<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
-----------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 2-2274
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ALTA GOLD CO.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 87-0259249
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 Whitney Ranch Drive, Suite 10, Henderson, Nevada 89014
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(Address of principal executive offices) (Zip Code)
(702) 433-8525
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
The number of shares outstanding of the registrant's common stock
as of November 2, 1998 was 33,441,308
<PAGE>
ALTA GOLD CO.
TABLE OF CONTENTS
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets as of
September 30, 1998 and December 31, 1997 3
Condensed Statements of Operations for the
Three Months Ended September 30, 1998 and 1997 5
Nine Months Ended September 30, 1998 and 1997 6
Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997 7
Notes to Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. Other Information
Item 2. Changes in Securities 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 20
EXHIBIT INDEX 21
2
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<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, December 31,
1998 1997
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 373,000 $ 3,330,000
Inventories 10,006,000 8,152,000
Prepaid expenses and other 466,000 157,000
------------- -------------
Total current assets 10,845,000 11,639,000
PROPERTY AND EQUIPMENT, net
Mining properties and claims 22,374,000 20,936,000
Buildings and equipment 28,736,000 17,697,000
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51,110,000 38,633,000
Less-accumulated depreciation (13,344,000) (11,705,000)
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Total property and equipment, net 37,766,000 26,928,000
DEFERRED MINE DEVELOPMENT COSTS, net 25,882,000 22,896,000
DEFERRED FINANCING COSTS 3,083,000 625,000
OTHER ASSETS 624,000 898,000
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Total Assets $ 78,200,000 $ 62,986,000
============= =============
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1998 1997
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<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,309,000 $ 829,000
Accrued liabilities 928,000 790,000
Current portion of long-term debt 5,128,000 7,482,000
------------- -------------
Total current liabilities 7,365,000 9,101,000
LONG-TERM DEBT, net of current portion 21,624,000 11,910,000
DEFERRED INCOME TAXES 662,000 662,000
OTHER LONG-TERM LIABILITIES 1,128,000 1,514,000
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Total liabilities 30,779,000 23,187,000
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STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; authorized
60,000,000 shares, issued 33,441,308 and
30,191,639 shares, respectively 33,000 30,000
Additional capital 53,058,000 46,615,000
Accumulated deficit (5,670,000) (6,846,000)
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Total stockholders' equity 47,421,000 39,799,000
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Total liabilities and stockholders' equity $ 78,200,000 $ 62,986,000
============= =============
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
4
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30,
---------------------------------
1998 1997
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<S> <C> <C>
REVENUE:
Sales of gold $ 5,237,000 $ 2,649,000
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OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation and
maintenance costs 3,987,000 1,636,000
General and administrative 327,000 323,000
Exploration 118,000 93,000
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4,432,000 2,052,000
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INCOME FROM OPERATIONS 805,000 597,000
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OTHER INCOME (EXPENSE):
Interest income and other 18,000 67,000
Loss on disposal of assets (127,000) -
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(109,000) 67,000
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INCOME BEFORE PROVISION FOR INCOME
TAXES 696,000 664,000
PROVISION FOR INCOME TAXES - -
------------- -------------
NET INCOME $ 696,000 $ 664,000
============= =============
NET INCOME PER SHARE:
Basic $ 0.02 $ 0.02
Diluted $ 0.02 $ 0.02
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 32,824,085 29,566,395
Diluted 35,466,474 34,409,424
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended September 30,
------------------------------------
1998 1997
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<S> <C> <C>
REVENUE:
Sales of gold $ 12,082,000 $ 8,498,000
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OPERATING COSTS AND EXPENSES:
Direct mining, production, reclamation and
maintenance costs 9,549,000 6,492,000
General and administrative 1,035,000 1,108,000
Exploration 234,000 180,000
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10,818,000 7,780,000
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INCOME FROM OPERATIONS 1,264,000 718,000
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OTHER INCOME (EXPENSE):
Interest income and other 80,000 185,000
Loss on disposal of assets (168,000) -
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(88,000) 185,000
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INCOME BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 1,176,000 903,000
PROVISION FOR INCOME TAXES - -
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INCOME BEFORE EXTRAORDINARY ITEM 1,176,000 903,000
EXTRAORDINARY ITEM:
Gain on extinguishment of debt - 784,000
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NET INCOME $ 1,176,000 $ 1,687,000
=============== ==============
EARNINGS PER SHARE:
INCOME BEFORE EXTRAORDINARY ITEM -
Basic $ 0.04 $ 0.03
Diluted $ 0.03 $ 0.03
NET INCOME -
Basic $ 0.04 $ 0.06
Diluted $ 0.03 $ 0.05
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 32,257,285 29,267,516
Diluted 35,738,870 33,164,099
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
6
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
--------------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,176,000 $ 1,687,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 2,734,000 1,624,000
Loss on disposal of assets 168,000 -
Gain on extinguishment of debt - (784,000)
Decrease (increase) in -
Inventories (1,854,000) (2,994,000)
Prepaid expenses and other (321,000) 375,000
Increase (decrease) in -
Accounts payable 480,000 (776,000)
Accrued and other liabilities 160,000 (171,000)
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Net cash provided by (used in) operating activities 2,543,000 (1,039,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (12,907,000) (3,388,000)
Additions to deferred mine development costs (2,568,000) (4,853,000)
Proceeds from disposal of assets 45,000 -
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Net cash used in investing activities (15,430,000) (8,241,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 21,465,000 18,274,000
Payments on debt (9,255,000) (6,083,000)
Financing costs (2,280,000) (929,000)
Proceeds from exercise of stock options - 185,000
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Net cash provided by financing activities 9,930,000 11,447,000
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,957,000) 2,167,000
CASH AND CASH EQUIVALENTS, beginning of period 3,330,000 518,000
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CASH AND CASH EQUIVALENTS, end of period $ 373,000 $ 2,685,000
============== ==============
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
7
<PAGE>
<TABLE>
<CAPTION>
ALTA GOLD CO.
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Nine Months Ended September 30,
-----------------------------------
1998 1997
-------------- ---------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest, net of amount capitalized $ - $ -
Cash paid during the period for income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Debt retired with common stock $ 4,850,000 $ 1,550,000
Interest capitalized on zero coupon debentures $ - $ 42,000
Imputed interest on convetible debentures $ - $ 1,111,000
</TABLE>
The accompanying notes to condensed financial statements are an
integral part of these statements.
8
<PAGE>
ALTA GOLD CO.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENT POLICIES AND DISCLOSURES
The interim, unaudited, condensed financial statements of
Alta Gold Co. (the "Company") included herein have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally required in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate
to make the information presented not misleading.
These interim, unaudited, condensed financial statements
should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September
30, 1998 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1998.
CASH AND CASH EQUIVALENTS
For purposes of the balance sheets and statements of cash
flows, the Company considers all investments with an original
maturity of three months or less to be cash equivalents.
RECLAMATION COSTS
Minimum standards for mine reclamation have been established
by various governmental agencies which affect certain operations
of the Company. The Company's general policy is to accrue
estimated reclamation costs during each property's productive
life based on estimated reserves using the units of production
method. As of September 30, 1998, and December 31, 1997, the
Company had reserved approximately $777,000 and $726,000,
respectively, for reclamation activities of which approximately
$27,000 is expected to be expended during the last three months
of 1998.
INCOME TAXES
No provision for income taxes was required in either 1998 or
1997 because of the utilization of net operating loss
carryforwards. As of September 30, 1998, the Company estimates
that it has approximately $29,806,000 in remaining net operating
loss carryforwards. These net operating loss carryforwards are
scheduled to expire during the period from 2005 to 2012.
EARNINGS PER SHARE
The Company follows the provisions of SFAS No. 128, EARNINGS
PER SHARE, which is required for financial statements issued for
periods ending after December 15, 1997, and requires restatement
of
9
<PAGE>
all prior-period earnings per share data presented. SFAS No. 128
replaces previously reported earnings per share with "basic"
earnings per share and "diluted" earnings per share. Basic
earnings per share is based on the weighted average number of
shares actually outstanding during the year. Diluted earnings
per share includes the potential dilution for the exercise of
stock options, warrants, and debt conversions.
NOTE 2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Precious metals:
Refined products $ 759,000 $ 865,000
In process 9,175,000 7,129,000
Consumable supplies 72,000 158,000
--------------- --------------
$ 10,006,000 $ 8,152,000
=============== ==============
</TABLE>
Inventories of in-process metals and consumable supplies are
valued at the lower of cost (using the first-in, first-out
method) or market. Inventories of refined products are valued at
market.
10
<PAGE>
NOTE 3. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Term loan with Standard Chartered Bank, Credit Agricole
Indosuez and Gerald Metals, Inc.; interest at LIBOR plus
2%; due December 31, 2001; principal payments payable in 11
equal quarterly installments, commencing June 30, 1999;
secured by a first priority mortgage lien on Olinghouse,
Griffon, Copper Flat and Kinsley $ 11,000,000 $ -
Revolving credit loan with Standard Chartered Bank, Credit
Agricole Indosuez and Gerald Metals, Inc.; interest at
LIBOR plus 2%; due October 31, 1999; secured by a first
priority mortgage lien on Olinghouse, Griffon, Copper Flat
and Kinsley 4,500,000 -
Credit facility with Gerald Metals, Inc. and BHF-Bank;
interest at LIBOR plus 2%; due March 31, 1999; principal
payments payable in 15 equal monthly installments,
commencing on January 31, 1998; secured by a first priority
mortgage lien on Kinsley and Griffon; paid in May 1998
- 8,500,000
Interim loan with U.S. Bancorp Leasing & Financial;
interest at prime plus 1%; converted into a 60-month
equipment loan on October 15, 1998; secured by equipment 3,320,000 -
Note payable; interest at 12% payable quarterly; due
January 2, 1999; secured by property 1,400,000 1,400,000
Convertible debentures; interest at 4% payable quarterly;
due April 14, 2000; unsecured 3,400,000 8,250,000
Notes payable; interest at various rates of 8.2% to 11.8%;
due at various dates between April 1999 and June 2002;
secured by equipment 3,132,000 1,242,000
--------------- ---------------
26,752,000 19,392,000
Less - current portion (5,128,000) (7,482,000)
--------------- ---------------
Total long-term debt $ 21,624,000 $ 11,910,000
--------------- ---------------
</TABLE>
11
<PAGE>
The convertible debentures may be converted into the
Company's common stock at a conversion price equal to the lesser
of (1) 90% of the average closing bid prices of the Company's
common stock for the five trading days preceding a notice of
conversion or (2) $4.00. The convertible debentures contain
certain covenants that impose restrictions on the ability of the
Company to, among other things, pay dividends on or repurchase
the Company's common stock. During the first nine months of
1998, $4,850,000 of the convertible debentures were converted
into 3,245,941 shares of the Company's common stock. From
September 30, 1998 through November 2, 1998, there were no
further conversions of the convertible debentures.
On April 16, 1998, the Company entered into an interim loan
and security agreement (the "Interim Loan") with U.S. Bancorp
Leasing & Financial. Under the terms of the Interim Loan, the
Company can borrow up to $4,708,000 for the purpose of financing
the construction of a crushing and conveyor system for
Olinghouse. The Interim Loan accrues interest at prime plus one
percent, with interest payable monthly. The Company has the
option of either paying off the Interim Loan or converting the
Interim Loan into an equipment loan. As of September 30, 1998,
the Company had borrowed $3,320,000 under the Interim Loan. On
October 15, 1998, the Company drew down the remaining facility
under the Interim Loan and converted the Interim Loan into a 60-
month equipment loan for $4,708,000, which bears interest at 7.6%
and is secured by the crushing and conveyor system at Olinghouse.
The Company entered into a $17,000,000 revolving credit and
term loan agreement (the "Revolving Credit and Term Loan") dated
as of April 30, 1998, with Standard Chartered Bank, Gerald
Metals, Inc. and Credit Agricole Indosuez. The Revolving Credit
and Term Loan carries an interest rate of LIBOR plus two percent,
payable monthly, and is comprised of two components, a $6,000,000
line of credit and a $11,000,000 term loan. The revolving line
of credit expires October 31, 1999. The term loan is to be
repaid in eleven equal quarterly installments beginning June 30,
1999. The Company used $6,800,000 of the Revolving Credit and
Term Loan to repay certain indebtedness to Gerald Metals, Inc.
and BHF-Bank Aktiengesellschaft. The remaining funds are being
used for (1) site development, construction and equipment for
Olinghouse, (2) working capital, and (3) the payment of certain
expenses. The Revolving Credit and Term Loan is secured by first
priority trust deeds on Olinghouse, Griffon, Kinsley and Copper
Flat, and a first priority security interest in all of the
Company's tangible and intangible personal property. Covenants
include restrictions on the ability of the Company to, among
other things, change the Company's corporate structure, pay
dividends on or repurchase the Company's common stock, and create
or suffer to exist any liens (other than permitted liens) on the
Company's assets or properties. In addition, the Company is
required to sell 100% of its gold production to Gerald Metals,
Inc. through April 30, 2003. All sales to Gerald Metals, Inc.
are made at the market price prevailing at the time of sale. As
of November 2, 1998, the Company had borrowed $16,000,000 under
the Revolving Credit and Term Loan.
12
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Section 21E of the Securities Exchange Act of 1934 provides
a "safe harbor" for forward-looking statements. Certain
information included herein contains statements that are forward-
looking, such as statements regarding management's expectations
about future production and development activities as well as
other capital spending, financing sources and the effects of
regulation. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not
limited to, those relating to the market price of metals,
production rates, production costs, the availability of
financing, the ability to obtain and maintain all of the permits
necessary to put and keep properties in production, development
and construction activities, dependence on existing management
and weather conditions. The Company cautions readers not to
place undue reliance on any such forward-looking statements, and
such statements speak only as of the date made.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997.
In the third quarter of 1998, the Company had $5,237,000 in
revenue from the sale of 15,600 ounces of gold at an average
price of $336/oz, as compared to $2,649,000 in revenue from the
sale of 7,900 ounces of gold at an average price of $335/oz in
the third quarter of 1997. In the third quarter of 1998, the
Company (1) mined 679,000 tons of ore at Griffon with an average
grade of 0.0301 oz/ton gold containing 20,470 ounces of gold, (2)
mined 118,000 tons of ore at Olinghouse with an average grade of
0.0262 oz/ton gold containing 3,082 ounces of gold, and (3)
produced 15,035 ounces of gold, including 12,901 ounces of gold
from Griffon at an average cash cost of $133/oz, 2,127 ounce of
gold from Kinsley at an average cash cost of $320/oz, and seven
ounces of gold from the initial shakedown run of the mill at
Olinghouse. In the third quarter of 1997, the Company mined
510,151 tons of ore at Kinsley with an average grade of 0.0398
oz/ton gold containing 20,329 ounces of gold and produced 11,001
ounces of gold from Kinsley at an average cash cost of $163/oz.
Mining at Griffon began in September 1997 and production of
refined gold began in January 1998. Mining began at Olinghouse
in July 1998 and production of refined gold began in September
1998. Mining at Kinsley was completed in early March 1998, with
gold production from heap leaching and pad rinsing expected to
continue in declining amounts through 2000. The decrease in gold
production at Kinsley from 11,001 ounces of gold in the third
quarter of 1997 to 2,127 ounces of gold in the third quarter of
1998 is due to the completion of mining at Kinsley in March 1998
and to the diminution of the size and the metallurgical quality
of the last two remaining ore bodies at Kinsley. The increase in
the average cash cost at Kinsley from $163/oz in the third
quarter of 1997 to $320/oz in the third quarter of 1998 is due to
the diminution of the size and the metallurgical quality of the
last two remaining ore bodies mined at Kinsley.
The increase in revenue from $2,649,000 in the third quarter
of 1997 to $5,237,000 in the third quarter of 1998 is due to the
initiation of gold production at Griffon in January 1998, as
partially offset by the decrease in production at Kinsley.
13
<PAGE>
Direct mining, production, reclamation and maintenance costs
increased from $1,636,000 in the third quarter of 1997 to
$3,987,000 in the third quarter of 1998 as the result of the
initiation of gold production at Griffon in January 1998 and the
higher cash cost of production at Kinsley in the third quarter of
1998, as partially offset by the completion of mining at Kinsley
in March 1998.
The increase in general and administrative expenses from
$323,000 in the third quarter of 1997 to $327,000 in the third
quarter of 1998 was de minimus.
The increase in exploration expense from $93,000 in the
third quarter of 1997 to $118,000 in the third quarter of 1998
was also de minimus.
Interest income and other decreased from $67,000 in the
third quarter of 1997 to $18,000 in the third quarter of 1998 as
a result of less funds being available for investment in the
third quarter of 1998.
In the third quarter of 1998, the Company realized a loss of
$127,000 from the disposal of unsalvageable equipment; there were
no such disposals in the third quarter of 1997.
No provision for income taxes was recognized in either the
third quarter of 1998 or the third quarter of 1997 because of the
utilization of net operating loss carryforwards. As of September
30, 1998, the Company estimates that it has approximately
$29,806,000 in remaining net operation loss carryforwards. These
net operating loss carryforwards are scheduled to expire during
the period 2005 to 2012.
COMPARISON OF THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997.
During the first nine months of 1998, the Company had
$12,082,000 in revenue from the sale of 36,000 ounces of gold at
an average price of $336/oz, as compared to $8,498,000 in revenue
from the sale of 24,790 ounces of gold at an average price of
$343/oz during the first nine months of 1997. During the first
nine months of 1998, the Company (1) mined 1,489,000 tons of ore
at Griffon with an average grade of 0.0321 oz/ton gold containing
47,775 ounces of gold, (2) mined 118,000 tons of ore at
Olinghouse with an average grade of 0.0262 oz/ton gold containing
3,082 ounces of gold, and (3) produced 35,652 ounces of gold,
including 27,581 ounces of gold from Griffon at an average cash
cost of $138/oz, 8,064 ounces of gold from Kinsley at an average
cash cost of $296/oz, and seven ounces of gold from the initial
shakedown run of the mill at Olinghouse. During the first nine
months of 1997, the Company mined 1,380,462 tons of ore at
Kinsley with an average grade of 0.0353 oz/ton gold containing
48,663 ounces of gold and produced 27,844 ounces of gold from
Kinsley at an average cash cost of $194/oz. Mining at Griffon
began in September 1997 and production of refined gold began in
January 1998. Mining began at Olinghouse in July 1998 and
production of refined gold began in September 1998. Mining at
Kinsley was completed in early March 1998, with gold production
from heap leaching and pad rinsing expected to continue in
declining amounts through 2000. The decrease in gold production
at Kinsley from 27,844 ounces of gold during the first nine
months of 1997 to 8,064 ounces of gold during the first nine
months of 1998 is due to the completion of mining at Kinsley in
March 1998 and to the diminution of the size and the
metallurgical quality of the last two remaining ore bodies at
Kinsley. The increase in the average cash cost at Kinsley from
$194/oz during the first nine months of 1997 to $296/oz during
the first nine months of 1998 is due to the diminution of the
size and the metallurgical quality of the last two remaining ore
bodies mined at Kinsley.
14
<PAGE>
The increase in revenue from $8,498,000 during the first
nine months of 1997 to $12,082,000 during the first nine months
of 1998 is due to the initiation of gold production at Griffon in
January 1998, as partially offset by the decrease in production
at Kinsley.
Direct mining, production, reclamation and maintenance costs
increased from $6,492,000 during the first nine months of 1997 to
$9,549,000 during the first nine months of 1998 as the result of
the initiation of gold production at Griffon in January 1998 and
the higher cash cost of production at Kinsley during the first
nine months of 1998, as partially offset by the completion of
mining at Kinsley in March 1998.
The decrease in general and administrative expenses from
$1,108,000 during the first nine months of 1997 to $1,035,000
during the first nine months of 1998 was de minimus.
The increase in exploration expense from $180,000 during the
first nine months of 1997 to $234,000 during the first nine
months of 1998 was also de minimus.
Interest income and other decreased from $185,000 during the
first nine months of 1997 to $80,000 during the first nine months
of 1998 as the result of less funds being available for
investment during the first nine months of 1998.
During the first nine months of 1998, the Company realized a
loss of $168,000 from the disposal of unsalvageable equipment;
there were no such disposals during the first nine months of
1997.
During the first nine months of 1997, the Company recorded
$784,000 as an extraordinary gain from the retirement of debt.
The gain resulted from the retirement of a $4,000,000 zero coupon
debenture due in 2008. The Company paid $750,000 in cash to
retire the debenture which had a net carrying value of $1,534,000
at the time of retirement.
No provision for income taxes was recognized during either
the first nine months of 1998 or the first nine months of 1997
because of the utilization of net operating loss carryforwards.
As of September 30, 1998, the Company estimates that it has
approximately $29,806,000 in remaining net operation loss
carryforwards. These net operating loss carryforwards are
scheduled to expire during the period 2005 to 2012.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had $3,480,000 in
working capital, as compared to $2,538,000 in working capital as
of December 31, 1997. The $942,000 increase in working capital
is primarily due to funds raised from debt financing and funds
generated from gold production at Griffon and Kinsley; the
increase was partially offset by funds used to (1) permit,
develop, construct and equip Olinghouse, (2) paydown outstanding
debt, and (3) continue the permitting of Copper Flat. The
Company believes that production from Griffon, Kinsley and
Olinghouse, which began producing gold in September 1998, and
further borrowings under the Interim Loan (defined below) and the
Revolving Credit and Term Loan (defined below) will provide
adequate liquidity for the Company's operational
15
<PAGE>
needs during the next twelve months. Additional financing will
be required to begin site development and construction at Copper
Flat.
INVESTING AND FINANCING ACTIVITIES
During the first nine months of 1998, the Company expended
(1) $12,907,000, primarily for site development, construction and
equipment at Olinghouse, and (2) $2,568,000 for the permitting
and development of Olinghouse and the permitting of Copper Flat.
During the same period, the Company (1) obtained $21,465,000 in
debt financing, (2) expended $2,280,000 for debt financing costs
and costs associated with a gold hedging program covering gold
production from January 1999 through September 2001, and (3)
retired $9,255,000 of debt.
On April 16, 1998, the Company entered into an interim loan
and security agreement (the "Interim Loan") with U.S. Bancorp
Leasing & Financial. Under the terms of the Interim Loan, the
Company can borrow up to $4,708,000 for the purpose of financing
the construction of a crushing and conveyor system for
Olinghouse. The Interim Loan accrues interest at prime plus one
percent, with interest payable monthly. The Company has the
option of either paying off the Interim Loan or converting the
Interim Loan into an equipment loan. As of September 30, 1998,
the Company had borrowed $3,320,000 under the Interim Loan. On
October 15, 1998, the Company drew down the remaining facility
under the Interim Loan and converted the Interim Loan into a 60-
month equipment loan for $4,708,000, which bears interest at 7.6%
and is secured by the crushing and conveyor system at Olinghouse.
The Company entered into a $17,000,000 revolving credit and
term loan agreement (the "Revolving Credit and Term Loan") dated
as of April 30, 1998, with Standard Chartered Bank, Gerald
Metals, Inc. and Credit Agricole Indosuez. The Revolving Credit
and Term Loan carries an interest rate of LIBOR plus two percent,
payable monthly, and is comprised of two components, a $6,000,000
line of credit and a $11,000,000 term loan. The line of credit
expires October 31, 1999. The term loan is to be repaid in
eleven equal installments beginning June 30, 1999. The Company
used $6,800,000 of the Revolving Credit and Term Loan to repay
certain indebtedness to Gerald Metals, Inc. and BHF-Bank
Aktiengesellschaft. The remaining funds are being used for (1)
site development, construction and equipment for Olinghouse, (2)
working capital, and (3) the payment of certain expenses. The
Revolving Credit and Term Loan is secured by first priority trust
deeds on Olinghouse, Griffon, Kinsley and Copper Flat, and a
first priority security interest in all of the Company's tangible
and intangible personal property. Covenants include restrictions
on the ability of the Company to, among other things, change the
Company's corporate structure, pay dividends on or repurchase the
Company's common stock, and create or suffer to exist any liens
(other than permitted liens) on the Company's assets or
properties. In addition, the Company is required to sell 100% of
its gold production to Gerald Metals, Inc. through April 30,
2003. All sales to Gerald Metals, Inc. are made at the market
price prevailing at the time of sale. As of November 2, 1998,
the Company had borrowed $16,000,000 under the Revolving Credit
and Term Loan.
In June 1998, the Company obtained $2,645,000 in additional
equipment financing, thereby completing the financing required to
put Olinghouse into production.
16
<PAGE>
OTHER
The approach of the year 2000 has become a potential problem
for businesses utilizing computers in their operations since many
computer programs are date sensitive and will only recognize the
last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). Management
has made a comprehensive assessment of the Company's exposure to
the Year 2000 Issue and what will be required to ensure that the
Company is Year 2000 compliant. The primary computer programs
utilized in the Company's operations and financial reporting
systems have been acquired from independent software vendors.
All of these vendors have been formally contacted to determine
whether their systems are Year 2000 compliant, and, if not,
timelines have been or will be established as to when the Company
will receive the required upgrades that assure that these systems
will be Year 2000 compliant. Maintenance or modification costs
associated with the Year 2000 Issue will be expensed as incurred,
while the cost of any new software will be capitalized and
amortized over the software's useful life. The Company does not
expect to incur costs in connection with the Year 2000 Issue that
would have a material impact on operations. Although the Company
presently believes that all of its software programs will be Year
2000 compliant, there can be no assurances that the Company will
not be adversely affected by the Year 2000 Issue.
OUTLOOK
On May 8, 1998, the Company received the final permit
necessary to begin site development and gold production at
Olinghouse. The property began producing gold in September 1998.
The Company estimates that $2,000,000 in additional expenditures
will be required to complete construction and start-up activities
at Olinghouse. No assurance can be given that the Company will
be able to produce gold at Olinghouse at the expected rate or
that the actual expenditures necessary to complete constructdion
and start-up activities at Olinghouse will not exceed the
estimated expenditures.
In addition to the funds necessary to put Olinghouse into
production, the Company has budgeted the following expenditures
for the fourth quarter of 1998: (1) $950,000 for debt
amortization, (2) $188,000 for permitting and holding costs,
principally for Copper Flat and Lookout Mountain, (3) $138,000
for exploration and (4) $27,000 for reclamation. These
expenditures are expected to be funded from (1) $1,500,000 of the
undrawn balance available under the Revolving Credit and Term
Loan, (2) $1,388,000 of the undrawn balance available under the
Interim Loan (see "Investing and Financing Activities" above),
and (3) funds from revenues generated from Griffon, Kinsley and,
Olinghouse. The Company believes that these funding sources will
provide adequate liquidity to meet the Company's estimated
expenditure requirements during the next twelve months.
Under the terms of the convertible debentures due April 14,
2000 (the "Debentures"), the Company must not issue more than
5,779,695 shares of its common stock in regard to the conversion
of all of the Debentures (the "Maximum Share Amount"), unless the
Company has obtained stockholder approval or a waiver by the
Nasdaq Stock Market. In lieu of any conversion of shares in
excess of the Maximum Share Amount, the Company must pay the
holders of the remaining outstanding Debentures 111% of the
remaining outstanding principal amount plus accrued and unpaid
interest (the "Penalty"). As of November 2, 1998, $6,600,000 of
the Debentures have been converted into 4,237,571 shares of the
Company's common stock. Based on a conversion price of $1.68
(90% of the average closing bid price of the Company's common
stock for the five trading days preceding
17
<PAGE>
November 2, 1998 or $1.87), the Company would be obligated to pay
the holders of the Debentures a total of $893,000 if the holders
were to convert all of the outstanding Debentures ($3,400,000 in
the aggregate principal amount as of November 2, 1998). The
amount payable to holders of the Debentures, if any, will
increase or decrease depending on the average closing bid price
of the Company's common stock. If the average closing bid price
of the Company's common stock were $2.45 or above, a conversion
of all the outstanding Debentures would not exceed the Maximum
Share Amount and no payment to holders in lieu of a conversion of
shares would be required. If a conversion of all or any of the
Debentures within the next 12 months should result in the
issuance of shares in excess of the Maximum Share Amount,
management believes that the Company will have sufficient funds
to pay the holders in lieu of a conversion of such shares or it
will request stockholder approval for the issuance of such
shares.
As of September 30, 1998, the Company had sold call options
for 11,250 ounces of gold with an exercise price of $390/oz,
expiring in various amounts during the period October 1998
through December 1998 and purchased (1) put options for 46,200
ounces of gold with an exercise price of $335/oz, expiring in
various amounts during the period October 1998 through February
1999 and (2) put options for 346,800 ounces of gold with an
exercise price of $280/oz, expiring in various amounts during the
period January 1999 through September 2001.
No assurance can be given that any of the Company's mining
projects will result in any significant contribution to the
Company's reserves, cash flow or earnings.
The Company's business is subject to various risk factors,
some of which are discussed in the Company's report on Form 10-K
for the year ended December 31, 1997, "Items 1. and 2. Business
and Properties - Risk Factors."
RECENTLY ISSUED ACCOUNTING STATEMENT
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (the
"Statement"). The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability
measured at its fair value. The Statement requires that changes
in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in
the income statement, and requires that a company must formally
document, designate, and assess effectiveness of transactions
that receive hedge accounting. The Statement is effective for
fiscal years beginning after June 15, 1999.
The Company does not believe that the Statement will have
any impact on the Company's financial statements.
18
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
As described in Part I, "Item 1. Financial Statements -
Notes to Condensed Financial Statements," Note 3, the Company is
subject to prohibitions against the payment of dividends and the
repurchase of common stock pursuant to the terms of Revolving
Credit and Term Loan.
On September 30, 1998, the Company issued the third and
final tranche of warrants to purchase 263,225 shares of the
Company's common stock at an exercise price of $2.325 and within
a five year exercise period. The warrants were issued to the
holders of the Debentures that were outstanding as of September
30, 1998, in accordance with the underlying master agreement
dated November 11, 1997. The warrants were issued pursuant to an
exemption from registration as set forth in Section 4(2) and
Regulation D of the Securities Act of 1933. For additional
information, see the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1997, Part II, "Item 5. Market
for Registrant's Common Equity and Related Stockholder Matters -
Other."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.01 Employment Agreement between Alta Gold Co.
and Joseph A. Pescio dated February 17, 1998
10.02 Employment Agreement between Alta Gold Co.
and Robert N. Pratt dated September 11, 1998
10.03 Employment Agreement between Alta Gold Co.
and John A. Bielun dated September 11, 1998
27.01 Financial Data Schedule
27.02 Restated Financial Data Schedule
(b) No reports were filed on Form 8-K during the three-
month period ended September 30, 1998.
19
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ALTA GOLD CO.
(Registrant)
Date: November 2, 1998 By: /s/ John A. Bielun
-------------------------------
John A. Bielun
Chief Financial Officer and
Chief Accounting Officer
(Duly authorized officer,
principal financial officer
and chief accounting
officer)
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------
<S> <C> <C>
10.01 Employment Agreement between Alta Gold Co. and 22
Joseph A. Pescio dated February 17, 1998
10.02 Employment Agreement between Alta Gold Co. and 31
Robert N. Pratt dated September 11, 1998
10.03 Employment Agreement between Alta Gold Co. and John 40
A. Bielun dated September 11, 1998
27.01 Financial Data Schedule 49
27.02 Restated Financial Data Schedule 51
</TABLE>
21
<PAGE>
EXHIBIT 10.01
22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as
of the 17th day of February, 1998, by and between Alta Gold Co. a
Nevada corporation ("Employer"), and Joseph A. Pescio
("Executive").
For and in consideration of the mutual covenants contained
herein and of the mutual benefits to be derived hereunder, the
parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Executive to
perform those duties generally described in this Agreement, and
Executive hereby accepts and agrees to such employment on the
terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence on
February 16, 1998, and end on February 15, 2001.
3. DUTIES. During the term of this Agreement, Executive
shall be employed by Employer and shall occupy the office of Vice
President - Operations. Executive agrees to serve in such
offices or positions with Employer or any subsidiary of Employer.
Executive shall devote substantially all of his working time
and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any
other substantial business activities which will significantly
interfere or conflict with the reasonable performance of his
duties hereunder.
4. COMPENSATION. For all services rendered by Executive,
Employer shall pay to Executive a salary of $103,000 per year
while serving as Vice President - Operations. All salary
payments shall be subject to withholding and other applicable
taxes. To compensate for cost of living increases, the rate of
salary shall be increased annually effective January 1, 1999, and
on each anniversary thereafter, as the Board of Directors, on the
recommendation of its compensation committee may determine or, in
the absense of such determination, in the amount of 7% over the
applicable salary rate during the preceding 12-month period. In
the event Executive resigns from his position with Employer and
not otherwise under the circumstances set forth at paragraphs 14
or 15 herein, compensation payments to Executive shall be limited
to compensation for services rendered by Executive.
<PAGE>
5. INCENTIVE COMPENSATION. Employer shall provide
Executive with incentive compensation in the form of cash and
stock bonuses not less often than once each year during the term
of this Agreement. The amount of such bonuses shall be
determined by the Board of Directors of Employer or a
compensation committee thereof taking into consideration the
relative contribution by Executive to the business of Employer,
the economy in general, and such other factors as the Board of
Directors or compensation committee deems relevant.
6. EMPLOYMENT BENEFITS. Employer shall provide health and
medical insurance for Executive in a form and program to be
chosen by Employer for its full-time employees. Executive shall
be entitled to participate in any retirement, pension, profit
sharing, or other plan approved by the Board of Directors.
7. WORKING FACILITIES. Employer shall provide to
Executive at Employer's principal executive offices suitable
executive offices and facilities appropriate for his position and
suitable for the performance of his responsibilities.
8. VACATIONS. Executive shall be entitled each year to
paid vacation of at least 5 weeks. Vacations shall be taken by
Executive at a time and with starting and ending dates mutually
convenient to Employer and Executive. Vacations or portions of
vacations not used in one employment year shall carry over to the
succeeding employment year, but shall thereafter expire if not
used within such succeeding year.
9. EXPENSES. Employer will reimburse Executive for
expenses incurred in connection with Employer's business,
including expenses for travel, lodging, meals, beverages,
entertainment, and other items upon Executive's periodic
presentation of an account of such expenses as required by
Employer's policies and procedures.
10. COVENANT NOT TO DISCLOSE PROPRIETARY INFORMATION. For
a period of three years after termination of Executive's
employment, Executive agrees that he will not directly or
indirectly use, employ, publish, or otherwise disclose any
procedures, policies, practices, trade secrets, computer
software, formulas, client opportunities, or other information of
a proprietary nature in the establishment, opening, or operation
of a business, or in connection with engaging in business with,
serving as an officer, director, employee or agent of, or owning
any equity interest (other than ownership of ten percent or less
of the outstanding stock of any corporation listed on the New
York or American Stock Exchange or included in the National
Association of Security Dealers Automated Quotation System) in
any person, firm, corporation, or business entity, that engages
in mining activities in the United States that are competitive
with Employer's mining activities. The parties intend that this
covenant not to disclose proprietary information shall be
construed as a series of separate covenants. If in any judicial
proceeding a court shall refuse to enforce any of the separate
covenants deemed included in this paragraph, then the
unenforceable covenants shall be deemed
2
<PAGE>
eliminated from these provisions for the purpose of those
proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
This covenant not to disclose proprietary information shall
not be construed as restricting the Executive's right to own
shares in any company or limited partnership or business entity,
provided they do not perform services, or participate in any way
in the management of, a business entity which competes in any
manner outlined above.
This covenant shall survive the termination of this
Agreement.
11. NONDISCLOSURE OF INFORMATION. In further consideration
of employment and the continuation of employment by Employer,
Executive will not, directly or indirectly, during or after the
term of employment disclose to any person not authorized by
Employer to receive or use such information, except for the sole
benefit of Employer, any of Employer's confidential or
proprietary data, information, or techniques, or give to any
person not authorized by Employer to receive it any information
that is not generally known to anyone other than Employer or that
is designated by Employer as "Limited", "Private", or
"Confidential", or similarly designated.
12. DISABILITY. If Executive is unable to perform his
services by reason of illness or incapacity for a period of more
than 9 consecutive months, the compensation thereafter payable to
him during the second consecutive 9-month period shall be one-
half of the compensation provided for in paragraph 4 hereof, and
during the third consecutive 9-month period, one-fourth of the
salary provided for in paragraph 4; PROVIDED, however, that no
such compensation shall be payable after the termination of this
Agreement. During such 27-consecutive-month period, Executive
shall be entitled to receive incentive compensation in the same
proportion as Executive's incentive compensation to his annual
salary set forth in paragraph 4 paid to Executive, if any, for
the fiscal year last preceding the date such illness of
incapacity commenced. Notwithstanding the foregoing, if such
illness or incapacity does not cease to exist within such 27-
consecutive-month period, Executive shall not be entitled to
receive any further compensation nor any payments set forth in
paragraph 14 herein from Employer and Employer may thereupon
terminate this Agreement.
13. TERMINATION FOR CAUSE. Except as set forth in the
foregoing paragraph, Employer may not terminate this Agreement
during its term without cause ("Cause"). Employer, however, may
terminate this Agreement for Cause by showing that Executive has
materially breached its terms; that Executive, in the
determination of the Board of Directors has been grossly
negligent in the performance of his duties; that he has
substantially failed to meet written standards established by
Employer for the performance of his duties; or that he has
engaged in material willful or gross misconduct in the
performance of his duties
3
<PAGE>
hereunder. If Employer terminates this Agreement for Cause, all
of Employer's obligations hereunder shall terminate.
14. PAYMENTS FOR TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Agreement without Cause and not as
the direct result of a change in control, as that phrase is
defined in paragraph 17 hereof, Executive shall be compensated by
Employer in a single lump sum payment, payable within 30 days
after termination of employment, of the following amounts:
(a) The amount of his salary as provided in paragraph
4; and
(b) Incentive compensation in the same proportion as
Executive's incentive compensation to his annual salary set
forth in paragraph 4, paid to Executive, if any, for the
fiscal year last preceding the year during which his
employment terminates, but prorated to reflect the number of
full months of his employment during the year of
termination.
(c) The remaining amount of his Signing Bonus. In
addition, Executive's coverage under the Employer's insured
employee benefit plan, as provided in paragraph 6, shall
continue through the term of this Agreement.
15. TERMINATION PAYMENT FOR CHANGE IN CONTROL. If
Executive resigns or is discharged by Employer (or is deemed to
be discharged pursuant to paragraph 17 below) as the direct and
sole result of a change in control, or in reasonable anticipation
of a change in control, then, in lieu of any payment otherwise
paid or payable to Executive under paragraph 14 hereof, Employer
shall pay to Executive an amount equal to 2.9 times the average
of the sum of amounts payable to Executive for salary, bonus, and
profit sharing for the five fiscal years immediately preceding
the date of the change in control or for such fewer fiscal years
if Executive has been employed by Employer for less than five
fiscal years, plus the remaining amount of the Signing Bonus.
Any amounts paid to Executive pursuant to this paragraph 15,
shall be subject to any applicable federal, state, and local tax
withholdings and shall be payable in a lump sum to Executive as
soon as practicable after Executive's resignation or discharge,
but subject to the terms of paragraph 16 herein.
16. TAX LIMITATION. If Employer reasonably determines that
the payment provided for in paragraph 15 hereof (the "Termination
Payment") will likely result in a loss of a deduction to Employer
as provided under Section 280G of the Internal Revenue Code of
1986, or any successor provision thereto, and the imposition of
the excise tax payable to Executive as provided under Section
4999 to the Internal Revenue Code of 1986, or any successor
provision thereto, such Termination Payment shall be reduced by
the least amount required to avoid such loss of deduction and
imposition of excise tax (collectively referred to
4
<PAGE>
hereinafter as the "Tax Penalties"). Employer shall make no
Termination Payment to Executive prior to determining whether the
Tax Penalties will apply to the Termination Payment. Employer
shall make such determination within a reasonable time after
Executive's resignation or discharge, but not to exceed 30 days
thereafter.
17. DEEMED TERMINATION OF EMPLOYMENT. For purposes of
paragraph 15 hereof, Executive shall be deemed to have been
discharged by Employer if Executive voluntarily resigns before
the end of the term of this Agreement, but after a change in
control has occurred, provided the Executive could not be
discharged by Employer for Cause, has given Employer at least 30
days prior written notice of such resignation, and such
resignation occurs after any of the following:
(a) Executive is removed or released from any of his
titles, positions, or offices in effect immediately prior to
the occurrence of a change in control, or Executive's duties
and responsibilities in such titles, positions, or offices
are materially changed;
(b) Executive's base salary in effect immediately
before the change in control is reduced;
(c) Executive is removed from participation in any of
Employer's bonus or profit sharing programs, or any such
bonus or profit sharing programs in which Executive was or
was entitled to participate in immediately prior to the
change in control are discontinued;
(d) Executive's office is based more than 50 miles
from the location of the principal office at which Executive
was based immediately prior to the occurrence of the change
in control; or
(e) Employer deprives Executive of or otherwise
reduces any material fringe benefit, including perquisites,
provided to Executive by Employer immediately prior to the
occurrence of a change in control.
(f) Executive makes a determination in good faith that
as a result of the change in control and a change in
circumstances thereafter and since the date of this
Agreement significantly affecting his position, he is unable
to carry out the authorities, powers, functions or duties
attached to his position and the situation is not remedied
within 30 days after receipt by Employer of written notice
from the Executive of such determination.
5
<PAGE>
18. DEFINITION OF CHANGE IN CONTROL. For purposes of this
Agreement, a "change in control" will be deemed to have occurred
on the first to occur of the following events:
(a) As a result of a cash tender offer, stock exchange
offer or other takeover device, any person, as that term is
used in Section 13(d) and 14(b)(2) of the Securities
Exchange Act of 1934, is or becomes a beneficial owner,
directly or indirectly, of stock of Employer representing
thirty percent (30%) or more of the total voting power of
Employer's then outstanding securities;
(b) Any material realignment of the Board of Directors
of Employer or change in officers of Employer resulting from
a concerted shareholder action, including without limitation
a proxy flight, voting trusts or pooling arrangements;
(c) Any sale by Employer of thirty percent (30%) or
more of its assets to a single purchaser or to a group of
associated purchasers; or
(d) Any merger, consolidation, or other reorganization
of Employer with an entity, other than its affiliates,
whereby Employer is not the surviving entity or the
shareholders of Employer otherwise fail to retain
substantially the same direct or indirect ownership in
Employer or its affiliates immediately after any such
merger, consolidation, or reorganization.
19. DEATH DURING EMPLOYMENT. If Executive dies during the
term of this Agreement, Employer shall pay to the estate,
trustee, or other legally constituted third party designated by
Executive in six equal monthly installments commencing on the
first day of the month immediately following the month in which
Executive dies, an amount equal to one year's salary provided for
in paragraph 4 of this Agreement, and payment of incentive
compensation in the same proportion as Executive's incentive
compensation to his annual salary set forth in paragraph 4 paid
to Executive for the fiscal year last preceding the year in which
Executive dies, but prorated for the number of full months of his
employment during the year of his death.
20. NONTRANSFERABILITY. Neither Executive, his spouse, his
designated contingent beneficiary, nor their estates shall have
any right to anticipate, encumber, or dispose of any payment due
under this Agreement. Such payments and other rights are
expressly declared nonassignable and nontransferable except as
specifically provided herein.
21. INDEMNIFICATION. Employer shall indemnify executive
and hold him harmless from liability for acts or decisions made
by him while performing services for Employer to the greatest
extent permitted by applicable law. Employer shall use its best
efforts to obtain
6
<PAGE>
coverage for Executive under any insurance policy now in force or
hereafter obtained during the term of this Agreement insuring
officers and directors of Employer against such liability.
22. ASSIGNMENT. This Agreement may not be assigned by
either party without the prior written consent of the other
party.
23. ENTIRE AGREEMENT. This Agreement is and shall be
considered to be the only agreement or understanding between the
parties hereto and supersedes and is controlling over any and all
other prior existing agreements between the parties with respect
to the employment of Executive by Employer. All negotiations,
commitments, and understandings acceptable to both parties have
been incorporated herein. No letter, telegram, or communication
passing between the parties hereto covering any matter during
this contract period, or any plans or periods thereafter, shall
be deemed a part of this Agreement; nor shall it have the effect
of modifying or adding to this Agreement unless it is distinctly
stated in such letter, telegram, or communication that it is to
constitute a part of this Agreement and is to be attached as a
rider to this Agreement and is signed by the parties to this
Agreement.
24. ENFORCEMENT. Executive acknowledges that any remedy at
law for breach of paragraphs 10 and 11 would be inadequate,
acknowledges that Employer would be irreparably damaged by an
actual or threatened breach thereof, and agrees that Employer
shall be entitled to an injunction restraining Executive from any
actual or threatened breach of paragraphs 10 and 11 as well as
any further appropriate equitable relief without any bond or
other security being required. In addition to the foregoing,
each of the parties hereto shall be entitled to any remedies
available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party.
25. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the state of Nevada.
26. SEVERABILITY. If and to the extent that any court of
competent jurisdiction holds any provision or any part thereof of
this Agreement to be invalid or unenforceable, such holding shall
in no way affect the validity of the remainder of this Agreement.
27. WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition
of this Agreement or to exercise any right or remedy consequent
upon a breach hereof shall constitute a waiver of any such breach
or of any other covenant, agreement, term, or condition.
28. LITIGATION EXPENSES. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel
and/or incur other costs and expenses in connection with the
enforcement of any and all of his rights under this Agreement, he
shall be entitled to recover
7
<PAGE>
from the Employer reasonable attorney's fees, costs, and expenses
incurred by him in connection with the enforcement of said
rights. Payment shall be made to the Executive by the Employer
at the time these attorney's fees, costs, and expenses are
incurred by the Executive. If, however, the Executive does not
prevail in such enforcement actions, he shall repay any such
payments to the Employer.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: ALTA GOLD CO.
By: /s/ Robert N. Pratt
--------------------------
Robert N. Pratt
President, Chairman and
Chief Executive Officer
EXECUTIVE:
/s/ Joseph A. Pescio
--------------------------
Joseph A. Pescio
8
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EXHIBIT 10.02
31
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as
of the 11th day of September, 1998, by and between Alta Gold Co.
a Nevada corporation ("Employer"), and Robert N. Pratt
("Executive").
For and in consideration of the mutual covenants contained
herein and of the mutual benefits to be derived hereunder, the
parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Executive to
perform those duties generally described in this Agreement, and
Executive hereby accepts and agrees to such employment on the
terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence on
October 16, 1998, and end on October 15, 2001.
3. DUTIES. During the term of this Agreement, Executive
shall be employed by Employer and shall occupy the office of
President, Chairman and Chief Executive Officer. Executive
agrees to serve in such offices or positions with Employer or any
subsidiary of Employer. Executive agrees to continue to serve as
a member of the Board of Directors of Employer, and to serve as a
director of any subsidiary of Employer, for no additional
compensation subject to removal by the shareholders of Employer.
Executive shall devote substantially all of his working time
and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any
other substantial business activities which will significantly
interfere or conflict with the reasonable performance of his
duties hereunder. However, this shall not be construed as
preventing Executive from holding mining properties located in
eastern Nevada in which he has had an interest for many years.
4. COMPENSATION. For all services rendered by Executive,
Employer shall pay to Executive a salary of $267,500 per year
while serving as President, Chairman and Chief Executive Officer.
All salary payments shall be subject to withholding and other
applicable taxes. To compensate for cost of living increases,
the rate of salary shall be increased annually effective January
1, 1999, and on each anniversary thereafter, as the Board of
Directors, on the recommendation of its compensation committee
may determine or, in the absence of such determination, in the
amount of 7% over the applicable salary rate during the preceding
12-month period. In the event Executive resigns from his
position with Employer and not otherwise under the circumstances
set forth at paragraphs 14 or 15 herein, compensation payments to
Executive shall be limited to compensation for services rendered
by Executive.
<PAGE>
5. INCENTIVE COMPENSATION. Employer shall provide
Executive with incentive compensation in the form of cash and
stock bonuses not less often than once each year during the term
of this Agreement. The amount of such bonuses shall be
determined by the Board of Directors of Employer or a
compensation committee thereof taking into consideration the
relative contribution by Executive to the business of Employer,
the economy in general, and such other factors as the Board of
Directors or compensation committee deems relevant.
6. EMPLOYMENT BENEFITS. Employer shall provide health and
medical insurance for Executive in a form and program to be
chosen by Employer for its full-time employees. Executive shall
be entitled to participate in any retirement, pension, profit
sharing, or other plan approved by the Board of Directors.
7. WORKING FACILITIES. Employer shall provide to
Executive at Employer's principal executive offices suitable
executive offices and facilities appropriate for his position and
suitable for the performance of his responsibilities.
8. VACATIONS. Executive shall be entitled each year to
paid vacation of at least 5 weeks. Vacations shall be taken by
Executive at a time and with starting and ending dates mutually
convenient to Employer and Executive. Vacations or portions of
vacations not used in one employment year shall carry over to the
succeeding employment year, but shall thereafter expire if not
used within such succeeding year.
9. EXPENSES. Employer will reimburse Executive for
expenses incurred in connection with Employer's business,
including expenses for travel, lodging, meals, beverages,
entertainment, and other items upon Executive's periodic
presentation of an account of such expenses as required by
Employer's policies and procedures.
10. COVENANT NOT TO DISCLOSE PROPRIETARY INFORMATION. For
a period of three years after termination of Executive's
employment, Executive agrees that he will not directly or
indirectly use, employ, publish, or otherwise disclose any
procedures, policies, practices, trade secrets, computer
software, formulas, client opportunities, or other information of
a proprietary nature in the establishment, opening, or operation
of a business, or in connection with engaging in business with,
serving as an officer, director, employee or agent of, or owning
any equity interest (other than ownership of ten percent or less
of the outstanding stock of any corporation listed on the New
York or American Stock Exchange or included in the National
Association of Security Dealers Automated Quotation System) in
any person, firm, corporation, or business entity, that engages
in mining activities in the United States that are competitive
with Employer's mining activities. The parties intend that this
covenant not to disclose proprietary information shall be
construed as a series of separate covenants. If in any judicial
proceeding a court shall refuse to enforce any of the separate
covenants
2
<PAGE>
deemed included in this paragraph, then the unenforceable
covenants shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
This covenant not to disclose proprietary information shall
not be construed as restricting the Executive's right to own
shares in any company or limited partnership or business entity,
provided they do not perform services, or participate in any way
in the management of, a business entity which competes in any
manner outlined above.
This covenant shall survive the termination of this
Agreement.
11. NONDISCLOSURE OF INFORMATION. In further consideration
of employment and the continuation of employment by Employer,
Executive will not, directly or indirectly, during or after the
term of employment disclose to any person not authorized by
Employer to receive or use such information, except for the sole
benefit of Employer, any of Employer's confidential or
proprietary data, information, or techniques, or give to any
person not authorized by Employer to receive it any information
that is not generally known to anyone other than Employer or that
is designated by Employer as "Limited", "Private", or
"Confidential", or similarly designated.
12. DISABILITY. If Executive is unable to perform his
services by reason of illness or incapacity for a period of more
than 9 consecutive months, the compensation thereafter payable to
him during the second consecutive 9-month period shall be fifty
percent (50%) of the compensation provided for in paragraph 4
hereof, and during the third consecutive 9-month period, twenty-
five percent (25%) of the salary provided for in paragraph 4;
PROVIDED, however, that no such compensation shall be payable
after the termination of this Agreement. During such 27-
consecutive-month period, Executive shall be entitled to receive
incentive compensation in the same proportion as Executive's
incentive compensation to his annual salary set forth in
paragraph 4 paid to Executive, if any, for the fiscal year last
preceding the date such illness of incapacity commenced.
Notwithstanding the foregoing, if such illness or incapacity does
not cease to exist within such 27-consecutive-month period,
Executive shall not be entitled to receive any further
compensation nor any payments set forth in paragraph 14 herein
from Employer and Employer may thereupon terminate this
Agreement.
13. TERMINATION FOR CAUSE. Except as set forth in the
foregoing paragraph, Employer may not terminate this Agreement
during its term without cause ("Cause"). Employer, however, may
terminate this Agreement for Cause by showing that Executive has
materially breached its terms; that Executive, in the
determination of the Board of Directors has been grossly
negligent in the performance of his duties; that he has
substantially failed to meet written standards established by
Employer for the performance of his duties; or that he has
engaged in material willful or gross misconduct in the
performance of his duties
3
<PAGE>
hereunder. If Employer terminates this Agreement for Cause, all
of Employer's obligations hereunder shall terminate.
14. PAYMENTS FOR TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Agreement without Cause and not as
the direct result of a change in control, as that phrase is
defined in paragraph 17 hereof, Executive shall be compensated by
Employer in a single lump sum payment, payable within 30 days
after termination of employment, of the following amounts:
(a) The amount of one year's salary, at his then
current annual salary; and
(b) Incentive compensation, in the same proportion as
Executive's incentive compensation to his annual, as paid to
Executive, if any, for the fiscal year last preceding the
year during which his employment terminates, but prorated to
reflect the number of full months of his employment during
the year of termination.
(c) Executive's coverage under the Employer's insured
employee benefit plan, as provided in paragraph 6, shall
continue through the term of this Agreement.
15. TERMINATION PAYMENT FOR CHANGE IN CONTROL. If
Executive resigns or is discharged by Employer (or is deemed to
be discharged pursuant to paragraph 17 below) as the direct and
sole result of a change in control, then, in lieu of any payment
otherwise paid or payable to Executive under paragraph 14 hereof,
Employer shall pay to Executive an amount equal to 2.9 times the
average of the sum of amounts payable to Executive for salary,
bonus, and profit sharing for the five fiscal years immediately
preceding the date of the change in control or for such fewer
fiscal years if Executive has been employed by Employer for less
than five fiscal years, plus the remaining amount of the Signing
Bonus. Any amounts paid to Executive pursuant to this paragraph
15, shall be subject to any applicable federal, state, and local
tax withholdings and shall be payable in a lump sum to Executive
as soon as practicable after Executive's resignation or
discharge, but subject to the terms of paragraph 16 herein.
16. TAX LIMITATION. If Employer reasonably determines that
the payment provided for in paragraph 15 hereof (the "Termination
Payment") will likely result in a loss of a deduction to Employer
as provided under Section 280G of the Internal Revenue Code of
1986, or any successor provision thereto, and the imposition of
the excise tax payable to Executive as provided under Section
4999 to the Internal Revenue Code of 1986, or any successor
provision thereto, such Termination Payment shall be reduced by
the least amount required to avoid such loss of deduction and
imposition of excise tax (collectively referred to hereinafter as
the "Tax Penalties"). Employer shall make no Termination Payment
to Executive prior to determining whether the Tax Penalties will
apply to the Termination
4
<PAGE>
Payment. Employer shall make such determination within a
reasonable time after Executive's resignation or discharge, but
not to exceed 30 days thereafter.
17. DEEMED TERMINATION OF EMPLOYMENT. For purposes of
paragraph 15 hereof, Executive shall be deemed to have been
discharged by Employer if Executive voluntarily resigns before
the end of the term of this Agreement, but after a change in
control has occurred, provided the Executive could not be
discharged by Employer for Cause, has given Employer at least 30
days prior written notice of such resignation, and such
resignation occurs after any of the following:
(a) Executive is removed or released from any of his
titles, positions, or offices in effect immediately prior to
the occurrence of a change in control, or Executive's duties
and responsibilities in such titles, positions, or offices
are materially changed;
(b) Executive's base salary in effect immediately
before the change in control is reduced;
(c) Executive is removed from participation in any of
Employer's bonus or profit sharing programs, or any such
bonus or profit sharing programs in which Executive was or
was entitled to participate in immediately prior to the
change in control are discontinued;
(d) Executive's office is based more than 50 miles
from the location of the principal office at which Executive
was based immediately prior to the occurrence of the change
in control; or
(e) Employer deprives Executive of or otherwise
reduces any material fringe benefit, including perquisites,
provided to Executive by Employer immediately prior to the
occurrence of a change in control.
(f) Executive makes a determination in good faith that
as a result of the change in control and a change in
circumstances thereafter and since the date of this
Agreement significantly affecting his position, he is unable
to carry out the authorities, powers, functions or duties
attached to his position and the situation is not remedied
within 30 days after receipt by Employer of written notice
from the Executive of such determination.
18. DEFINITION OF CHANGE IN CONTROL. For purposes of this
Agreement, a "change in control" will be deemed to have occurred
on the first to occur of the following events:
5
<PAGE>
(a) As a result of a cash tender offer, stock exchange
offer or other takeover device, any person, as that term is
used in Section 13(d) and 14(b)(2) of the Securities
Exchange Act of 1934, is or becomes a beneficial owner,
directly or indirectly, of stock of Employer representing
thirty percent (30%) or more of the total voting power of
Employer's then outstanding securities;
(b) Any material realignment of the Board of Directors
of Employer or change in officers of Employer resulting from
a concerted shareholder action, including without limitation
a proxy flight, voting trusts or pooling arrangements;
(c) Any sale by Employer of thirty percent (30%) or
more of its assets to a single purchaser or to a group of
associated purchasers; or
(d) Any merger, consolidation, or other reorganization
of Employer with an entity, other than its affiliates,
whereby Employer is not the surviving entity or the
shareholders of Employer otherwise fail to retain
substantially the same direct or indirect ownership in
Employer or its affiliates immediately after any such
merger, consolidation, or reorganization.
19. DEATH DURING EMPLOYMENT. If Executive dies during the
term of this Agreement, Employer shall pay to the estate,
trustee, or other legally constituted third party designated by
Executive in six equal monthly installments commencing on the
first day of the month immediately following the month in which
Executive dies, an amount equal to one year's salary provided for
in paragraph 4 of this Agreement, and payment of incentive
compensation in the same proportion as Executive's incentive
compensation to his annual salary set forth in paragraph 4 paid
to Executive for the fiscal year last preceding the year in which
Executive dies, but prorated for the number of full months of his
employment during the year of his death.
20. NONTRANSFERABILITY. Neither Executive, his spouse, his
designated contingent beneficiary, nor their estates shall have
any right to anticipate, encumber, or dispose of any payment due
under this Agreement. Such payments and other rights are
expressly declared nonassignable and nontransferable except as
specifically provided herein.
21. INDEMNIFICATION. Employer shall indemnify executive
and hold him harmless from liability for acts or decisions made
by him while performing services for Employer to the greatest
extent permitted by applicable law. Employer shall use its best
efforts to obtain coverage for Executive under any insurance
policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against
such liability.
6
<PAGE>
22. ASSIGNMENT. This Agreement may not be assigned by
either party without the prior written consent of the other
party.
23. ENTIRE AGREEMENT. This Agreement is and shall be
considered to be the only agreement or understanding between the
parties hereto and supersedes and is controlling over any and all
other prior existing agreements between the parties with respect
to the employment of Executive by Employer. All negotiations,
commitments, and understandings acceptable to both parties have
been incorporated herein. No letter, telegram, or communication
passing between the parties hereto covering any matter during
this contract period, or any plans or periods thereafter, shall
be deemed a part of this Agreement; nor shall it have the effect
of modifying or adding to this Agreement unless it is distinctly
stated in such letter, telegram, or communication that it is to
constitute a part of this Agreement and is to be attached as a
rider to this Agreement and is signed by the parties to this
Agreement.
24. ENFORCEMENT. Executive acknowledges that any remedy at
law for breach of paragraphs 10 and 11 would be inadequate,
acknowledges that Employer would be irreparably damaged by an
actual or threatened breach thereof, and agrees that Employer
shall be entitled to an injunction restraining Executive from any
actual or threatened breach of paragraphs 10 and 11 as well as
any further appropriate equitable relief without any bond or
other security being required. In addition to the foregoing,
each of the parties hereto shall be entitled to any remedies
available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party.
25. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the state of Nevada.
26. SEVERABILITY. If and to the extent that any court of
competent jurisdiction holds any provision or any part thereof of
this Agreement to be invalid or unenforceable, such holding shall
in no way affect the validity of the remainder of this Agreement.
27. WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition
of this Agreement or to exercise any right or remedy consequent
upon a breach hereof shall constitute a waiver of any such breach
or of any other covenant, agreement, term, or condition.
28. ARBITRATION. Any dispute or claim arising out of or
related to this Agreement, or the rights or obligations of the
parties here to, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. Any such
arbitration shall be before a single arbitrator to be chosen on
the mutual agreement of both parties. Should the parties be
unable to agree, then an arbitrator will be appointed by the
American Arbitration
7
<PAGE>
Association. The arbitrator shall assess fees and costs as he
deems appropriate. All arbitration hearings shall be held in
Henderson, Nevada.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: ALTA GOLD CO.
By: /s/
------------------------------------
Compensation Committee Chairman
EXECUTIVE:
/s/ Robert N. Pratt
------------------------------------
Robert N. Pratt
8
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EXHIBIT 10.03
40
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as
of the 11th day of September, 1998, by and between Alta Gold Co.
a Nevada corporation ("Employer"), and John A. Bielun
("Executive").
For and in consideration of the mutual covenants contained
herein and of the mutual benefits to be derived hereunder, the
parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Executive to
perform those duties generally described in this Agreement, and
Executive hereby accepts and agrees to such employment on the
terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence on
October 16, 1998, and end on October 15, 2001.
3. DUTIES. During the term of this Agreement, Executive
shall be employed by Employer and shall occupy the office of
Senior Vice President and Chief Financial Officer. Executive
agrees to serve in such offices or positions with Employer or any
subsidiary of Employer.
Executive shall devote substantially all of his working time
and efforts to the business of Employer and its subsidiaries and
shall not during the term of this Agreement be engaged in any
other substantial business activities which will significantly
interfere or conflict with the reasonable performance of his
duties hereunder.
4. COMPENSATION. For all services rendered by Executive,
Employer shall pay to Executive a salary of $166,239 per year
plus a $350 per month car allowance while serving as Senior Vice
President and Chief Financial Officer. All salary payments shall
be subject to withholding and other applicable taxes. To
compensate for cost of living increases, the rate of salary shall
be increased annually effective January 1, 1996, and on each
anniversary thereafter, as the Board of Directors, on the
recommendation of its compensation committee may determine or, in
the absense of such determination, in the amount of 7% over the
applicable salary rate during the preceding 12-month period. In
the event Executive resigns from his position with Employer and
not otherwise under the circumstances set forth at paragraphs 15
or 16 herein, compensation payments to Executive shall be limited
to compensation for services rendered by Executive.
<PAGE>
5. INCENTIVE COMPENSATION. Employer shall provide
Executive with incentive compensation in the form of cash and
stock bonuses not less often than once each year during the term
of this Agreement. The amount of such bonuses shall be
determined by the Board of Directors of Employer or a
compensation committee thereof taking into consideration the
relative contribution by Executive to the business of Employer,
the economy in general, and such other factors as the Board of
Directors or compensation committee deems relevant.
6. EMPLOYMENT BENEFITS. Employer shall provide health and
medical insurance for Executive in a form and program to be
chosen by Employer for its full-time employees. Executive shall
be entitled to participate in any retirement, pension, profit
sharing, or other plan approved by the Board of Directors.
7. WORKING FACILITIES. Employer shall provide to
Executive at Employer's principal executive offices suitable
executive offices and facilities appropriate for his position and
suitable for the performance of his responsibilities.
8. VACATIONS. Executive shall be entitled each year to
paid vacation of at least 5 weeks. Vacations shall be taken by
Executive at a time and with starting and ending dates mutually
convenient to Employer and Executive. Vacations or portions of
vacations not used in one employment year shall carry over to the
succeeding employment year, but shall thereafter expire if not
used within such succeeding year.
9. EXPENSES. Employer will reimburse Executive for
expenses incurred in connection with Employer's business,
including expenses for travel, lodging, meals, beverages,
entertainment, and other items upon Executive's periodic
presentation of an account of such expenses as required by
Employer's policies and procedures.
10. COVENANT NOT TO DISCLOSE PROPRIETARY INFORMATION. For
a period of three years after termination of Executive's
employment, Executive agrees that he will not directly or
indirectly use, employ, publish, or otherwise disclose any
procedures, policies, practices, trade secrets, computer
software, formulas, client opportunities, or other information of
a proprietary nature in the establishment, opening, or operation
of a business, or in connection with engaging in business with,
serving as an officer, director, employee or agent of, or owning
any equity interest (other than ownership of ten percent or less
of the outstanding stock of any corporation listed on the New
York or American Stock Exchange or included in the National
Association of Security Dealers Automated Quotation System) in
any person, firm, corporation, or business entity, that engages
in mining activities in the United States that are competitive
with Employer's mining activities. The parties intend that this
covenant not to disclose proprietary information shall be
construed as a series of separate covenants. If in any judicial
proceeding a court shall refuse to enforce any of the separate
covenants
2
<PAGE>
deemed included in this paragraph, then the unenforceable
covenants shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
This covenant not to disclose proprietary information shall
not be construed as restricting the Executive's right to own
shares in any company or limited partnership or business entity,
provided they do not perform services, or participate in any way
in the management of, a business entity which competes in any
manner outlined above.
This covenant shall survive the termination of this
Agreement.
11. NONDISCLOSURE OF INFORMATION. In further consideration
of employment and the continuation of employment by Employer,
Executive will not, directly or indirectly, during or after the
term of employment disclose to any person not authorized by
Employer to receive or use such information, except for the sole
benefit of Employer, any of Employer's confidential or
proprietary data, information, or techniques, or give to any
person not authorized by Employer to receive it any information
that is not generally known to anyone other than Employer or that
is designated by Employer as "Limited", "Private", or
"Confidential", or similarly designated.
12. DISABILITY. If Executive is unable to perform his
services by reason of illness or incapacity for a period of more
than 9 consecutive months, the compensation thereafter payable to
him during the second consecutive 9-month period shall be fifty
percent (50%) of the compensation provided for in paragraph 4
hereof, and during the third consecutive 9-month period, twenty-
five percent (25%) of the salary provided for in paragraph 4;
PROVIDED, however, that no such compensation shall be payable
after the termination of this Agreement. During such 27-
consecutive-month period, Executive shall be entitled to receive
incentive compensation in the same proportion as Executive's
incentive compensation to his annual salary set forth in
paragraph 4 paid to Executive, if any, for the fiscal year last
preceding the date such illness of incapacity commenced.
Notwithstanding the foregoing, if such illness or incapacity does
not cease to exist within such 27-consecutive-month period,
Executive shall not be entitled to receive any further
compensation nor any payments set forth in paragraph 14 herein
from Employer and Employer may thereupon terminate this
Agreement.
13. TERMINATION FOR CAUSE. Except as set forth in the
foregoing paragraph, Employer may not terminate this Agreement
during its term without cause ("Cause"). Employer, however, may
terminate this Agreement for Cause by showing that Executive has
materially breached its terms; that Executive, in the
determination of the Board of Directors has been grossly
negligent in the performance of his duties; that he has
substantially failed to meet written standards established by
Employer for the performance of his duties; or that he has
engaged in material willful or gross misconduct in the
performance of his duties
3
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hereunder. If Employer terminates this Agreement for Cause, all
of Employer's obligations hereunder shall terminate.
14. PAYMENTS FOR TERMINATION WITHOUT CAUSE. In the event
that Employer terminates this Agreement without Cause or Robert
N. Pratt ceases to hold positions as Chairman, President and
Chief Executive Officer, and not as the direct result of a change
in control, as that phrase is defined in paragraph 17 hereof, and
the Executive is unable to carry out the duties, functions,
powers or authorities of this position due to conflicts with Mr.
Pratt's replacement, and the situation cannot be cured within 60
- - days, then the Executive can petition the Board of Directors
for a hearing. Should the Board of Directors not concur with the
Executives petition he can then pursue the remedies set forth in
paragraph 28. Upon concurrence by the Board of Directors the
executive shall be compensated by Employer in a single lump sum
payment within 30 days after termination of employment, of the
following amounts:
(a) The amount of one years salary, at his then
current annual salary; and
(b) Incentive compensation, in the same proportion as
Executive's incentive compensation to his annual salary as
paid to Executive, if any, for the fiscal year last
preceding the year during which his employment terminates,
but prorated to reflect the number of full months of his
employment during the year of termination.
(c) Executive's coverage under the Employer's insured
employee benefit plan, as provided in paragraph 6, shall
continue through the term of this Agreement.
15. TERMINATION PAYMENT FOR CHANGE IN CONTROL. If
Executive resigns or is discharged by Employer (or is deemed to
be discharged pursuant to paragraph 17 below) as the direct and
sole result of a change in control, then, in lieu of any payment
otherwise paid or payable to Executive under paragraph 14 hereof,
Employer shall pay to Executive an amount equal to 2.9 times the
average of the sum of amounts payable to Executive for salary,
bonus, and profit sharing for the five fiscal years immediately
preceding the date of the change in control or for such fewer
fiscal years if Executive has been employed by Employer for less
than five fiscal years, plus the remaining amount of the Signing
Bonus. Any amounts paid to Executive pursuant to this paragraph
15, shall be subject to any applicable federal, state, and local
tax withholdings and shall be payable in a lump sum to Executive
as soon as practicable after Executive's resignation or
discharge, but subject to the terms of paragraph 16 herein.
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16. TAX LIMITATION. If Employer reasonably determines that
the payment provided for in paragraph 15 hereof (the "Termination
Payment") will likely result in a loss of a deduction to Employer
as provided under Section 280G of the Internal Revenue Code of
1986, or any successor provision thereto, and the imposition of
the excise tax payable to Executive as provided under Section
4999 to the Internal Revenue Code of 1986, or any successor
provision thereto, such Termination Payment shall be reduced by
the least amount required to avoid such loss of deduction and
imposition of excise tax (collectively referred to hereinafter as
the "Tax Penalties"). Employer shall make no Termination Payment
to Executive prior to determining whether the Tax Penalties will
apply to the Termination Payment. Employer shall make such
determination within a reasonable time after Executive's
resignation or discharge, but not to exceed 30 days thereafter.
17. DEEMED TERMINATION OF EMPLOYMENT. For purposes of
paragraph 15 hereof, Executive shall be deemed to have been
discharged by Employer if Executive voluntarily resigns before
the end of the term of this Agreement, but after a change in
control has occurred, provided the Executive could not be
discharged by Employer for Cause, has given Employer at least 30
days prior written notice of such resignation, and such
resignation occurs after any of the following:
(a) Executive is removed or released from any of his
titles, positions, or offices in effect immediately prior to
the occurrence of a change in control, or Executive's duties
and responsibilities in such titles, positions, or offices
are materially changed;
(b) Executive's base salary in effect immediately
before the change in control is reduced;
(c) Executive is removed from participation in any of
Employer's bonus or profit sharing programs, or any such
bonus or profit sharing programs in which Executive was or
was entitled to participate in immediately prior to the
change in control are discontinued;
(d) Executive's office is based more than 50 miles
from the location of the principal office at which Executive
was based immediately prior to the occurrence of the change
in control; or
(e) Employer deprives Executive of or otherwise
reduces any material fringe benefit, including perquisites,
provided to Executive by Employer immediately prior to the
occurrence of a change in control.
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(f) Executive makes a determination in good faith that as a
result of the change in control and a change in circumstances
thereafter and since the date of this Agreement significantly
affecting his position, he is unable to carry out the
authorities, powers, functions or duties attached to his position
and the situation is not remedied within 30 days after receipt by
Employer of written notice from the Executive of such
determination.
18. DEFINITION OF CHANGE IN CONTROL. For purposes of this
Agreement, a "change in control" will be deemed to have occurred
on the first to occur of the following events:
(a) As a result of a cash tender offer, stock exchange
offer or other takeover device, any person, as that term is
used in Section 13(d) and 14(b)(2) of the Securities
Exchange Act of 1934, is or becomes a beneficial owner,
directly or indirectly, of stock of Employer representing
thirty percent (30%) or more of the total voting power of
Employer's then outstanding securities;
(b) Any material realignment of the Board of Directors
of Employer or change in officers of Employer resulting from
a concerted shareholder action, including without limitation
a proxy flight, voting trusts or pooling arrangements;
(c) Any sale by Employer of thirty percent (30%) or
more of its assets to a single purchaser or to a group of
associated purchasers; or
(d) Any merger, consolidation, or other reorganization
of Employer with an entity, other than its affiliates,
whereby Employer is not the surviving entity or the
shareholders of Employer otherwise fail to retain
substantially the same direct or indirect ownership in
Employer or its affiliates immediately after any such
merger, consolidation, or reorganization.
19. DEATH DURING EMPLOYMENT. If Executive dies during the
term of this Agreement, Employer shall pay to the estate,
trustee, or other legally constituted third party designated by
Executive in six equal monthly installments commencing on the
first day of the month immediately following the month in which
Executive dies, an amount equal to one year's salary provided for
in paragraph 4 of this Agreement, and payment of incentive
compensation in the same proportion as Executive's incentive
compensation to his annual salary set forth in paragraph 4 paid
to Executive for the fiscal year last preceding the year in which
Executive dies, but prorated for the number of full months of his
employment during the year of his death.
6
<PAGE>
20. NONTRANSFERABILITY. Neither Executive, his spouse, his
designated contingent beneficiary, nor their estates shall have
any right to anticipate, encumber, or dispose of any payment due
under this Agreement. Such payments and other rights are
expressly declared nonassignable and nontransferable except as
specifically provided herein.
21. INDEMNIFICATION. Employer shall indemnify executive
and hold him harmless from liability for acts or decisions made
by him while performing services for Employer to the greatest
extent permitted by applicable law. Employer shall use its best
efforts to obtain coverage for Executive under any insurance
policy now in force or hereafter obtained during the term of this
Agreement insuring officers and directors of Employer against
such liability.
22. ASSIGNMENT. This Agreement may not be assigned by
either party without the prior written consent of the other
party.
23. ENTIRE AGREEMENT. This Agreement is and shall be
considered to be the only agreement or understanding between the
parties hereto and supersedes and is controlling over any and all
other prior existing agreements between the parties with respect
to the employment of Executive by Employer. All negotiations,
commitments, and understandings acceptable to both parties have
been incorporated herein. No letter, telegram, or communication
passing between the parties hereto covering any matter during
this contract period, or any plans or periods thereafter, shall
be deemed a part of this Agreement; nor shall it have the effect
of modifying or adding to this Agreement unless it is distinctly
stated in such letter, telegram, or communication that it is to
constitute a part of this Agreement and is to be attached as a
rider to this Agreement and is signed by the parties to this
Agreement.
24. ENFORCEMENT. Executive acknowledges that any remedy at
law for breach of paragraphs 10 and 11 would be inadequate,
acknowledges that Employer would be irreparably damaged by an
actual or threatened breach thereof, and agrees that Employer
shall be entitled to an injunction restraining Executive from any
actual or threatened breach of paragraphs 10 and 11 as well as
any further appropriate equitable relief without any bond or
other security being required. In addition to the foregoing,
each of the parties hereto shall be entitled to any remedies
available in equity or by statute with respect to the breach of
the terms of this Agreement by the other party.
25. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the state of Nevada.
26. SEVERABILITY. If and to the extent that any court of
competent jurisdiction holds any provision or any part thereof of
this Agreement to be invalid or unenforceable, such holding shall
in no way affect the validity of the remainder of this Agreement.
7
<PAGE>
27. WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition
of this Agreement or to exercise any right or remedy consequent
upon a breach hereof shall constitute a waiver of any such breach
or of any other covenant, agreement, term, or condition.
28. ARBITRATION. Any dispute or claim arising out of or
related to this Agreement, or the rights or obligations of the
parties here to, shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. Any such
arbitration shall be before a single arbitrator to be chosen on
the mutual agreement of both parties. Should the parties be
unable to agree, then an arbitrator will be appointed by the
American Arbitration Association. The arbitrator shall assess
fees and costs as he deems appropriate. All arbitration hearings
shall be held in Henderson, Nevada.
AGREED AND ENTERED INTO as of the date first above written.
EMPLOYER: ALTA GOLD CO.
By: /s/ Robert N. Pratt
------------------------
Robert N. Pratt
President, Chairman and
Chief Executive Officer
EXECUTIVE:
/s/ John A. Bielun
-------------------------
John A. Bielun
8
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