Buyer shall conduct all of its operations on said Property in a good
miner-like manner in accordance with generally accepted mining
standards.
<PAGE>
(k) During the term of the Lease/Purchase Period, Buyer does hereby agrees
to perform all assessment work required to be performed upon the mining
claims, or pay annual fees due by law, and does further agree to
furnish Seller with a detailed statement of all such work/payments in
order that Seller may prepare and record all proper affidavits, notices
and other documents required by law to evidence the performance of said
annual assessment work and/or annual payments due under federal mining
laws.
(l) In the event Buyer does not exercise its right to purchase hereunder,
Buyer agrees to surrender the Property to Seller in good condition,
with written evidence of same from the Bureau of Land Management.
Assuming all payments due hereunder are current, Buyer, will, however,
have the right to remove any machinery and equipment placed by it
within the Property including track, pipe, receivers and cables, but
Buyer shall, if it terminates its right to purchase hereunder, leave
all timber, chutes and ladders in place and in good condition. Buyer
shall have the right to effect the removal of such machinery and
equipment prior to the expiration of the Lease/Purchase Period, or
within thirty (30) days thereafter. Any such machinery or equipment not
removed prior to the expiration of said period of thirty (30) days
following termination of this Agreement shall be deemed affixed to the
Property and shall become and remain the property of Seller.
(m) If, for any reason, there shall be a default on the part of Buyer
during the Lease/Purchase Period, and Buyer shall fail or refuse to
comply with any of the terms or provisions hereof, then, at the option
of Seller, Seller may give notice in writing to Buyer of such default
specifying the nature and character thereof and, unless the default
shall be corrected, or action commenced to correct such default, within
thirty (30) days after receipt by Buyer of such notice, then, at the
option of Seller, this Agreement and all rights of Buyer hereunder
shall be terminated and Buyer shall quietly and peaceably surrender the
Property to Seller.
13.Patents. Throughout the term of this Lease/Purchase Agreement, Seller,
or Buyer on behalf of Seller, shall have the right to proceed under the Mining
Laws of the United States to patent any or all of the unpatented mining claims
included in the Property.
14. Cancellation by Seller. If Buyer fails or refuses to pay any payments
or NSR royalties when due hereunder, or fails to perform any other terms,
conditions or covenants, or any part thereof, as provided herein, and such
default continues for a period of thirty (30) days after
<PAGE>
receipt by Buyer of Seller's notice thereof, Seller or its agents may re-enter
and take possession of the Property and this Agreement shall be forthwith
terminated; provided, however, that upon such termination, Buyer shall be liable
for all accrued financial obligations under this Agreement. However, in the
event the default is not related to payment of monies, then Buyer shall not be
deemed in default if it commences efforts to cure such default within thirty
(30) days after receipt of Seller's notice thereof.
15.Cancellation by Buyer. If any of the following circumstances occur,
Buyer may terminate this Lease/Purchase Agreement and be relieved of any and all
further unaccrued financial obligations to Seller herein, upon thirty (30) days'
written notice to Seller:
(a) Buyer is unable to obtain state and BLM permits for mining in
quantities required, in Buyer's opinion, for economical operation of
the Property;
(b) Buyer is unable to establish, in Buyer's opinion, sufficient mineral
reserves exist on the Property to provide economical operation; or
(c) Buyer is unable to continue mining operations due, in Buyer's opinion,
to a lack of mineral reserves.
16. Miscellaneous.
(a) Time. Time is of the essence of this Agreement and in the performance
and enforcement of each of the promises, covenants, representations and
warranties of the parties contained herein.
(b) Entire Agreement. This Agreement constitutes the entire agreement of
the parties and all prior rights, negotiations, obligations, agreements
and representations, if any, are merged herein.
(c) Binding Effects. This Agreement shall inure to the benefit of, and be
binding upon, the parties and their respective heirs, executors,
administrators, successors and legal representatives.
(d) Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of California.
(e) Notices. Any notice or notices which any party hereto is required, or
deems necessary, useful or convenient to give to any other party or
parties hereto, at any time and from time to time, shall be in writing
and shall be personally served upon or mailed to the parties by U.S.
Mail, postage prepaid, certified, return receipt requested, at the
following addresses:
<PAGE>
To Seller at: 2616 Two Mile Road
Twenty-Nine Palms, California 92277
To Buyer at: 5190 Neil Road, Suite 320
Reno, Nevada 89502
With copies to: Michael J. Morrison, Esq.
1025 Ridgeview Drive, Suite 400
Reno, Nevada 89509
Notice shall be deemed given five (5) days after personal service or
postmark by the U.S. Postal Service.
(f) Attorneys' Fees and Costs. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful
or prevailing party shall be entitled to recover reasonable attorneys'
fees and other costs and expenses incurred in that action or
proceeding, in addition to any other relief to which it may be
entitled.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to constitute but one and
the same instrument.
(h) Captions. Article and paragraph captions contained in this Agreement
are inserted only as a matter of convenience and reference. Said
captions shall not be construed to define, limit, restrict, extend or
describe this Agreement or the intent of any provision hereof.
(i) Gender and Number. Whenever used in this Agreement and as required by
the context of the transaction, the single number shall include the
plural, the plural number shall include the singular, and masculine
gender shall include the feminine and neuter.
(j) Form of Association. As required by the context, the term "person"
shall include individuals, partnerships, limited partnerships,
corporations, estates and trusts.
(k) Facsimile/Photocopies. The parties agree that a fully executed
facsimile or photocopy of this Agreement shall have the same force and
effect as the original.
(l) Arbitration of Disputes. All claims, disputes and other matters in
question between the parties to this Agreement, arising out of or
relating to this Agreement or the breach thereof, shall be decided by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, unless the parties agree otherwise.
No arbitration, arising out of or relating to this Agreement shall
include, by consolidation, joinder, or in any other manner, any
additional person not a party to this Agreement, except by written
consent of the parties containing a specific reference to this
Agreement and signed by any person sought to be joined. Any consent to
arbitration involving an additional person or persons shall not
constitute consent to arbitration of any dispute not described therein
or with any person not named or described therein. This Agreement to
arbitrate, and any agreement to arbitrate with an additional person or
persons duly consented to by the parties to this Agreement, shall be
specifically enforceable under the prevailing arbitration laws.
Notice of the demand for arbitration shall be filed in writing with the
other party to this Agreement and with the American Arbitration
Association. The demand shall be made within a reasonable time after
the claim, dispute or other matter in question has arisen. In no event
shall the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable
statute of limitations.
The award rendered by the arbitrators shall be final and judgment may
be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
The arbitration shall be by three (3) neutral arbitrators; one selected
by each party to this Agreement and the third selected by the two
selected by the parties.
(m) Force Majeure. Whenever the time for performance of any act hereunder
is limited and the performance thereof is hindered, prevented or
delayed by any factor or circumstance beyond the reasonable control of
the party obliged to perform and which said party could not have
avoided by the use of due diligence, such as acts of God, fire, floods,
or other acts of nature, riots or civil commotions, casualty or other
cause, regulations, orders or requirements of the Government, embargos,
war or other disabling
<PAGE>
causes, whether similar or different, then the time for the performance
of any such act or obligation shall be extended for a period equal to
the extent of such delay.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
T.K.M. CORPORATION, "Seller"
By:________________________ By:________________________
JOEI JAMIESON, "Seller"
NEWGOLD, INC., "Buyer"
By:________________________
Arthur Scott Dockter,
President
<PAGE>
MISSION MINE
CLAIMS LIST
AUGUST 1996
Mission Mine 1
Ward 1 through 9 9
Ward A, B, C 3
Star 1 through 4 and 10 5
New Duplex 1
New Duplex 1&2 2
New Dawn 2 1
22
CAMC Nos. 113882 through 113895
116957 through 116963
24370
<PAGE>
MISSION MINE
EQUIPMENT LIST 26TH JANUARY 1996
Ref. Photo
Number No.'s
1 1a,b Detroit Diesel generator EM A-C
2a,b,c Seriel #262114512
Type: BRKT RPM 1800
KVA: 281
Cycles: 60
Volts: 208/240
Amps: 780/678 416/480
Phases: 3
PF: 0.8
Frame: 2300 Constr. Bk. 67
Powered By: G.M. Diesel 1271 V12
Model: #71257230
List: #KS15929 List 11-5
Total Hours: 1,205.8
2 3 G.M. Hercules Diesel Generator (100 KW)
Seriel #105334
#47A6340
Speed: 1450 RPM
Volts: 125-250
Amps: 400
Total Hours: 13,105
3 4 10KVA Dieter Diesel, 440 volt, 3 phase
generator, air cooled
Series #2602
4 5a,b Cutler Hammer CSS Switchboard
Seriel #C85048844
Volts: 277/460
3 phase, 4 wire
60 Hertz
400 amp sully rating
400 section rating
5 25 KVA 110 volt single phase transformer
6 75 KVA, 33 phase transformer
Seriel #T-1-59444-3
7 36 volt, 220 volt, 3 phase
Seriel #82301079
8 D.C. Power Supply
H.B.8. Equipment Division
Model #L2000 9M
Seriel #814585
<PAGE>
DC 9 volts, 2000 amps
Input AC 50, 230 volts
9 6a,b Precious metal electro winning electro-
plating circuit
Seriel #81458E
10 Miscellaneous electrial motors, new and used
Air Compressors and Equipment
11 7a,b In Portable Building
8a,b,c Gardner-Denver vertical air compressor
600 cfm
Bore L.P.6
Bore H.P. 43/4
Stroke 5
Model #WB 04011
Seriel #174721
Speed 870 rpm
Pressure 100 psi
Powered by: CAT Diesel, Diesel engine
Caterpillar - Rookford P.T.O.
Model PTA - 11450
Seriel #209256
Inclusive with pressure vessels
12 9 Two portable trailer mounted 150 cfm
air compressors
10 Ingersoll - Rand and Jager
13 62 Air operated hoist and bucket
14 62 Underground drilling equipment
15 Miscellaneous new and used air motors
16 Compressor hoses and drill components
Hoist, Crushing, Milling and Extractive
Equipment
17 11a,b Ore Skip (2)
18 11a,b Man elevator
19 12a,b,c Hoist - U.S. Navy
#21 Deck Wind
Mfg by Westinghouse, 50 h.p., 250 V,
DC with multiple speeds
Sorgel Air cooled transformer H-ins, 20 KVA
<PAGE>
60 cycles, 1-phase
Seriel #X13594-6
20 64 Five underground ore cars (1.5 tons)
21a 45/46 Water tank - 18,000 gallon storage
b Water tank - 6,000 - 7,000 gallon
22 43 3x2500 gallon fuel storage tanks
23 46,15, 4 storage hoppers - miscellaneous
16 60 ton: 85 ton on headname, 1(degree)
crusher
24 16,17, 4x30', 2x10' and 1x5' conveyors,
18,22-26 7 in total
25 28,29 1x40' bucket elevator
26 29,30 3 storage hoppers, 50 tons each
27 21 1 Double Jaw Iowa crusher
Cedar Rapids 18"x40" and 6"x40"
Model DJ50, 50 tons per hour to minus 1
(degree)
20 Powered by: GMC 671 Diesel engine
28 26,27 1 Kennedy gearless cons crusher
Model 25 1/2, #2851867, Electric powered,
50 hp motor
25 tons per hour to minus 1/4"
30 31,32 Rod Mill, Kennedy - Van Suan
33,34 5'x8', 13 ton rod charge capacity with rods
75 hp electric motor
Machine #1389
Gear Box: Faulk Corp
Model #71/2 gho
M.O. 6920-0252
31 57 Hummer 3'x4' fine screen vibratory
classifier
32 35,36 Wemco attritiion machine, size 20
3 tank agitator
33 38 Denver, 3 cell floatation unit, each 30"x36"
34 40 Hazen Quinn, 4 call floatation unit 18"x24"
35 41 1 shaker table concentrator 4"x9"
36 63 2 sand pumps 3", 7.5 hp electric motor
<PAGE>
37 15,18, 4 goose-neck double bogey trailers, 8 wheel,
21,22, on which plant is mounted
23,27,
29,30,
31,32,
34,40
38 2 electric transformers in circuit
39 42 Various electrical overload, relay and
starter panels
110/220/440 volts
40 1 explosive storage bunker
41 37 Sparkletts all-steel/rubber-lined clarifier
42 37 15-test precious metals gravity belt
concerntraing table denver jig
43 8 fiberglass tanks, 8'x4'
44 Steel tailings trough, 30'x50'x2'
45 58,62 2x40' shipping containers
46 62 2x27' shipping containers
47 13 1 Comet radial arm saw, 24" carbide
tipped blade
10 hp, 220/440 v
48 59 Speedy-melt amalting furnace with
#70 crucibles
49 2 Screw feeders, 10"x8'
50 Vertical antenna tower
Vehicles
51 48,49 1 Crane, Garwood, model 75B
Detroit diesel powered model 471,
15 ton with drag line
<PAGE>
EXHIBIT 10.3
OFFICE BUILDING LEASE
This Lease between Duffel Financial and Construction Company a California
Company ("Landlord'), and Newgold, Inc. a Nevada Corporation ("Tenant"), is
dated May 20, 1996
1. LEASE OF PREMISES.
In consideration of the Rent (as defined at Section 5.4) and the provisions of
this Lease, Landlord leases to Tenant and Tenant leases from Landlord the
Premises shown by diagonal lines on the floor plan attached hereto as Exhibit
"A" and further described at Section 21. The Premises are located within the
Building and Project described in Section 21. Tenant shall have the
non-exclusive right (unless otherwise provided herein) in common with Landlord,
other tenants, subtenants and invitees, to use of the Common Areas (as defined
at Section 2e).
2. DEFINITIONS
As used in this lease, the following terms shall have the following meanings:
a. Base Rent (initial): $ Sixty-Two Thousand Three Hundred Ten and no / 100 per
year. -------------------------------------------------- ($62,310.00)
b. Base: The calendar year of 1996
c. Broker(s)
Landlord's: None
Tenant's: None
d. Commencement Dale: August 01, 1996
e Common Areas: the building lobbies, common corridors and hallways, restrooms,
garage and parking areas, stairways. elevators and other generally understood
public or common areas. Landlord shall have the right to regulate or restrict
the use of the Common Areas.
f. Expense Stop: (fill in if applicable): $ 5.00
g. Expiration Dale: July 31, 2001 unless otherwise sooner terminated in
accordance with the provisions of this Lease.
h. Index (Section 5.2): United States Department of Labor, Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers, Annual with 4% CAP
Average, Subgroup "All Items" (1967 = 100).
i. Landlord's Mailing Address: P.O. Box 70187, Reno, Nevada - Mailing 5190 Neil
Road, Suite 201, Reno, Nevada 89502 - Physical Address Tenant's Mailing
address: P.O. Box 230, Clarksburg, CA 95612
j. Monthly Installments or Base Rent (initial): Five Thousand One Hundred
Ninety-Two and 50/100 per month.($5192.00)
k. Parking: Tenant shall be permitted, upon payment of the then prevailing
monthly rate (as set by Landlord from time to time) to park Thirteen (13)
cars on a non-exclusive basis in the area(s) designated by Landlord for
parking. Tenant shall abide by any and all parking regulations and rules
established from time to time by Landlord or Landlord's parking operator.
Landlord reserves the right to separately charge Tenant's guests and visitors
for parking.
l. Premises: that portion of the Building containing approximately 3350 square
feet of Rentable Area shown by diagonal lines on exhibit "A" located on the 3
rd floor of the Building and known as Suite 320.
m. Project: The building of which the Premises are a part the "Building") and
any other buildings or improvements on the real property ("the Property")
located at 5190 Neil Road, Reno, Nevada and further described at Exhibit "B."
The Project is known as U.S. Bank Center
n. Rentable Area: as to both the Premises and the Project. the respective
measurements of floor area as may from time to time be subject to lease by
Tenant and all tenants of the Project. respectively, as determined by
Landlord and applied on a consistent basis throughout the project.
<PAGE>
o. Security Deposit (Article 7):$ Five Thousand One Hundred Ninety-Two and
50/100 ($5,192.50)
p. State: the State of Nevada
q. Tenant's First adjustment date (Section 5.2): the first day of the calendar
month following the Commencement Date plus 12 months
r. Tenant's Proportionate Share: _______3.2____%. Such share is a fraction, the
numerator of which is the Rentable Area of the Premises, and the denominator
of which is the Rentable Area of the Project, as determined by Landlord from
time to time. The Project consists of 1 building(s) containing a total
Rentable Area of 104,144 square feet.
s. Tenant's Use Clause (Article 8): General Offices
t. Term: the period commencing on the Commencement Date and expiring at midnight
on the Expiration Date.
3. EXHIBITS AND ADDENDA.
The exhibits and addenda listed below (unless lined out) are incorporated by
reference in this Lease:
d. Rules & Regulations
4. DELIVERY OF POSSESSION.
If for any reason Landlord does not deliver possession of the Premises to Tenant
on the Commencement Date, Landlord shall not be subject to any liability for
such failure, the Expiration Date shall not change and the validity of this
Lease shall not be impaired, but Rent shall be abated until delivery of
possession. "Delivery of possession" shall be deemed to occur on the date
Landlord completes Landlord's Work as defined In Exhibit "C!' If Landlord
permits Tenant to enter into possession of the Premises before the Commencement
Date, such possession shall be subject to the provisions of this Lease,
including, without limitation, the payment of Rent.
5. RENT.
5.1 Payment of base rent - Tenant agrees to pay the Base Rent for the Premises.
Monthly Installments of Base Rent shall be payable in advance on the first day
of each calendar month of the Term. If the Term begins (or ends) on other than
the first (Or last) day of a calendar month, the Base Rent for the partial month
shall be prorated on a per diem basis Tenant shall pay Landlord the first
Monthly Installment of Base Rent when Tenant executes the Lease.
5.2 Adjusted Base Rent.
a. The Base Rent (and the corresponding Monthly Installments of Base Rent)
set forth at Section 2.a shall be adjusted annually (the "Adjustment Date"),
commencing on Tenant's First Adjustment Date. Adjustments, if any, shall be
based upon increases (if any) in the Index. The Index in publication three
(3} months before the Commencement Date shall be the "Base Index!' The Index
in publication three (3) months before each Adjustment Date shall be the
"Comparison Index."As of each Adjustment Date, the Base Rent payable during
the ensuing twelve month period shall be determined by increasing the initial
Base Rent by a percentage equal to the percentage increase, if any, in the
Comparison Index over the Base Index. If the Comparison Index for any
Adjustment Date is equal to or less than the Comparison Index for the
preceding Adjustment Date (or the Base Index in the case of First Adjustment
Date), the Base Rent for the ensuing twelve-month period shall remain the
amount of Base Rent payable during the preceding twelve-month period. When
the Base Rent payable as of each Adjustment Date is determined, Landlord
shall promptly give Tenant written notice of such adjusted Base Rent and the
manner in which it was computed The Base Rent as so adjusted from time to
time shall be the "Base Rent" for all purposes under this Lease.
b. If at any Adjustment Date the Index no longer exists in the form described
In this Lease, Landlord may substitute any substantially equivalent official
index published by the Bureau of Labor Statistics or its successor. Landlord
shall use any appropriate conversion factors to accomplish such substitution.
The substitute index shall then become the "Index" hereunder.
5.3 Project Operating Costs.
a. In order that the Rent payable during the Term reflect any increase in
Project Operating Costs, Tenant agrees to pay to Landlord as Rent, Tenant's
Proportionate Share of all increases in costs, expenses and obligations
attributable to the Project and its operation all as provided below.
b, If, during any calendar year during the Term, Project Operating Costs
exceed the Project Operating Costs for the Base Year, Tenant shall pay to
Landlord, In addition to the Base Rent and all other payments due under this
Lease, an amount equal to Tenant's Proportionate Share of such excess Project
Operating Costs in accordance with the provisions of this Section 5.3 b.
<PAGE>
(1) The term "Project Operating Costs" shall include all those items
described in the following subparagraphs (a) and (b).
(a) All taxes, assessments, water and sewer charges and other similar
governmental charges levied on or attributable to the Building or Project
or their operation, including without limitation, (i) real property taxes
or assessments levied or assessed against the Building or Project, (ii)
assessments or charges levied or assessed against the Building or Project
by any redevelopment agency, (iii) any tax measured by gross rentals
received from the leasing of the Premises, Building or Project, excluding
any net income, franchise, capital stock, estate or inheritance taxes
imposed by the State or federal government or their agencies, branches or
departments; provided that if at any time during the Term any
governmental entity levies, assesses or imposes on Landlord any (1)
general or special, ad valorem or specific, excise, capital levy or other
tax, assessment, levy or charge directly on the Rent received under this
Lease or on the rent reserved under any other leases of space in the
Building or Project, or (2) any license fee, excise or franchise tax,
assessment, levy or charge measured by or based, in whole or in part,
upon such rent, or (3) any transfer, transaction, or similar tax,
assessment, levy or charge based directly or indirectly upon the
transaction represented by this Lease or such other leases, or (4) any
occupancy use, per capita or other tax, assessment, levy or charge based
directly or indirectly upon the use or occupancy of the Premises or other
premises within the Building or Project, then any such taxes,
assessments, levies and charges shall be deemed to be included in the
term Project Operating Costs. If at any time during the Term the assessed
valuation of, or taxes on, the Project are not based on a completed
Project having at least eighty-five percent (85%) of the Rentable Area
occupied, then the 'taxes" component of Project Operating Costs shall be
adjusted by Landlord to reasonably approximate the taxes which would have
been payable if the Project were completed and at least eighty-five
percent (85%) occupied.
(b) Operating costs incurred by Landlord in maintaining and operating the
Building and Project, including without limitation the following: costs
of (1) utilities; (2) supplies; (3) insurance (including public
liability, property damage, earthquake, and fire and extended coverage
insurance for the full replacement cost of the Building and Project as
required by Landlord or its lenders for the Project: (4) services of
independent contractors; (5) compensation (including employment taxes and
fringe benefits) of all persons who perform duties connected with the
operation maintenance, repair or overhaul of the Building or Project, and
equipment, improvements and facilities located within the Project,
including without limitation engineers, janitors, painters, floor waxes,
window washers, security and parking personnel and gardeners (but
excluding persons performing services not uniformly available to or
performed for substantially all Building or Project tenants); (6)
operation and maintenance of a room for delivery and distribution of mail
to tenants of the Building or Project as required by the U.S. Postal
Service (including, without limitation, an amount equal to the fair
market rental value of the mail room premises); (7) management of the
Building or Project, whether managed by Landlord or an independent
contractor (including, without limitation, an amount equal to the fair
market value of any on~site manager's office); (8) rental expenses for
(or a reasonable depreciation allowance on) personal property used in the
maintenance, operation or repair of the Building or Project; (9) costs,
expenditures or charges (whether capitalized or not) required by any
governmental or quasi-governmental authority; (10) amortization of
capital expenses (including financing costs) (i) required by a
governmental entity for energy conservation or life safety purposes, or
(ii) made by Landlord to reduce Project Operating Costs; and (11) any
other costs or expenses incurred by Landlord under this Lease and not
otherwise reimbursed by tenants of the Project. If at any time during the
Term, less than eighty-five percent (85%) of the Rentable Area of the
Project is occupied, the "operating costs" component of Project Operating
Costs shall be adjusted by Landlord to reasonably approximate the
operating costs which would have been incurred if the Project had been at
least eighty-five percent (85%) occupied
(2) Tenant's Proportionate Share of Project Operating Costs shall be payable
by Tenant to Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for
each calendar year thereafter ("Comparison Year"), Tenant shall pay
Landlord an amount equal to Tenant's Proportionate Share of the Project
Operating Costs incurred by Landlord in the Comparison Year which
exceeds the total amount of Project Operating Costs payable by Landlord
for the Base Year. This excess is referred to as the "Excess Expenses"
(b) To provide for current payments of Excess Expenses, Tenant shall, at
Landlord's request, pay as additional rent during each Comparison Year,
an amount equal to Tenant's Proportionate Share of the Excess Expenses
payable during such Comparison Year, as estimated by Landlord from time
to time. Such payments shall be made in monthly installments, commencing
on the first day of the month following the month in which Landlord
notifies Tenant of the amount it is to pay hereunder and continuing
until the first day of the month following the month in which Landlord
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gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the
Excess Expenses for each Comparison Year and Tenant's Proportionate
Share thereof, and then to make an adjustment in the following year
based on the actual Excess Expenses incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first
Comparison Year (or as soon thereafter as is practical), Landlord shall
deliver to Tenant a statement setting forth Tenant's Proportionate Share
of the Excess Expenses for the preceding Comparison Year. If Tenant's
Proportionate Share of the actual Excess Expenses for the previous
Comparison Year exceeds the total of the estimated monthly payments made
by Tenant for such year, Tenant shall pay Landlord the amount of the
deficiency within ten (10) days of the receipt of the statement. If such
total exceeds Tenant's Proportionate Share of the actual Excess Expenses
for such Comparison Year, then Landlord shall credit against Tenant's
next ensuing monthly installment(s) of additional rent an amount equal to
the difference until the credit is exhausted. If a credit is due from
Landlord on the Expiration Date, Landlord shall pay Tenant the amount of
the credit The obligations of Tenant and Landlord to make payments
required under this Section 5.3 shall survive the Expiration Date.
(d) Tenant's Proportionate Share of Excess Expenses in any Comparison
Year having less than 365 days shall be appropriately prorated.
(a) If any dispute arises as to the amount of any additional rent due
hereunder, Tenant shall have the right after reasonable notice and at
reasonable times to Inspect Landlord's accounting records at Landlord's
accounting office and, if after such inspection Tenant still disputes the
amount of additional rent owed, a certification as to the proper amount
shall be made by Landlord's certified public accountant, which
certification shall be final and conclusive. Tenant agrees to pay the
cost of such certification unless it is determined that Landlord's
original statement overstated Project Operating Costs by more than five
percent (5%)
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(f) If this Lease sets forth an Expense Stop at Section 2f, then during
the Term Tenant shall be liable for Tenant's Proportionate Share of any
actual Project Operating Costs which exceed the amount of the Expense
Stop. Tenant shall make current payments of such excess costs during the
Term in the same manner as is provided for payment of Excess Expenses
under the applicable provisions of Section 5.3b(2)(b) and (c) above.
5.4 Definition of Rent. All costs and expenses which Tenant assumes or agrees to
pay to Landlord under this Lease shall be deemed additional rent (which,
together with the Base Rent is sometimes referred to as the "Rent. The Rent
shall be paid to the Building manager (or other person) and at such place, as
Landlord may from time to time designate in writing, without any prior demand
therefor and without deduction or offset, in lawful money of the United States
of America
5.5 Rent control If the amount of Rent or any other payment due under this Lease
violates the terms of any governmental restrictions on such Rent or payment,
then the Rent or payment due during the period of such restrictions shall be the
maximum amount allowable under those restrictions. Upon termination of the
restrictions, Landlord shall, to the extent it is legally permitted, recover
from Tenant the difference between the amounts received during the period of the
restrictions and the amounts Landlord would have received had there been no
restrictions.
5.6 Taxes Payable by Tenant. In addition to the Rent and any other charges to be
paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for any
and all taxes payable by Landlord (other than net income taxes) which are not
otherwise reimbursable under this Lease, whether or not now customary or within
the contemplation of the parties, where such taxes are upon, measured by or
reasonably attributable to (a) the cost or value of Tenant's equipment.
furniture, fixtures and other personal property located in the Premises, or the
cost or value of any leasehold improvements made in or to the Premises by or for
Tenant, other than Building Standard Work made by Landlord, regardless
furniture, fixtures and other personal property located in the Premises, or the
cost or value of any leasehold improvements made in or to the Premises by or for
Tenant, other than Building Standard Work made by Landlord, regardless of
whether title to such improvements is held by Tenant or Landlord; (b) the gross
or net Rent payable under this Lease, including, without limitation. any rental
or gross receipts tax levied by any taxing authority with respect to the receipt
of the Rent hereunder; (C) the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion thereof; or (d) this transaction or any document to which Tenant is
a party creating or transferring an interest or an estate in the Premises. If it
becomes unlawful for Tenant to reimburse Landlord for any costs as required
under this Lease. the Base Rent shall be revised to net Landlord the same net
Rent after imposition of any tax or other charge upon Landlord as would have
been payable to Landlord but for the reimbursement being unlawful.
6. INTEREST AND LATE CHARGES.
If Tenant fails to pay when due any Rent or other amounts or charges which
Tenant is obligated to pay under the terms of this Lease, the unpaid amounts
shall bear interest at the maximum rate then allowed by law. Tenant acknowledges
that the late payment of any Monthly Installment of Base Rent will cause
Landlord to lose the use of that money and incur Costs and expenses not
contemplated under this Lease, including without limitation, administrative and
collection costs and processing and accounting expenses, the exact amount of
which is extremely difficult to ascertain. Therefore, in addition to interest,
if any such installment is not received by Landlord within ten (10) days from
the date it is due, Tenant shall pay Landlord a late charge equal to ten percent
(10%) of such installment. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the loss suffered from such nonpayment by Tenant
Acceptance of any interest or late charge shall not constitute a waiver of
Tenant's default with respect to such nonpayment by Tenant nor prevent Landlord
from exercising any other rights or remedies available to Landlord under this
Lease.
7. SECURITY DEPOSIT.
Tenant agrees to deposit with Landlord the Security Deposit set forth at Section
2.0 upon execution of this Lease. as security for Tenant's faithful performance
of its obligations under this Lease. Landlord and Tenant agree that the Security
Deposit may be commingled with funds of Landlord and Landlord shall have no
obligation or liability for payment of interest on such deposit Tenant shall not
mortgage, assign, transfer or encumber the Security Deposit without the prior
written consent of Landlord and any attempt by Tenant to do so shall be void,
without force or effect and shall not be binding upon Landlord. If Tenant fails
to pay any Rent or other amount when due and payable under this Lease, or fails
to perform any of the terms hereof, Landlord may appropriate and apply or use
all or any portion of the Security Deposit for Rent payments or any other amount
then due and unpaid, for payment of any amount for which Landlord has become
obligated as a result of Tenant's default or breach, and for any loss or damage
sustained by Landlord as a result of Tenant's default or breach, and Landlord
may so apply or use this deposit without prejudice to any other remedy Landlord
may have by reason of Tenant's default or breach. If Landlord so uses any of the
Security Deposit, Tenant shall, within ten (10) days after written demand
therefor, restore the Security Deposit to the full amount originally deposited;
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Tenants failure to do so shall constitute an act of default hereunder and
Landlord shall have the right to exercise any remedy provided for at Article 27
hereof Within fifteen (15) days after the Term (or any extension thereof) has
expired or Tenant has vacated the Premises, whichever shall last occur, and
provided Tenant is not then in default on any of its obligations hereunder,
Landlord shall return the Security Deposit to Tenant, or, if Tenant has assigned
its interest under this Lease, to the last assignee of Tenant If Landlord sells
its interest in the Premises, Landlord may deliver this deposit to the purchaser
of Landlord's interest and thereupon be relieved of any further liability or
obligation with respect to the Security Deposit
8. TENANT'S USE OF THE PREMISES.
Tenant shall use the Premises solely for the purposes set forth in Tenant's Use
Clause. Tenant shall not use or occupy the Premises in violation of law or any
covenant, condition or restriction affecting the Building or Project or the
certificate of occupancy issued for the Building or Project, and shall, upon
notice from Landlord, immediately discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be a violation of
law or the certificate of occupancy. Tenant, at Tenant's own cost and expense,
shall comply with all laws, ordinances, regulations, rules and/or any directions
of any governmental agencies or authorities having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, Impose any
duty upon Tenant or Landlord with respect to the Premises or its use or
occupation. A judgment of any court of competent jurisdiction or the admission
by Tenant in any action or proceeding against Tenant that Tenant has violated
any such laws, ordinances, regulations, rules and/or directions in the use of
the Premises shall be deemed to be a conclusive determination of that fact as
between Landlord and Tenant. Tenant shall not do or permit to be done any time,
extended coverage or other insurance policy covering the Building or Project
and/or property located therein, and shall comply with all rules, orders,
regulations, requirements and recommendations of the Insurance Services Office
or any other organization performing a similar function. Tenant shall
<PAGE>
promptly upon demand reimburse Landlord for any additional premium charged for
such policy by reason of Tenant's failure to comply with the provisions of this
Article. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstructor interfere with the rights of other
tenants or occupants of the Building or Project, or injure or annoy them, or use
or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose. nor shall Tenant cause. maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises.
9. SERVICES AND UTILITIES.
Provided that Tenant is not in default hereunder, Landlord agrees to furnish to
the Premises during generally recognized business days. and during hours
determined by Landlord in its sole discretion, and subject to the Rules and
Regulations of the Building or Project, electricity for normal desk top office
equipment and normal copying equipment, and heating, ventilation and air
conditioning ("HVAC") as required in Landlord's judgment for the comfortable use
and occupancy of the Premises. If Tenant desires HVAC at any other time,
Landlord shall use reasonable efforts to furnish such service upon reasonable
notice from Tenant and Tenant shall pay Landlord's charges therefor on demand.
Landlord shall also maintain and keep lighted the common stairs, common entries
and restrooms in the Building. Landlord shall not be in default hereunder or be
liable for any damages directly or indirectly resulting from, nor shall the Rent
be abated by reason of (i) the installation, use or interruption of use of any
equipment in connection with the furnishing of any of the foregoing services,
(ii) failure to furnish or delay in furnishing any such services where such
failure or delay is caused by accident or any condition or event beyond the
reasonable control of Landlord, or by the making of necessary repairs or
improvements to the Premises, Building or Project. or (iii) the limitation,
curtailment or rationing of, or restrictions on, use of water. electricity, gas
or any other form of energy serving the Premises, Building or Project. Landlord
shall not be liable under any circumstances for a loss of or injury to property
or business, however occurring, through or in connection with or incidental to
failure to furnish any such services. If Tenant uses heat generating machines or
equipment in the Premises which affect the temperature otherwise maintained by
the HVAC system, Landlord reserves the right to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost of
installation, operation and maintenance thereof, shall be paid by Tenant to
Landlord upon demand by Landlord.
Tenant shall not, without the written consent of Landlord, use any apparatus or
device in the Premises, including without limitation, electronic data processing
machines, punch card machines or machines using in excess of 120 volts, which
consumes more electricity than is usually furnished or supplied for the use of
premises as general office space, as determined by Landlord Tenant shall not
connect any apparatus with electric current except through existing electrical
outlets in the Premises, Tenant shall not consume water or electric current in
excess of that usually furnished or supplied for the use of premises as general
office space (as determined by Landlord), without first procuring the written
consent of Landlord, which Landlord may refuse, and in the event of consent,
Landlord may have installed a water meter or electrical current meter in the
Premises to measure the amount of water or electric current consumed. The cost
of any such meter and of its installation, maintenance and repair shall be paid
for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand for
all such water and electric current consumed as shown by said meters, at the
rates charged for such services by the local public utility plus any additional
expense incurred in keeping account of the water and electric current so
consumed. If a separate meter is not installed, the excess cost for such water
and electric current shall be established by an estimate made by a utility
company or electrical engineer hired by Landlord at Tenant's expense.
Nothing contained in this Article shall restrict Landlord's right to require at
any time separate metering of utilities furnished to the Premises. In the event
utilities are separately metered, Tenant shall pay promptly upon demand for all
utilities consumed at utility rates charged by the local public utility plus any
additional expense incurred by Landlord in keeping account of the utilities so
consumed. Tenant shall be responsible for the maintenance and repair of any such
meters at its sole cost.
Landlord shall furnish elevator service, lighting replacement for building
standard lights, restroom supplies window washing and janitor services in a
manner that such services are customarily furnished to comparable office
buildings in the area.
10. CONDITION OF THE PREMISES.
Tenant's taking possession of the Premises shall be deemed conclusive evidence
that as of the date of taking possession the Premises are in good order and
satisfactory condition, except for such matters as to which Tenant gave Landlord
notice on or before the Commencement Date. No promise of Landlord to alter,
remodel, repair or improve the Premises, the Building or the Project and no
representation, express or implied, respecting any matter or thing relating to
the Premises, Building, Project or this Lease (including, without limitation,
the condition of the Premises, the Building or the Project) have been made to
Tenant by Landlord or its Broker or Sales Agent, other than as may be contained
herein or in a separate exhibit or addendum signed by Landlord and Tenant.
<PAGE>
11. CONSTRUCTION, REPAIRS AND MAINTENANCE.
a. Landlord's Obligations. Landlord shall-perform Landlord's Work to the
Premises as described in Exhibit "C." Landlord shall maintain in good order,
condition and repair the Building and all other portions of the Premises not
the obligation of Tenant or of any other tenant in the building.
b. Tenant's Obligations.
(1) Tenant shall perform Tenant's Work to the Premises as described in
Exhibit "C."
(2) Tenant at Tenant's sole expense shall, except for services furnished by
Landlord pursuant to Article 9 hereof, maintain the Premises in good order,
condition and repair, including the interior surfaces of the ceilings,
walls and floors, all doors, all interior windows, all plumbing, pipes and
fixtures, electrical wiring, switches and fixtures, Building Standard
furnishings and special items and equipment installed by or at the expense
of Tenant.
(3) Tenant shall be responsible for all repairs and alterations in and to
the Premises, Building and Project and the facilities and systems thereof.
the need for which arise out of tenants use or occupancy of the premisses
the installation, removal , use or operation of Tenant's Property (as
defined in Article 13) in the Premises, (iii) the moving of Tenant's
Property into or out of the building, or the act. Omission. Misuse or
neglect of Tenant. its agents contractors, employees or invitees.
<PAGE>
(4) If Tenant fails to maintain the Premises in good order, condition and
repair, Landlord shall give Tenant notice to do such acts as are reasonably
required to so maintain the Premises. If Tenant fails to promptly commence
such work and diligently prosecute it to completion, then Landlord shall
have the right to do such acts and expend such funds at the expense of
Tenant as are reasonably required to perform such work. Any amount so
expended by Landlord shall be paid by Tenant promptly after demand with
interest at the prime commercial rate then being charged by Bank of America
NT & SA plus two percent (2%) per annum, from the date of such work, but
not to exceed the maximum rate then allowed by law. Landlord shall have no
liability to Tenant for any damage, inconvenience, or interference with the
use of the Premises by Tenant as a result of performing any such work.
c. Compliance with Law. Landlord and Tenant shall each do all acts required
to comply with all applicable laws, ordinances, and rules of any public
authority relating to their respective maintenance obligations as set forth
herein.
d. Waiver by Tenant. Tenant expressly waives the benefits of any statute now
or hereafter in effect which would otherwise afford the Tenant the right to
make repairs at Landlord's expense or to terminate this Lease because of
Landlord's failure to keep the Premises in good order, condition and repair.
e. Load and Equipment limits. Tenant shall not place a load upon any floor of
the Premises which exceeds the load per square foot which such floor was
designed to carry, as determined by Landlord or Landlord's structural
engineer The cost of any such determination made by Landlord's structural
engineer shall be paid for by Tenant upon demand. Tenant shall not install
business machines or mechanical equipment which cause noise or vibration to
such a degree as to be objectionable to Landlord or other Building tenants.
f Except as otherwise expressly provided in this Lease, Landlord shall have
no liability to Tenant nor shall Tenant's obligations under this Lease be
reduced or abated in any manner whatsoever by reason of any inconvenience,
annoyance, interruption or injury to business arising from Landlord's making
any repairs or changes which Landlord is required or permitted by this Lease
or by any other tenant's lease or required by law to make in or to any
portion of the Project, Building or the Premises. Landlord shall nevertheless
use reasonable efforts to minimize any interference with Tenant's business in
the Premises. Tenant shall give Landlord prompt notice of any damage to or
defective condition in any part or appurtenance of the Building's mechanical,
electrical, plumbing, HVAC or other systems serving, located in, or passing
through the Premises
g. Tenant shall give Landlord prompt notice of any damage to or defective
condition in any part or appurtenance of the Building's mechanical,
electrical, plumbing, HVAC or other systems serving, located in, or passing
through the Premises.
h. Upon the expiration or earlier termination of this Lease, Tenant shall
return the Premises to Landlord clean and in the same condition as on the
date Tenant took possession, except for normal wear and tear. Any damage to
the Premises, including any structural damage, resulting from Tenant's use or
from the removal of Tenant's fixtures, furnishings and equipment pursuant to
Section 13b shall be repaired by Tenant at Tenant's expense.
12. ALTERATIONS AND ADDITIONS.
a. Tenant shall not make any additions, alterations or improvements to the
Premises without obtaining the prior written consent of Landlord. Landlord's
consent may be conditioned on Tenant's removing any such additions,
alterations or improvements upon the expiration of the Term and restoring the
Premises to the same condition as on the date Tenant took possession. All
work with respect to any addition, alteration or improvement shall be done in
a good and workmanlike manner by properly qualified and licensed personnel
approved by Landlord, and such work shall be diligently prosecuted to
completion. Landlord may, at Landlord's option, require that any such work be
performed by Landlord's contractor, in which case the cost of such work shall
be paid for before commencement of the work. Tenant shall pay to Landlord
upon completion of any such work by Landlord's contractor, an administrative
fee of fifteen percent (15%) of the cost of the work.
b. Tenant shall pay the costs of any work done on the Premises pursuant to
Section 12a, and shall keep the Premises, Building and Project free and clear
of liens of any kind. Tenant shall indemnify, defend against and keep
Landlord free and harmless from all liability loss, damage, costs, attorneys'
fees and any other expense incurred on account of claims by any person
performing work or furnishing materials or supplies for Tenant or any person
claiming under Tenant.
Tenant shall keep Tenant's leasehold interest, and any additions or
Improvements which are or become the property of Landlord under this Lease,
free and clear of all attachment or judgment liens. Before the actual
commencement of any work for which a claim or lien may be filed, Tenant shall
give Landlord notice of the intended commencement date a sufficient time
before that date to enable Landlord to post notices of non-responsibility or
any other notices which Landlord deems necessary for the proper protection of
<PAGE>
Landlord's interest in the Premises, Building or the Project, and Landlord
shall have the right to enter the Premises and post such notices at any
reasonable time.
c. Landlord may require, at Landlord's sole option, that Tenant provide to
Landlord, at Tenant's expense, a lien and completion bond In an amount equal
to at least one and one-half (1 1/2) times the total estimated cost of any
additions, alterations or improvements to be made in or to the Premises, to
protect Landlord against any liability for mechanic's and materialmen's liens
and to insure timely completion of the work. Nothing contained in this
Section 12c shall relieve Tenant of its obligation under Section 12b to keep
the Premises, Building and Project free of all liens.
d. Unless their removal is required by Landlord as provided in Section 12a,
all additions, alterations and improvements made to the Premises shall become
the property of Landlord and be surrendered with the Premises upon the
expiration of the Term; provided, however, Tenant's equipment, machinery and
trade fixtures which can be removed without damage to the Premises shall
remain the property of Tenant and may be removed, subject to the provisions
of Section 13b.
13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY.
a. All fixtures, equipment, improvements and appurtenances attached to or
built into the Premises at the commencement of or during the Term, whether or
not by or at the expense of Tenant ("Leasehold Improvements"), shall be and
remain a part of the Premises, shall be the property of Landlord and shall
not be removed by Tenant, except as expressly provided in Section 13b.
<PAGE>
b. All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment located in the
Premises and acquired by or for the account of Tenant, without expense to
Landlord, which can be removed without structural damage to the Building, and
all furniture, furnishings and other articles or movable personal property
owned by Tenant and located in the Premises (collectively "Tenant's Property"
shall be and shall remain the property of Tenant and may be removed by Tenant
at any time during the Term: provided that if any of Tenant's Property is
removed, Tenant shall promptly repair any damage to the Premises or to the
Building resulting from such removal.
14. RULES AND REGULATIONS.
Tenant agrees to comply with (and cause its agents, contractors, employees and
invitees to comply with) the rules and regulations attached hereto as Exhibit
"D" and with such reasonable modifications thereof and additions thereto as
Landlord may from time to time make. Landlord shall not be responsible for any
violation of said rules and regulations by other tenants or occupants of the
Building or Project.
15. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights, exercisable without liability to Tenant
for (a) damage or injury to property, person or business, (b) causing an actual
or constructive eviction from the Premises, or (c) disturbing Tenant's use or
possession of the Premises:
a. To name the Building and Project and to change the name or street address
of the Building or Project;
b. To install and maintain all signs on the exterior and interior of the
Building and Project:
c. To have pass keys to the Premises and all doors within the Premises,
excluding Tenant's vaults and safes;
d. At anytime during the Term, and on reasonable prior notice to Tenant, to
inspect the Premises, and to show the Premises to any prospective purchaser
or mortgagee of the Project, or to any assignee of any mortgage on the
Project, or to others having an interest in the Project or Landlord, and
during the last six months of the Term, to show the Premises to prospective
tenants thereof; and
e. To enter the Premises for the purpose of making inspections, repairs,
alterations, additions or improvements to the Premises or the Building
(including, without limitation, checking, calibrating, adjusting or balancing
controls and other parts of the HVAC system), and to take all steps as may be
necessary or desirable for the safety, protection, maintenance or
preservation of the Premises or the Building or Land lord's interest therein,
or as may be necessary or desirable for the operation or Improvement of the
Building or in order to comply with laws, orders or requirements of
governmental or other authority. Landlord agrees to use its best efforts
(except in an emergency) to minimize interference with Tenant's business in
the Premises in the course of any such entry.
16. ASSIGNMENT AND SUBLETTING.
No assignment of this Lease or sublease of all or any part of the Premises shall
be permitted, except as provided in this Article 16.
a. Tenant shall not, without the prior written consent of Landlord, assign or
hypothecate this Lease or any interest herein or sublet the Premises or any
part thereof, or permit the use of the Premises by any party other than
Tenant. Any of the foregoing acts without such consent shall be void and
shall, at the option of Landlord, terminate this Lease. This Lease shall not,
nor shall any interest of Tenant herein, be assignable by operation of law
without the written consent of Landlord.
b. If at any time Qr from time to time during the Term Tenant desires to
assign this Lease or sublet all or any part of the Premises, Tenant shall
give notice to Landlord setting forth the terms and provisions of the
proposed assignment or sublease, and the identity of the proposed assignee or
subtenant. Tenant shall promptly supply Landlord with such information
concerning the business background and financial condition of such proposed
assignee or subtenant as Landlord may reasonably request Landlord shall have
the option, exercisable by notice given to Tenant within twenty (20) days
after Tenant's notice is given, either to sublet such space from Tenant at
the rental and on the other terms set forth in this Lease for the term set
forth in Tenant's notice, or, in the case of an assignment, to terminate this
Lease. If Landlord does not exercise such option, Tenant may assign the Lease
or sublet such space to such proposed assignee or subtenant on the following
further conditions:
(1) Landlord shall have the right to approve such proposed assignee or
subtenant, which approval shall not be unreasonably withheld;
(2) The assignment or sublease shall be on the same terms set forth in the
notice given to Landlord:
<PAGE>
(3) No assignment or sublease shall be valid and no assignee or sublessee
shall take possession of the Premises until an executed counterpart of such
assignment or sublease has been delivered to Landlord:
(4) No assignee or sublessee shall have a further right to assign or sublet
except on the terms herein contained: and
(5) Any sums or other economic consideration received by Tenant as a result
of such assignment or subletting, however denominated under the assignment
or sublease, which exceed, in the aggregate, (i) the total sums which
Tenant Is obligated to pay Landlord under this Lease (prorated to reflect
obligations allocable to any portion of the Premises subleased), plus (ii)
any real estate brokerage commissions or fees payable in connection with
such assignment or subletting, shall be paid to Landlord as additional rent
under this Lease without affecting or reducing any other obligations of
Tenant hereunder.
c. Notwithstanding the provisions of paragraphs a and b above, Tenant may
assign this Lease or sublet the Premises or any portion thereof, without
Landlord's consent and without extending any recapture or termination option
to Landlord, to any corporation which controls, is controlled by or is under
common control with Tenant, or to any corporation resulting from a merger or
consolidation with Tenant, or to any person or entity which acquires all the
assets of Tenant's business as a going concern, provided that (i) the
assignee or sublessee assumes, in full, the obligations of Tenant under this
Lease, (ii) Tenant remains fully liable under this Lease, and (iii) the use
of the Premises under Article 8 remains unchanged.
<PAGE>
d. No subletting or assignment shall release Tenant of Tenant's obligations
under this Lease or alter primary liability of Tenant to pay the Rent and to
perform all other obligations to be performed by Tenant hereunder. The
acceptance of Rent by Landlord from any other person shall not be deemed to
be a waiver by Landlord of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting In the event of default by an assignee or subtenant of Tenant or
any successor of Tenant in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such assignee, subtenant or successor. Landlord
may consent to subsequent assignments of the Lease or sublettings or
amendments or modifications to the Lease with assignees of Tenant, without
notifying Tenant, or any successor of Tenant, and without obtaining its or
their consent thereto and any such actions shall not relieve Tenant of
liability under this Lease.
e. If Tenant assigns the Lease or sublets the Premises or requests the
consent of Landlord to any assignment or subletting or; for any act that
tenant proposes to do, then Tenant shall upon demand, pay Landlord an
administrative fee of One Hundred Fifty and No/100ths Dollars ($150.00) plus
any attorneys' fees reasonably incurred by Landlord in connection with such
act or request.
17. HOLDING OVER.
If after expiration of the Term, Tenant remains in possession of the Premises
with Landlord's permission (express or implied), Tenant shall become a tenant
from month to month only, upon all the provisions of this Lease (except as to
term and ease Rent), but the "Monthly Installments of Base Rent" payable by
Tenant shall be increased to one hundred fifty percent (150%) of the Monthly
Installments of Base Rent payable by Tenant at the expiration of the Term. Such
monthly rent shall be payable in advance on or before the first day of each
month. If either party desires to terminate such month to month tenancy, it
shall give the other party not less than thirty (30) days advance written notice
of the date of termination.
18. SURRENDER OF PREMISES.
a. Tenant shall peaceably surrender the Premises to Landlord on the
Expiration Date, in broom-clean condition and in as good condition as when
Tenant took possession, except for (i) reasonable wear and tear, (ii) loss by
fire or other casualty, and (iii) loss by condemnation. Tenant shall, on
Landlord's request, remove Tenant's Property on or before the Expiration Date
and promptly repair all damage to the Premises or Building caused by such
removal.
b. If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any of Tenant's Property left on the Premises
shall be deemed to be abandoned, and, at Landlord's option, title shall pass
to Landlord under this Lease as by a bill of sale. If Landlord elects to
remove all or any part of such Tenant's Property, the cost of removal,
Including repairing any damage to the Premises or Building caused by such
removal, shall be paid by Tenant. On the Expiration Date Tenant shall
surrender all keys to the Premises.
19. DESTRUCTION OR DAMAGE.
a. If the Premises or the portion of the Building necessary for Tenant's
occupancy is damaged by fire earthquake, act of God, the elements of other
casualty Landlord shall, subject to the provisions of this Article, promptly
repair the damage, if such repairs can' In Landlord's opinion, be completed
within (90) ninety days. If Landlord determines that repairs can be completed
within ninety (90) days, this Lease shall remain in full force and effect,
except that if such damage is not the result of the negligence or willful
misconduct of Tenant or Tenant's agents, employees, contractors, licensees or
invitees, the Base Rent shall be abated to the extent Tenant's use of the
Premises Is impaired, commencing with the date of damage and continuing until
completion of the repairs required of Landlord under Section 19d.
b. If in Landlord's opinion, such repairs to the Premises or portion of the
Building necessary for Tenant's occupancy cannot be completed within ninety
(90) days, Landlord may elect, upon notice to Tenant given within thirty (30)
days after the date of such fire or other casualty, to repair such damage, in
which event this Lease shall continue in full force and effect, but the Base
Rent shall be partially abated as provided in Section 19a. If Landlord does
not so elect to make such repairs, this Lease shall terminate as of the date
of such fire or other casualty
c. If any other portion of the Building or Project is totally destroyed or
damaged to the extent that in Landlord's opinion repair thereof cannot be
completed within ninety (90) days, Landlord may elect upon notice to Tenant
given within thirty (30) days after the date of such fire or other casualty
to repair such damage, in which event this Lease shall continue in full force
and effect, but the Base Rent shall be partially abated as provided In
Section 19a. If Landlord does not elect to make such repairs, this Lease
shall terminate as of the date of such fire or other casualty.
<PAGE>
d. If the Premises are to be repaired under this Article, Landlord shall
repair at its cost any injury or damage to the Building and Building Standard
Work In the Premises. Tenant shall be responsible at its sole cost and
expense for the repair, restoration and replacement of any other Leasehold
Improvements and Tenant's Property Landlord shall not be liable for any loss
of business, inconvenience or annoyance arising from any repair or
restoration of any portion of the Premises, Building or Project as a result
of any damage from fire or other casualty.
e. This Lease shall be considered an express agreement governing any case of
damage to or destruction of the Premises, Building or Project by fire or
other casualty, and any present or future law which purports to govern the
rights of Landlord and Tenant in such circumstances in the absence of express
agreement, shall have no application.
20. EMINENT DOMAIN.
a. If the whole of the Building or Premises is lawfully taken by condemnation
or in any other manner for any public or quasi public purpose, this Lease
shall terminate as of tile date of such taking, and Rent shall be prorated to
such date. If less than the whole of the Building or Premises is so taken,
this Lease shall be unaffected by such taking, provided that (i) Tenant shall
have the right to terminate this Lease by notice to Landlord given within
ninety (90) days after the date of such taking if twenty Percent (20%) or
more of the Premises is taken and the remaining area of the Premises is not
reasonably sufficient for Tenant to continue operation of Its business, and
(ii) Landlord shall have the right to terminate this Lease by notice to
Tenant given within ninety (90) days after the date of such taking. If either
Landlord or Tenant so elects to terminate this Lease, the Lease shall
terminate on the 30 th day after either such notice. The Rent shall be
prorated to the date of termination. If this Lease continues in force upon
such partial taking, the Base Rent and Tenant's Proportionate Share shall be
equitably adjusted according to the remaining Rentable Area of the Premises
and Project.
<PAGE>
b. In the event of any taking, partial or whole, all of the proceeds of any
award, judgment or settlement payable by the condemning authority shall be
the exclusive property of Landlord, and Tenant hereby assigns to Landlord all
of its right, title and interest in any award, judgment or settlement from
the condemning authority. Tenant, however, shall have the right, to the
extent that Landlord's award is not reduced or prejudiced, to claim from the
condemning authority (but not from Landlord) such compensation as may be
recoverable by Tenant in its own right for relocation expenses and damage to
Tenant's personal property.
c. In the event of a partial taking of the Premises which does not result in
a termination of this Lease, Landlord shall restore the remaining portion of
the Premises as nearly as practicable to its condition prior to the
condemnation or taking, but only to the extent of Building Standard Work.
Tenant shall be responsible at its sole cost and expense for the repair,
restoration and replacement of any other Leasehold Improvements and Tenant's
Property.
21. INDEMNIFICATION.
a. Tenant shall indemnify and hold Landlord harmless against and from
liability and claims of any kind for loss or damage to property of Tenant or
any other person, or for any injury to or death of any person, arising out
of: (1) Tenant's use and occupancy of the Premises, or any work, activity or
other things allowed or suffered by Tenant to be done in, on or about the
Premises: (2) any breach or default by Tenant of any of Tenant's obligations
under this Lease; or (3) any negligent or otherwise tortious act or omission
of Tenant, its agents, employees, invitees or contractors. Tenant shall at
Tenant's expense, and by counsel satisfactory to Landlord, defend Landlord
in any action or proceeding arising from any such claim and shall indemnify
Landlord against all costs, attorneys' fees, expert witness fees and any
other expenses incurred in such action or proceeding. As a material part of
the consideration for Landlord's execution of this Lease, Tenant hereby
assumes all risk of damage or injury to any person or property in, on or
about the Premises from any cause.
b. Landlord shall not be liable for injury or damage which may be sustained
by the person or property of Tenant. its employees, invitees or customers,
or any other person in or about the Premises, caused by or resulting from
fire, steam. electricity, gas, water or rain which may leak or flow from or
into any part of the Premises, or from the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, whether such damage or injury results
from conditions arising upon the Premises or upon other portions of the
Building or Project or from other sources. Landlord shall not be liable for
any damages arising from any act or omission of any other tenant of the
Building or Project.
22. TENANT'S INSURANCE.
a. All insurance required to be carried by Tenant hereunder shall be issued
by responsible insurance companies acceptable to Landlord and Landlord's
lender and qualified to do business in the State. Each policy shall name
Landlord, and at Landlord's request any mortgagee of Landlord, as an
additional insured, as their respective interests may appear. Each policy
shall contain (i) a cross-liability endorsement, (ii) a provision that such
policy and the coverage evidenced thereby shall be primary and
non-contributing with respect to any policies carried by Landlord and that
any coverage carried by Landlord shall be excess insurance, and (iii) a
waiver by the insurer of any right of subrogation against Landlord, its
agents, employees and representatives, which arises or might arise by reason
of any payment under such policy or by reason of any act or omission of
Landlord, its agents, employees or representatives. A copy of each paid up
policy (authenticated by the insurer) or certificate of the insurer
evidencing the existence and amount of each insurance policy required
hereunder shall be delivered to Landlord before the date Tenant is first
given the right of possession of the Premises, and thereafter within thirty
(30) days after any demand by Landlord therefor. Landlord may, at any time
and from time to time, inspect and/or copy any insurance policies required
to be maintained by Tenant hereunder. No such policy shall be cancellable
except after twenty (20) days written notice to Landlord and Landlord's
lender. Tenant shall furnish Landlord with renewals or "binders" of any such
policy at least ten (10) days prior to the expiration thereof. Tenant agrees
that if Tenant does not take out and maintain such insurance, Landlord may
(but shall not be required to) procure said insurance on Tenant's behalf and
charge the Tenant the premiums together with a twenty-five percent (25%)
handling charge, payable upon demand Tenant shall have the right to provide
such insurance coverage pursuant to blanket policies obtained by the Tenant,
provided such blanket policies expressly afford coverage to the Premises,
Landlord, Landlord's mortgagee and Tenant as required by this Lease.
b. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect policies of casualty insurance covering (i)
all Leasehold Improvements (including any alterations, additions or
improvements as may be made by Tenant pursuant to the provisions of Article
12 hereof), and (ii) trade fixtures, merchandise and other personal property
from time to time in, on or about the Premises, in an amount not less than
<PAGE>
one hundred percent (100%) of their actual replacement cost from time to
time, providing protection against any peril included within the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage, vandalism and malicious mischief The proceeds of such
insurance shall be used for the repair or replacement of the property so
insured. Upon termination of this Lease following a casualty as set forth
herein, the proceeds under (i) shall be paid to Landlord, and the proceeds
under (ii) above shall be paid to Tenant.
c. Beginning on the date Tenant is given access to the Premises for any
purpose and continuing until expiration of the Term, Tenant shall procure,
pay for and maintain in effect workers' compensation insurance as required by
law and comprehensive public liability and property damage insurance with
respect to the Construction of improvements on the Premises, the use,
operation or condition of the Premises and the operations of Tenant in, on or
about the Premises, providing personal injury and broad form property damage
coverage for not less than One Million Dollars ($1,000,000.00) combined
single limit for bodily injury, death and property damage liability.
d. Not less than every three (3) years during the Term, Landlord and Tenant
shall mutually agree ~ increases in all of Tenant's insurance policy limits
for all insurance to be carried by Tenant asset forth in this Article. In the
event Landlord and Tenant cannot mutually agree upon the amounts of said
Increases, then Tenant agrees that all insurance,,policy limits as set forth
in this Article shall be adjusted for increases in the cost of living in the
same manner as is set forth in Section 5.2 hereof for the adjustment of the
Base Rent.
<PAGE>
23. WAIVER OF SUBROGATION.
Landlord and Tenant each hereby waive all rights of recovery against the other
and against the officers, employees, agents and representatives of the other, on
account of loss by or damage to the waiving party of its property or the
property of others under its control, to the extent that such loss or damage is
insured against under any fire and extended co~rage insurance policy which
either may have in force at the time of the loss or damage. Tenant shall, upon
obtaining the policies of insurance required under this Lease, give notice to
its insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
24. SUBORDINATION AND ATTORNMENT.
Upon written request of Landlord, or any first mortgagee or first deed of trust
beneficiary of Landlord, or ground lessor of Landlord, Tenant shall, in writing,
subordinate its rights under this Lease to the lien of any first mortgage or
first deed of trust, or to the interest of any lease in which Landlord is
lessee, and to all advances made or hereafter to be made thereunder. However,
before signing any subordination agreement, Tenant shall have the right to
obtain from any lender or lessor or Landlord requesting such subordination, an
agreement in writing providing that, as long as Tenant is not in default
hereunder, this Lease shall remain in effect for the full Term The holder of any
security interest may, upon written notice to Tenant. elect to have this Lease
prior to its security interest regardless of the time of the granting or
recording of such security interest.
In the event of any foreclosure sale, transfer in lieu of foreclosure or
termination of the lease in which Landlord is lessee, Tenant shall attorn to the
purchaser, transferee or lessor as the case may be, and recognize that party as
Landlord under this Lease, provided such party acquires and accepts the Premises
subject to this Lease.
25. TENANT ESTOPPEL CERTIFICATES.
Within ten (10) days after written request from Landlord, Tenant shall execute
and deliver to Landlord or Landlord's designee, a written statement certifying
(a) that this Lease is unmodified and in full force and effect, or is in full
force and effect as modified and stating the modifications; (b) the amount of
Base Rent and the date to which Base Rent and additional rent have been paid in
advance; (c) the amount of any security deposited with Landlord; and (d) that
Landlord is not in default hereunder or, if Landlord is claimed to be in
default, stating the nature of any claimed default. Any such statement may be
relied upon by a purchaser, assignee or lender. Tenant's failure to execute and
deliver such statement within the time required shall at Landlord's election be
a default under this Lease and shall also be conclusive upon Tenant that: (1)
this Lease is in full force and effect and has not been modified except as
represented by Landlord; (2) there are no uncured defaults in Landlord's
performance and that Tenant has no right of offset, counterclaim or deduction
against Rent; and (3) not more than one month's Rent has been paid in advance.
26. TRANSFER OF LANDLORD'S INTEREST.
In the event of any sale or transfer by Landlord of the Premises, Building or
Project, and assignment of this Lease by Landlord, Landlord shall be and is
hereby entirely freed and relieved of any and all liability and obligations
contained in or derived from this Lease arising out of any, act, occurrence or
omission relating to the Premises, Building, Project or Lease occurring after
the consummation of such sale or transfer, providing the purchaser shall
expressly assume all of the covenants and obligations of Landlord under this
Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord
may transfer the security deposit or prepaid Rent to Landlord's successor and
upon such transfer, Landlord shall be relieved of any and all further liability
with respect thereto.
27. DEFAULT.
27.1. Tenant's Default. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Tenant:
a. If Tenant abandons or vacates the Premises; or
b. If Tenant fails to pay any Rent or any other charges required to be paid
by Tenant under this Lease and such failure continues for (5) days after such
payment is due and payable; or
c. If Tenant fails to promptly and fully perform any other covenant,
condition or agreement contained in this Lease and such failure continues for
thirty (30) days after written notice thereof from Landlord to Tenant; or
d. If a writ of attachment or execution is levied on this Lease or on any of
Tenant's Property: or
e. If Tenant makes a general assignment for the benefit of creditors, or
provides for an arrangement, composition, extension or adjustment with its
creditors; or
<PAGE>
f. If Tenant files a voluntary petition for relief or if a petition against
Tenant in a proceeding under the federal bankruptcy laws or other insolvency
laws is filed and not withdrawn or dismissed within forty-five (45) days
thereafter, of if under the provisions of any law providing for
reorganization or winding up of corporations, any court of competent
jurisdiction assumes jurisdiction, custody or control Or Tenant or any
substantial part of its property and such jurisdiction, custody or control
remains in force unrelinquished, unstayed or unterminated for a period of
forty-five (45) days; or
g. If in any proceeding or action in which Tenant is a party, a trustee,
receiver, agent or custodian is appointed to take charge of the Premises or
Tenant's Property (or has the authority to do so) for the purpose of
enforcing a lien against the Premises or Tenant's Property; or
h. If Tenant is a partnership or consists of more than one (1) person or
entity, if any partner of the partnership or other person or entity is
involved in any of the acts or event. described in subparagraphs d through g
above.
27.2. Remedies. In the event of Tenant's default hereunder, then in addition to
any other rights or remedies Landlord may have under the law, Landlord shall
have the right , at Landlords option, without further notice or demand of any
kind to do the following:
a. Terminate this Lease ans Tenant's right to possession of the Premises and
take possession thereof, and Tenant shall have no further claim to the
Premises or under this Lease: or
b. Continue this Lease in effect, reenter and occupy the Premises for the
account of Tenant, and collect any unpaid Rent or other charges which have or
thereafter become due and payable; or
c. Reenter the Premises under the provisions of subparagraph b, and
thereafter elect to terminate this Lease and Tenant's right to possession of
the Premises.
<PAGE>
If Landlord reenters the Premises under the provisions of subparagraphs b or c
above, Landlord shall not be deemed to have terminated this Lease or the
obligation of Tenant to pay any Rent or other charges thereafter accruing,
unless Landlord notifies Tenant in writing of Landlord's election to terminate
this Lease. In the event of any reentry or retaking of possession by Landlord,
Landlord shall have the right, but not the obligation, to remove all or any part
of Tenant's Property in the Premises and to place such property in storage at a
public warehouse at the expense and risk of Tenant. If Landlord elects to relet
the Premises for the account of Tenant, the rent received by Landlord from such
reletting shall be applied as follows: first, to the payment of any indebtedness
other than Rent due hereunder from Tenant to Landlord; second, to the payment of
any costs 'of such reletting; third, to the payment of the cost of any
alterations or repairs to the Premises: fourth to the payment of Rent due and
unpaid hereunder; and the balance, If any, shall be held by Landlord and applied
in payment of future Rent as it becomes due. If that portion of rent received
from the reletting which is applied against the Rent due hereunder is less than
the amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly
upon demand by Landlord. Such deficiency shall be calculated and paid monthly
Tenant shall also pay to Landlord, as soon as determined, any costs and expenses
incurred by Landlord in connection with such reletting or in making alterations
and repairs to the Premises, which are not covered by the rent received from the
reletting.
Should Landlord elect to terminate this Lease under the provisions of
subparagraph a or c above, Landlord may recover as damages from Tenant the
following:
1. Past Rent. The worth at the time of the award of any unpaid Rent which had
been earned at the time of termination: plus
2.Rent Prior to Award: The worth at the time of the award of the amount by
which the unpaid Rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided; plus
3. Rent After Award. The worth at the time of the award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of the rental loss that Tenant proves could be reasonably
avoided; plus
4. Proximately Caused Damages. Any other amount necessary to compensate
Landlord for all detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, but not limited to, any costs
or expenses (including attorneys' fees). incurred by Landlord in (a) retaking
possession of the Premises, (b) maintaining the Premises after Tenant's
default, (c) preparing the Premises for reletting to a new tenant, including
any repairs or alterations, and (d) reletting the Premises, including
broker's commissions.
"The worth at the time of the award" as used in subparagraphs 1 and 2 above, is
to be computed by allowing interest at the rate of ten percent (10%) per annum
"The "worth at the time of the award" as used in subparagraph 3 above, is to be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank situated nearest to the Premises at the time of the award plus one percent
(1%).
The waiver by Landlord of any breach of any term, covenant or condition of this
Lease shall not be deemed a waiver of such term. covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition.
Acceptance of Rent by Landlord subsequent to any, breach hereof shall not be
deemed a waiver of any preceding breach other than the failure to pay the
particular Rent so accepted, regardless of Landlord's knowledge of any breach at
the time of such acceptance of Rent. Landlord shall not be deemed to have waived
any term, covenant or condition unless Landlord gives Tenant written notice of
such waiver.
27.3 Landlord's Default. If Landlord fails to perform any covenant, condition or
agreement contained in this Lease within thirty (30) days after receipt of
written notice from Tenant specifying such default, or if such default cannot
reasonably be cured within thirty (30) days, if Landlord fails to commence to
cure within that thirty (30) day period, then Landlord shall be liable to Tenant
for any damages sustained by Tenant as a result of Landlord's breach; provided,
however, it is expressly understood and agreed that if Tenant obtains a money
judgment against Landlord resulting from any default or other claim arising
under this Lease, that judgment shall be satisfied only out of the rents,
issues, profits, and other income actually received on account of Landlord's
right, title and interest In the Premises, Building or Project, and no other
real, personal or mixed property of Landlord (or of any of the partners which
comprise Landlord, if any) wherever Situated, shall be subject 10 levy to
satisfy such judgment. If, after notice to Landlord of default, Landlord (or any
first mortgagee or first deed of trust beneficiary of Landlord) fails to cure
the default as provided herein, then Tenant shall have the right to cure that
default at Landlord's expense. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against any payments of Rent
or any other charges due and payable under this Lease except as otherwise
specifically provided herein.
<PAGE>
28. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any real estate broker
or agent in connection with this Lease or its negotiation except Broker and
Sales Agent. Tenant shall indemnify and hold Landlord harmless from any cost,
expense or liability (including costs of suit and reasonable attorneys' fees)
for any compensation, commission or fees claimed by any other real estate broker
or agent in connection with this Lease or its negotiation by reason of any act
of Tenant.
29. NOTICES.
All notices, approvals and demands permitted or required to be given under this
Lease shall be in writing and deemed duly served or given if personally
delivered or sent by certified or registered U.S. mail, postage prepaid, and
addressed as follows: (a) if to Landlord, to Landlord's Mailing Address and to
the Building manager, and (b) if to Tenant, to Tenant's Mailing Address;
provided, however, notices to Tenant shall be deemed duly served or given If
delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time
to time by notice to the other designate another place for receipt of future
notices.
30. GOVERNMENT ENERGY OR UTILITY CONTROLS.
In the event of imposition of federal, state or local government controls,
rules, regulations, or restrictions on the use or consumption of energy or other
utilities during the Term, both Landlord and Tenant shall be bound thereby. In
the event of a difference In interpretation by Landlord and Tenant of any such
controls, the interpretation of Landlord shall prevail, and Landlord shall have
the right to enforce compliance therewith, including the right of entry into the
Premises to effect compliance.
31. RELOCATION OF PREMISES.
Landlord shall have the right to relocate the Premises to another part of the
Building in accordance with the following:
<PAGE>
a. The new premises shall be substantially the same in size, dimensions,
configuration, decor and nature as the Premises described in this Lease, and
if the relocation occurs after the Commencement Date, shall be placed in that
condition by Landlord at its cost.
b. Landlord shall give Tenant at least thirty (30) days written notice of
Landlord's intention to relocate the Premise.
c. As nearly as practicable, the physical relocation of the Premises shalt
take place on a weekend and shall be completed before the following Monday.
If the physical relocation has not been completed in that time, Base Rent
shall abate in full from the time the physical relocation commences to the
time it is completed. Upon completion of such relocation, the new premises
shall become the "Premises" under this Lease.
d. All reasonable costs incurred by Tenant as a result of the relocation
shall be paid by Landlord.
e. If the new premises are smaller than the Premises as it existed before the
relocation, Base Rent shall be reduced proportionately.
f. The parties hereto shall immediately execute an amendment to this Lease
setting forth the relocation of the Premises and the reduction of Base Rent,
if any.
32. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of its obligations under this
Lease. shall peaceably and quietly enjoy the Premises, subject to the terms of
this Lease and to any mortgage, lease, or other agreement to which this Lease
may be subordinate
33. OBSERVANCE OF LAW.
Tenant shall not use the Premises or permit anything to be done in or about the
Premises which will in any way conflict with any law, statute, ordinance or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. Tenant shall, at its sole cost and expense, promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force, and with the
requirements of any board of fire insurance underwriters or other similar bodies
now or hereafter constituted, relating to, or affecting the condition, use or
occupancy of the Premises, excluding structural changes not related to or
affected by Tenant's improvements or acts. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against Tenant,
whether Landlord is a party thereto or not, that Tenant has violated any law,
ordinance or governmental rule, regulation or requirement, shall be conclusive
of that fact as between Landlord and Tenant.
34. FORCE MAJEURE.
Any prevention, delay or stoppage of work to be performed by Landlord or Tenant
which is due to strikes, labor disputes, inability to obtain labor; materials,
equipment or reasonable substitutes therefor, acts of God, governmental
restrictions or regulations or controls, judicial orders, enemy or hostile
government actions, civil commotion, fire or other casualty, or other causes
beyond the reasonable control of the party obligated to perform hereunder, shall
excuse performance of the work by that party for a period equal to the duration
of that prevention, delay or stoppage. Nothing in this Article 34 shall excuse
or delay Tenant's obligation to pay Rent or other charges under this Lease.
35. CURING TENANT'S DEFAULTS.
If Tenant defaults In the performance of any of its obligations under this
Lease, Landlord may (but shall not be obligated to) without waiving such
default, perform the same for the account at the expense of Tenant. Tenant shall
pay Landlord all costs of such performance promptly upon receipt of a bill
therefor.
36. SIGN CONTROL.
Tenant shall not affix, paint, erect or inscribe any sign, projection, awning,
signal or advertisement of any kind to any part of the Premises, Building or
Project, including without limitation, the inside or outside of windows or
doors, without the written consent of Landlord. Landlord shall have the right to
remove any signs or other matter, installed without Landlord's permission,
without being liable to Tenant by reason of such removal and to charge the cost
of removal to Tenant as additional rent hereunder, payable within ten (10) days
of written demand by Landlord.
37. MISCELLANEOUS.
a. Accord & Satisfaction; Allocation of Payments. No payment by Tenant or
receipt by Landlord of a lesser amount than the Rent provided for In this Lease
shall be deemed to be other than on account of the earliest due Rent, nor shall
any endorsement or statement on any check or letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
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balance of the Rent or pursue any other remedy provided for In this Lease. In
connection with the foregoing, Landlord shall have the absolute right in its
sole discretion to apply any payment received from Tenant to any account or
other payment of Tenant then not current and due or delinquent
b. Addenda. If any provision contained in an addendum to this Lease is
Inconsistent with any other provision herein, the provision contained In the
addendum shall control, unless otherwise provided in the addendum.
c. Attorney's fees. If any action or proceeding is brought by either party
against the other pertaining to or arising out of this Lease, the finally
prevailing party shall be entitled to recover all costs and expenses, including
reasonable attorneys' fees, incurred on account of such action or proceeding,
d. Captions Articles and Section Numbers. The captions appearing within the body
of this Lease have been inserted as a matter of convenience end for reference
only and In no way define, limit or enlarge the scope or meaning of this Lease.
All references to Article and Section numbers refer to Articles and Sections in
this Lease.
e. Changes Requested by Lender. Neither landlord nor lender shall unreasonably
withhold its consent to changes or amendments to this Lease requested by the
lender on Landlord's interest, so long as these changes do not alter the basic
business terms of this Lease or otherwise materially diminish any rights or
materially increase any obligations of the party from whom consent to such
charge or amendment is requested.
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f. Choice Of Law This Lease shall be construed and enforced in accordance with
the laws of the State.
g. Consent. Notwithstanding anything contained in this Lease to the contrary,
Tenant shall have no claim, and hereby waives the right to any claim against
Landlord for money damages by reason of any refusal, withholding or delaying by
Landlord of any consent, approval or statement of satisfaction, and in such
event, Tenant's only remedies therefor shall be an action for specific
performance, injunction or declaratory judgment to enforce any right to such
consent, etc.
h. Corporate Authority. If Tenant is a corporation, each individual signing this
Lease on behalf of Tenan: represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation, and that this Lease
is binding on Tenant in accordance with its terms. Tenant shall, at Landlord's
request, deliver a certified copy of a resolution of its board of directors
authorizing such execution.
i. Counterparts. This Lease may be executed in multiple counterparts, all of
which shall constitute one and the same Lease.
j. Execution of Lease; No Option. The submission of this Lease to Tenant shall
be for examination purposes only, and does not and shall not constitute a
reservation of or option for Tenant to lease, or otherwise create any interest
of Tenant in the Premises or any other premises within the Building or Project.
Execution of this Lease by Tenant and its return to Landlord shall not be
binding on Landlord notwithstanding any time interval, until Landlord has in
fact signed and delivered this Lease to Tenant.
k. Furnishing of Financial Statements; Tenant's Representations. In order to
induce Landlord to enter into This Lease Tenant agrees that it shall promptly
furnish Landlord, from time to time, upon Landlord's written request, with
financial statements reflecting Tenant's current financial condition. Tenant
represents and warrants that all financial statements, records and information
furnished by Tenant to Landlord in connection with this Lease are true, correct
and complete in all respects.
l. Further Assurances. The parties agree to promptly sign all documents
reasonably requested to give effect to the provisions of this Lease.
m. Mortgagee Protection. Tenant agrees to send by certified or registered mail
to any first mortgagee or first deed of trust beneficiary of Landlord whose
address has been furnished to Tenant, a copy of any notice of default served by
Tenant on Landlord. If Landlord fails to cure such default within the time
provided for in this Lease, such mortgagee or beneficiary shall have an
additional thirty (30) days to cure such default; provided that if such default
cannot reasonably be cured within that thirty (30) day period, then such
mortgagee or beneficiary shall have such additional time to cure the default as
is reasonably necessary under the circumstances.
n. Prior Agreements; Amendments. This Lease contains all of the agreements of
the parties with respect to any matter covered or mentioned in this Lease, and
no prior agreement or understanding pertaining to any such matter shall be
effective for any purpose. No provisions of this Lease may be amended or added
to except by an agreement in writing signed by the parties or their respective
successors in interest.
o. Recording. Tenant shall not record this Lease without the prior written
consent of Landlord. Tenant, upon the request of Landlord, shall execute and
acknowledge a "short form" memorandum of this Lease for recording purposes.
p. Severability. A final determination by a court of competent jurisdiction that
any provision of this Lease is invalid shall not affect the validity of any
other provision, and any provision so determined to be invalid shall, to the
extent possible, be construed to accomplish its intended effect.
q. Successors and Assigns. This Lease shall apply to and bind the heirs,
personal representatives, and permitted successors and assigns of the parties.
r. Time of the Essence. Time is of the essence of this Lease.
s. Waiver. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be
construed as a waiver of such default
The receipt and acceptance by Landlord of delinquent Rent shall not constitute a
waiver of any other default; it shall constitute only a waiver of timely payment
for the particular Rent payment involved. No act or conduct of Landlord,
including, without limitation, the acceptance of keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the Term. Only a written notice from Landlord to Tenant shall
constitute acceptance of the surrender of the Premises and accomplish a
termination of the Lease. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of the
Lease.
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The parties hereto have executed this Lease as of the dates set forth below.
Date: May 30, 1996 Date:
Landlord: Duffel Financial & Construction Co. Tenant: Newgold, Inc.
By: /s/ Ralph W. Riggins By: /s/ Arthur Scott Dockter
Title: Vice President Title: President
By:_________________________________ By:____________________
Title:________________________________ Title:___________________
<PAGE>
EXHIBIT 23
INDEPENDANT AUDITOR'S REPORT
We consent to the incorporation, by reference in the Annual Report on Form
10-KSB, of the financial statements of Warehouse Auto Centers, Inc. for each of
the two fiscal years ended January 31, 1996 and 1995.
Ciaccia & Catarisano, LLP
Certified Public Accountants
Rochester, New York
January 20, 1997
