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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission File Number 033-07773-A
FREMONT GOLD CORPORATION
(Exact name of small business issuer in its charter)
Delaware 65-0110447
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
777 Hornby Street, Suite 2000, Vancouver, British Columbia, Canada V6Z 1S4
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE (604) 682-4606
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 []
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended December 31, 1996 were
$15,730.
The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the average of the bid and asked prices of the
registrant's common stock, par value $.001 (the "Common Stock"), as reported by
the registrant's market makers on March 25, 1997, was approximately $4,814,632.
Shares of voting stock held by each officer and director and by each person who
owns 5% or more of the outstanding voting stock have been excluded in that such
persons may be deemed affiliates. This determination of affiliate status is not
necessarily conclusive.
There were 6,060,000 shares of the registrant's Common Stock, par value
$.001 per share, issued and outstanding on March 25, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format
Yes [ ] No [X]
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TABLE OF CONTENTS
Page
PART I ................................................................... 2
ITEM 1. DESCRIPTION OF BUSINESS ................................ 2
ITEM 2. DESCRIPTION OF PROPERTY ................................ 19
ITEM 3. LEGAL PROCEEDINGS ...................................... 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .... 19
PART II .................................................................. 19
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS ................................................ 19
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION .............................................. 21
ITEM 7. FINANCIAL STATEMENTS ................................... 22
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .................... 40
PART III ................................................................. 40
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT .................................................... 40
ITEM 10. EXECUTIVE COMPENSATION ................................. 42
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT ............................................. 45
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ......... 48
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ....................... 50
SIGNATURES ............................................................... 52
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
CURRENT OPERATIONS.
Fremont Gold Corporation (the "Company"), is engaged in the
acquisition, exploration and development of mineral properties, primarily gold
and copper properties located in Latin America. Through the Company's officers'
and directors' extensive mineral exploration experience and Latin American
knowledge and contacts, the Company is continuously assessing new opportunities
for the acquisition of properties with the potential of significant gold and
copper reserves. Although the Company is currently in negotiations to acquire,
and/or is assessing the advisability of entering into negotiations to acquire,
several mineral properties, the Company has no present commitments or agreements
with respect to any property acquisitions other than those discussed below.
The Company's principal mineral property interests consist of mining
concessions located on three exploration properties in Chile. The Resguardo
Property, the Cenizas Property and the Santa Eloisa Property mining concessions
are currently held through existing leases, purchase options and applications
for mining concessions filed by the Company. See "Business of The Company
- --Mineral Exploration Properties." The Company's mineral property interests are
held by a Chilean operating company, Minera Fremont Gold Chile, S.A., a Chilean
corporation ("MFG"), of which Flagship Holding Ltd., a Barbados corporation and
a wholly owned subsidiary of the Company ("FHL"), owns 99% of the issued and
outstanding shares of common stock. Unless otherwise indicated, the term
"Company" means collectively Fremont Gold Corporation, FHL and MFG.
The Resguardo Property covers an area of 15,417 hectares (38,095 acres)
along 19 kilometers of the highly productive Atacama Fault System in Region III
of northern Chile. The property, at an altitude of 1,000 meters, is on the same
structural trend and about 10 kilometers south of the Mantoverde Mine operated
by the Anglo-American Company. The property is accessible by paved and well
maintained dirt roads and is approximately a 20 kilometer drive from the coastal
town of Chanoval, and approximately 100 kilometers from Copiapo, a town with a
population of about 150,000. Recent geochemical sampling and diamond drill
results completed by the Company and the Company's inspection of a series of
small surface mine workings has indicated gold mineralization at Resguardo
Property along a zone which appears to be at least 5 kilometers long and open to
the north and south ends. The Company's interest in the property is held by MFG
and consists of i) a 99 year lease of mining concessions on 3,417 hectares and
ii) applications for mining concessions on 12,000 hectares to be held directly
by MFG. Pursuant to Chilean mining concession application procedures, the
Company, upon filing its application for an exploration mining concession, has
the right to conduct exploration activities on such property. See "Item 1.
Description of Business -- Chile -- Mining Concessions." The Company expects the
application process to be completed, and the exploration concessions granted to
MFG, in the third quarter of 1997. See "Item 1. Description of Business--Mineral
Exploration Properties--Resguardo Property".
The Cenizas Property covers an area of approximately 5,700 hectares
(14,250 acres), on the West Fissure Fault, a regional geological structure that
controls much of the known gold and copper mineralization in northern Chile.
Located midway between, and on the same structural trend as, the major copper
deposits of La Escondida and El Salvador, the property is 20 kilometers south of
the Guanaco gold mine operated by Amax Gold, Inc. The property is in Region II
of northern Chile at an altitude of approximately 3,000 meters in the southern
Atacama desert and is easily reached in a three hour drive from the coastal town
of Taltal. Gold mineralization, first discovered in the area by RTZ Mining and
Exploration Limited ("RTZ") with a regional geochemical survey, occurs on the
property in Tertiary volcanics and diorite intrusives. Subsequent work by RTZ
consisted of geophysical surveys, trenching, numerous short rotary drill holes
to define gold mineralization under shallow gravel cover and the drilling of 23
reverse-circulation drill holes. Results of this work have shown highly
anomalous to ore grade gold mineralization in trenches and drill holes in
several areas on the property. See "Item 1. Description of Business--Mineral
Exploration Properties--Cenizas Property."
The Santa Eloisa Property covers approximately 4,700 hectares (11,600
acres) in the Maricunga Gold Mining District located in Region II of northern
Chile. The geological setting of the Santa Eloisa Property is similar to that of
several large porphyry style gold deposits that have been discovered in the
Maricunga District over the past several years. The property is at an altitude
of between 4,200 and 5,300 meters and can be reached in about a five hour drive,
along mostly dirt roads, from the nearby town of Copiapo. The Company has an
option to acquire a 50% interest in the mining
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concessions on the Santa Eloisa Property by making payments totaling $500,000 to
the mining concession owners and completing $1,000,000 of exploration work on
the property before March 31, 1999. After the Company has satisfied its payment
and exploration commitments, and if the mining concession owners do not
contribute on a proportionate basis to further exploration and feasibility
expenses, the Company can increase its ownership interest to 75% by funding and
completing a feasibility study. The Company's interest in the Santa Eloisa
Property is held by MFG. See "Item 1. Description of Business--Mineral
Exploration Properties--Santa Eloisa Property."
The Company publishes its consolidated financial statements in U.S.
dollars. It is anticipated, however, that because the location of the Company's
executive offices is in Canada and the Company's primary operation is in Chile,
significant portions of the Company's revenues, when and if earned, and expenses
may be collected and paid in Canadian dollars or Chilean pesos. Transactions
recorded in currencies other than U.S. dollars will be translated (I) income and
expense items will be translated at the weighted average exchange rate
prevailing during the period, (ii) monetary assets and liabilities will be
translated at the rates prevailing at the balance sheet date and (iii)
non-monetary assets and liabilities will be translated at historical rates. All
references to "$" herein are to United States currency and all monetary amounts
are presented in U.S. dollars.
BACKGROUND AND CAPITAL STRUCTURE.
The Company was incorporated under the laws of the State of Florida as
Tri-Way Industries, Inc. on June 27, 1986, for the purpose of seeking,
investigating and acquiring business opportunities. The Company did not engage
in any meaningful operations until on or about November 22, 1989, when the
Company acquired The Rothchild Group, Inc. ("Rothchild Group") as its wholly
owned subsidiary. Following the acquisition, the Company changed its name to The
Rothchild Companies, Inc.
From November of 1989 until mid-1993, the Company, through the
Rothchild Group, operated as a full service advertising agency engaged in the
advertising, marketing and public relations businesses. On October 20, 1993,
however, the Rothchild Group filed for bankruptcy protection under Chapter 7 of
the United States Bankruptcy Code in the Bankruptcy Court for the Southern
District of Florida. After the Chapter 7 liquidation of the Rothchild Group, the
Company did not engage in any meaningful business or commercial activities. None
of the Company's current officers and directors were affiliated with the Company
until 1996.
On July 12, 1994, an investment group ("Investment Group") completed
the purchase of an aggregate of 315,598 shares of the Company's Common Stock
representing, at that time, approximately 60% of the Company's issued and
outstanding Common Stock. In addition, the Investment Group provided sufficient
funds in the form of loans to ensure the Company's viability and permit the
Company to pursue possible business combinations, mergers or similar
transactions. These loans were subsequently converted into 419,656 shares of
Common Stock of the Company on December 30, 1994.
On April 8, 1996, via a merger into a corporation formed for that
purpose, the Company completed the transfer of its state of incorporation from
Florida to Delaware. Accordingly, the Company is now a Delaware corporation.
On April 15, 1996, the board of directors of the Company and holders of
a majority of the outstanding Common Stock of the Company authorized a
one-for-twenty (1-for-20) reverse split of the Company's Common Stock, pursuant
to which each 20 shares of the Company's Common Stock outstanding immediately
prior to April 30, 1996 were converted into one share of the Company's Common
Stock. In connection with the reverse split, the Company maintained the par
value of its Common Stock at $.001 per share, and the total number of shares of
Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock herein have been adjusted retroactively to reflect this
reverse split.
On June 4, 1996, Laminco Resources, Inc., a British Columbia
corporation engaged in the business of mineral exploration and development
("Laminco"), in a privately negotiated transaction, purchased 600,000 shares of
the Company's Common Stock (representing 60% of the Company's issued and
outstanding Common Stock as of the date of the acquisition) from the Investment
Group. In connection with the completion of this share acquisition by Laminco,
all of the members of Company's board of directors and all of the Company's
officers resigned and were replaced and
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the Company implemented a new business plan discussed above under "Current
Operations." The Company's current president and chief executive officer,
Michael J. Hopley, was appointed at this time.
On July 25, 1996, the Board of Directors of the Company and holders of
a majority of the outstanding shares of the Common Stock of the Company,
authorized the Company, by written consent, to take a series of actions. These
actions included: i) changing the Company's name to Fremont Gold Corporation to
better reflect the proposed business of the Company, ii) approval of an Amended
and Restated Certificate of Incorporation, iii) approval and adoption of a Stock
Option Plan to allow the Company to attract and retain the best available
personnel for positions of responsibility within the Company and to provide
additional incentive to employees of the Company in order to promote the success
of the Company's business; and iv) making certain management and director
changes and forming the Company's Compensation and Audit Committees.
On July 30, 1996 the Company completed a private placement of 1,000,000
shares of Common Stock at an offering price of $.20 aggregating $200,000 in
proceeds to the Company. Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, a director and chief
financial officer of the Company and David Shaw, a director of the Company,
purchased 154,000, 73,310 and 138,603 shares, respectively, of the Company's
Common Stock in the private placement. See "Item 12. Certain Relationships and
Related Transactions."
On July 30, 1996 the Company completed a private placement of 500,000
shares of its Common Stock to Laminco in consideration of $140,000.
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company.
These shares of FHL common stock were acquired directly from the FHL
shareholders in exchange for 3,560,000 newly issued shares of the Company's
Common Stock. Upon completion of the share exchange, the Company directly owned
all of the issued and outstanding shares of FHL's common stock. Michael J.
Hopley, a director, president and chief executive officer of the Company, Edward
M. Topham, director, chief financial officer, secretary and treasurer of the
Company, and David Shaw, a director of the Company, received 418,000, 256,000
and 372,000 shares, respectively, of the Company's Common Stock in the exchange.
These interests in FHL were disclosed to the members of the Company's board and
the acquisition of FHL was approved by the holders of a majority of the issued
and outstanding Common Stock of the Company. See "Item 12. Certain Relationships
and Related Transactions."
On August 21, 1996, the Company commenced an offering of $1,800,000
principal amount of its 10.5% Series A Convertible Notes (the "Series A Notes").
In December 1996, the Company completed the offering of Series A Notes and
accepted subscriptions aggregating a total of $1,800,000 in principal. Each
Series A Note is convertible, at the option of the Series A Note Holder, into
Units at any time after the Issue Date (as defined in the Series A Note) prior
to the close of business on the maturity date at the rate of $.50 of principal
per Unit. Each Unit is composed of one share of Common Stock and one Redeemable
Common Stock Purchase Warrant (each a "Warrant," and together the "Warrants").
Each Warrant is exercisable to purchase one share of Common Stock at a price per
share equal to the greater of $1.50 or 75% of the ten day average closing
prices, as quoted on the OTC-BB, immediately preceding the notice of exercise.
The Warrants to be issued as a component of the Units will be redeemable by the
Company at any time after issuance, upon 15 days written notice to the Warrant
holders, at a redemption price of $.10 per Warrant. The holders of the Series A
Notes, if any, issued Units upon conversion without an effective Registration
Statement under the Securities Act of 1933, as amended ("Act"), covering such
Units, the Common Stock included in the Units, and the Common Stock underlying
the Warrants included in the Units, shall have the right, at any time, to join
with the Company to register the Units, the Common Stock and Warrants included
in the Units, and the Common Stock underlying the Warrants in any Registration
Statement under the Act filed by the Company. Each purchaser of the Series A
Notes has entered into a Voluntary Stock Pooling Agreement ("Pooling Agreement")
which limits transfer of the Shares of Common Stock included in the Units. See
"Item 5. Market for Common Equity and Related Stockholder Matters--Voluntary
Stock Pooling Agreements."
On December 31, 1996, Laminco, pursuant to a Share Purchase and Sale
Agreement, sold 2,597,000 of the Company's Common Stock, representing all of the
shares of the Company's Common Stock beneficially owned by Laminco (other than
400,000 shares underlying a warrant to purchase Common Stock previously issued
to Laminco). Each of the purchasers of these shares entered into a Stockholders
Agreement with the Company, the terms of which restrict the transferability of
the shares purchased until December 20, 1997.
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On February 27, 1997, the Company amended the terms and conditions of
the Series A Notes. The Company extended the expiration date of the Warrant to
be included in the Units from April 15, 1997 to September 30, 1997. The Company
has requested that the Series A Note holders extend the maturity date of the
Series A Notes from March 1, 1997 to June 30, 1997. As of March 31, 1997, 80% of
the Series A Note holders, representing 89% of the outstanding principal balance
of the Series A Notes, have delivered an executed Maturity Date Extension
Agreements to the Company. The Company is in default of the remaining Series A
Notes. In the event that the remaining Series A Note holders do not agree to the
maturity date extension, these Series A Note holders may pursue remedies under
their Series A Notes, in accordance with certain terms and conditions including
earning default interest at the rate of 16% per annum. The principal amount of
Series A Notes in default is $198,000. The Company believes that the remaining
Series A Note holders will agree to the maturity date extension.
On April 1, 1997, the Company borrowed $650,000 from an unaffiliated
lender ("Lender") pursuant to a promissory note ("Bridge Note"). The Bridge Note
provides for an interest rate of 12% (per annum) and is due on July 31, 1997.
The Bridge Note is secured by a pledge agreement ("Pledge Agreement"). Under the
terms of the Pledge Agreement, Michael J. Hopley, a director, president and
chief executive officer of the Company, Edward M. Topham, a director, chief
financial officer, secretary and treasurer of the Company and David Shaw, a
director of the Company, pledged, in the aggregate, 1,088,412 shares of Common
Stock of the Company owned by them to the Lender as security for the Bridge
Note. The Company also issued the Lender a warrant to purchase 650,000 shares of
the Company's Common Stock for a period of two years at a price of $1.50 per
share. In connection with this transaction the Company granted an unaffiliated
individual a loan acquisition fee consisting of a warrant to purchase 85,000
shares of the Company's Common Stock for a period of two years at a price of
$1.50 per share. In consideration of pledging their Common Stock as security to
facilitate this loan, the Company has agreed to issue Messrs. Hopley, Topham and
Shaw an aggregate of 75,000 shares of the Company's Common Stock.
The Company's registered office and headquarters is 777 Hornby Street,
Suite 2000, Vancouver, British Columbia V6Z 1S4, its telephone number is
604-682-4606. While its headquarters are in Vancouver, the Company has
established an office in Santiago, Chile from which its Chilean exploration
activities are directed.
CHILE.
Currently, all of the Company's mineral exploration properties are
located in Chile. The following information has been compiled by the Company
from governmental and private publications, and advice of the Company's Chilean
counsel.
General Information -- Chile is located on the west coast of South
America and extends 4,720 kilometers along the Pacific Ocean from the
continent's southernmost tip to its northern border with Peru. To the east, it
is bordered by Bolivia and Argentina. The country is divided into 12 regions and
a metropolitan area and covers 756,946 square kilometers. The population is
approximately 13.8 million, with over 5 million people residing in the
metropolitan area of Santiago. The official language of Chile is Spanish.
Governmental Organization -- Chile has a presidential system of
government with a bicameral legislature consisting of the Senate and the Chamber
of Deputies. The president is elected directly by the electorate for a term of
six years. The Senate consists of 36 elected and nine appointed senators. Of the
nine appointees, three are selected by the president, two by the Supreme Court,
and one by each of the four Armed Forces. Senators serve for eight years. The
Chamber of Deputies consists of 120 members who serve for four years.
The governmental system is based on the Constitution adopted during the
rule of General Augusto Pinochet. After General Pinochet failed to secure a
further eight-year term as President in a plebiscite held in October 1988,
constitutional reforms were negotiated and then adopted in July 1989. The
reforms received the support of all significant political parties. Under these
reforms, the number of elected Senators was increased from 24 to 36, thereby
diluting the power of the nine appointed Senators. Other reforms included the
reduction of the president's term of office from eight to four years (later
increased to six), increased civilian representation on the National Security
Council and the simplification of amending procedures for the Constitution. The
Constitution was subsequently amended in 1991 to provide for the first election
of municipal councilors and mayors.
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General Pinochet's term of office ended March 1990 upon the
inauguration of Mr. Patricio Aylwin who had been elected in December 1989 by
capturing 55% of the vote. Mr. Aylwin was a member of the Christian Democrats
and the candidate of the centre-left coalition, the Democratic Coalition. Mr.
Eduardo Frei was elected president in the December 1993 election. Mr. Frei is
also a member of the Christian Democrats and was the chosen candidate of the
Democratic Coalition. The next nationwide congressional election is scheduled
for December 1997.
Currency -- The official monetary unit of Chile is the peso. The
average 1995 nominal exchange rate was 396.5 pesos to the U.S. dollar and the
comparable 1994 rate was 420.1 pesos to the U.S. dollar. On January 1, 1997, the
exchange rate was approximately 425.6 pesos to the U.S. dollar. The exchange
rate for the peso is determined by market prices.
The Chilean Central Bank is an independent body charged with sole
control over monetary policy and has the goal of controlling inflation and
maintaining the value of the currency. The current policy of the Central Bank is
to maintain the value of the peso within a band of 10% around an official
reference rate based on a basket of currencies which includes the U.S. dollar,
the Yen and the Deutschmark. The official reference rate is adjusted to take
into account domestic inflation rates and the inflation rates of Chile's major
trading partners.
With a few significant exceptions, foreign currency is freely tradable
in an informal market, the participants in which include individuals, business
entities and exchange houses. The informal market is not available to obtain
foreign exchange for imports, to convert foreign exchange into pesos or to
repatriate profits and capital. Instead, a formal exchange market, comprised of
banks which have received the requisite authorization from the Central Bank,
must be used for these purposes.
The repatriation of profits and capital by investors subject to a
foreign investment regime may require the prior authorization of the Central
Bank. Authorization is routinely granted and it guarantees investors access to
foreign currency through the formal foreign exchange market. See "Chile--Foreign
Investment and Tax."
Foreign Investment and Tax -- Chile's foreign investment laws are
considered to be liberal in relation to other South American countries. Chile's
foreign investment statute (also know as Decree Law No. 600) regulates various
aspects of foreign investment in Chile and is intended to ensure
non-discrimination in relation to the rights and benefits conferred upon
national investors. The statute applies to foreign individuals and legal
entities and to Chilean citizens who reside out of the country and who transfer
foreign capital into Chile. Decree Law No. 600 applies to investments made with
freely convertible foreign currency, tangible assets, technology which may be
capitalized, loans associated with foreign investments and capitalized
convertible foreign currency loans.
Investments in Chile by individuals or entities subject to Decree Law
No. 600 which either: (a) exceed U.S. $5 million or the equivalent in other
currencies; (b) relate to sectors or activities normally developed by the
government; (c) concern the social communications media; or (d) are undertaken
by foreign governments, must be approved by the Foreign Investment Committee.
The members of the Foreign Investment Committee include the Minister of the
Economy, the Minister of Finance, the Minister of Foreign Affairs, the Minister
of National Planning, the President of the Central Bank, and, for investments
which relate to ministries which are not represented above, by that
corresponding minister. Other types of investments may be approved by the
Executive Vice President of the Committee with the consent of the Ministry of
Economy.
After approval, the Chilean government, represented by the Minister of
the Economy or by the Executive Vice President of the Committee, and the
investor enter into a contract establishing the terms under which the foreign
investor may transfer capital into Chile. The Company has applied for and
received approval under Decree Law No. 600 to make foreign investments in Chile
up to $5,000,000 over an indefinite period of time. As a result, Foreign
Investment Committee approval of the Company's investments is not yet required.
If and when the Company decides to invest in excess of $5,000,000 in its Chilean
operations such approval will be necessary. The Company is not aware of any
reason at this time why such approval would not be granted upon request;
however, there can be no assurances in this regard and if approval is not
granted, the Company's operations in Chile would suffer a material adverse
effect.
Investments in mining and industrial activities totaling U.S. $50
million or more may obtain the benefit of locking in certain advantages for a
period of 10 to 20 years, including tax laws in effect at the time of the
investment relating to the depreciation of assets, loss carry forwards and
organization expenses. Official authorization may be
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granted to maintain accounting records in foreign currencies. The contract with
the Foreign Investment Committee relating to such investments could also confer
upon the investor the right to be governed by the laws and regulations
concerning the free export of goods that are in force at the time the contract
is signed and such additional benefits as the use of offshore accounts to
maintain export proceeds for certain payments, including principal and interest
on loans, charges for supplies, fees for technical assistance and profits. It is
possible for exporters to deposit foreign exchange earnings outside the country
and to remove profits and dividends when required, subject to the balance being
brought back into Chile.
Foreign currency investments are governed by Chapter XIV of the Foreign
Exchange Regulations. Chapter XIV regulates individuals, corporations and other
entities bringing foreign exchange into Chile. Under Chapter XIV, the Central
Bank approves the contribution and issues a certificate. This certificate
permits the holder to dispose of foreign exchange through commercial banks or
other entities within limitations established by the Central Bank. Under Chapter
XIV, profits may be repatriated annually and capital may be repatriated after
one year. Under Decree Law No. 600, profits and interest earned may be remitted
at any time, and capital may be repatriated after one year. As a result,
clearance under Decree Law No. 600 provides some advantage to foreign investors
in Chile, such as the Company.
Foreign investors may carry on business in Chile as individuals or
through one of the various types of entities permitted under Chilean law,
including corporations, limited liability companies, branches of foreign
corporation, limited liability or silent partnerships, general partnerships and
joint ventures. There is no limit on ownership for a foreign party investing in
a Chilean company.
Foreign investors are also granted the option under the Foreign
Investment Statute to choose to pay tax on the profits at the same rate as local
companies, currently estimated to be 35%, but subject to future changes, or at a
rate of 42%, which is guaranteed to remain unchanged for ten years.
Mining Industry -- Chile is rich in a wide variety of mineral
resources, including copper, molybdenum, cobalt, silver and gold. Mining
accounted for 7.2% of Chile's gross domestic product in 1995, which was up from
6.7% in 1994.
Of all the minerals with which Chile is endowed, copper is the most
significant. Chile possesses an estimated one-quarter of the world's copper
reserves and is the largest producer of copper in the western world. The largest
single copper producer in Chile is the state-owned corporation, Codelco (Chilean
Copper Corporation). Over the years, copper production has increased
significantly. Copper production was 2.5 million tons in 1995, up significantly
from 2.2 million tons in 1994.
The Pinochet government encouraged foreign investors to develop copper
mining. In addition, a new mining code came into force in 1983. While Codelco's
production has fallen slightly in the 1990's, increased private participation
and increased foreign investment in the non-state owned sector has increased in
significance. The export of copper from Chile is authorized by the Chilean
Copper Commission.
Chilean Gold production is expected to reach 51.5 tons in 1996, up from
1994 gold production of 38.6 tons, representing a 10% increase in production
over 1993 figures. The 1996 increase is a result of the opening of three new
mines: Refugio in the Region II; Andacollo Oro in the Region IV; and Fachinal in
Region XI. These mines should produce 9.5 tons of gold this year. Chilean gold
production nearly trebled between 1985 and 1995 reaching 44.5 tons yielding
$428.5 million in export earnings.
Mining Concessions -- Following a longstanding legal tradition, the
1980 Constitution (the "Constitution") established that the State is the owner
of all mineral resources, but permits the exploration and exploitation of
mineral deposits by private parties through mining concessions. The Constitution
also established that mining concessions are to be granted by the courts with
such concessions having the rights and obligations determined by a
Constitutional Organic Law. For those minerals that are specifically excluded
from mining concessions, such as hydrocarbons, lithium, and ores located
offshore or in areas deemed important to national security, the Constitution
provides that exploration and exploitation can be carried out directly by the
State by administrative concessions or by operating contracts. These
administrative concessions and the operating contracts can be terminated by the
State at any time, provided the corresponding indemnity is paid. The Company
does not hold any administrative concessions.
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The 1982 Mining Law, Constitutional Organic Law No. 18097 of 1982 and
the Constitution provide the legal framework for the exploration and
exploitation of minerals in Chile. This law can only be changed with the
approval of 60 percent of both houses of Congress.
Under the 1982 Mining Law, mining concessions may be granted only by
the courts and such concessions constitute interests in real property that can
be mortgaged or transferred. The concession holder also has the right to defend
ownership of the mining concession against the State and third parties.
A Chilean mining concession is a property right, distinct and
independent of the ownership of land on which it is located, even though both
may belong to the same person or entity. If a mining concession is filed on land
owned by third-party, the mining concession holder must negotiate a
"servidumbre" (right of way) with the land owner. If reasonable compensation for
the right of way cannot be negotiated with the land owner, the concession holder
may seek remedies from the local court having jurisdiction in the area in which
the mining concessions are located. There is a strong body of law in Chile which
gives concession owners the right of access and the right to explore and develop
mining concessions.
Mining concessions may be either exploration concessions or
exploitation concessions. The annual fee for an exploration concession is
approximately $1.00 per hectare and for an exploitation concession approximately
$5.00 per hectare. An exploration concession is the right to explore the defined
area and to later obtain an exploitation concession over the area. The
application process for an exploration concession (a Pedimentos) takes
approximately six months. Exploration concessions are granted for a two-year
period and may be renewed once for an additional two years provided that upon
such renewal one-half of the area covered by the original concession is
surrendered by the concession holder. It is generally the Company's policy to
file for exploration concessions on properties which have had little or no
exploration work completed. An exploitation concession is the exclusive right to
explore for and exploit minerals from the defined area for an indefinite period.
The application process for an exploitation concession (a Manifestaciones) takes
approximately 18 months to complete. However, the filing of an exploitation
concession by an exploration concession holder prior to expiration of the two
year exploration concession is sufficient to preserve the owner's interest in
the concessions until the exploitation concession is granted or denied. The
applicant has the right to proceed with exploration immediately upon filing an
application for a mining concession. It is not necessary to have an exploration
concession prior to an exploitation concession. However, if an exploration
concession is not renewed or an application for an exploitation concession filed
prior to the expiration of an exploration concession, the exploration concession
is lost. Also, exploitation activities are impermissible without an exploitation
concession. If exploitation activities occur prior to the grant of an
exploitation concession, the existing exploration concession could be lost.
Under the Chilean claims system, a claimant may file on top of ("top
filed") an existing concession. All claims filed under the claims procedure are
gazetted (published) in the Mining Bulletin which is printed monthly and
subscribed to by the Company. If a claim holder is top filed, the top filer does
not have a preferential right to the concession unless the original concession
holder lets the concession lapse for lack of payment of patents or lack of
defense. All claim filings can be challenged when made and, with respect to an
exploitation concession, an annulment may be requested by the holder of
preexisting claims for a period of four years from the date of publication of
the grant. If a top filed claim is not challenged, the prior granted concession
loses priority upon lapse. Concessions can lapse, and a top filer gain priority,
in the following primary ways: (i) an exploration concession expires after two
years if it is not renewed or converted to an exploitation concession; (ii) if
an exploration concession is renewed and one-half of the original claim
abandoned as required, a top filer gains priority on the abandoned portion of
the concession; (iii) failure to pay any patents for the concession; or (iv)
failure to defend an exploration concession against a top filed claim for a
period of four years following publication of the grant of the top filed
concession. Even if a concession is defended, there is a potential for the prior
concession to lose priority to the top filed claim if the courts determine that
the prior concession had been improperly filed under the claims procedures.
The Company has instigated a program to review, on a monthly basis, all
newly-published claims against the Company's claims to determine if a top filing
situation exists. If a top filing situation is found during the Company's
systematic review of newly-published claims, the Company is prepared to take
appropriate action to defend its claims position. The Company is not aware of
any material third party top filing situations on its properties.
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Environmental Regulation -- Environmental matters are governed by a new
environmental policy system which includes permitting or licensing procedures.
Part of the new environmental policy requires mining companies to submit an
environmental impact statement to the State for approval prior to bringing a
mine into production. In addition, prior to commencing production mining,
companies must assume liability for environmental damage caused by the producing
mine. Because the Company is currently only involved in exploration of its
properties, these laws have no material effect on the Company's current business
operations. However, if the Company desires to commence production of one or
more of its properties, there can be no assurance that the necessary permits can
be obtained.
MINERAL EXPLORATION PROPERTIES.
The Company currently holds mineral exploration interests in three
distinct properties in Chile--Resguardo, Cenizas and Santa Eloise. Below is a
description of each of these properties, the Company's exploration programs and
the Company's interest in each of them.
Resguardo Property
Summary -- The Resguardo Property covers an area of 15,417 hectares
(38,095 acres) along 19 kilometers of the highly productive Atacama Fault System
in Region III of northern Chile. The property, at an altitude of 1,000 meters,
is on the same structural trend and about 10 kilometers south of the Mantoverde
Mine operated by the Anglo-American Company. The property is accessible by
paved and well-maintained dirt roads and is approximately a 20 kilometer drive
from the coastal town of Chanoval, and approximately 100 kilometers from
Copiapo, a town with a population of about 150,000. Recent geochemical sampling
and diamond drill results completed by the Company and the Company's inspection
of a series of small surface mine workings has indicated gold mineralization at
Resguardo along a zone which appears to be at least 5 kilometers long and open
to the north and south ends. The Company's interest in the property is held by
MFG and consists of I) a 99 year lease of mining concessions on 3,417 hectares
and ii) applications for mining concessions on 12,000 hectacres to be held
directly by MFG. Pursuant to Chilean mining concession application procedures,
the Company, upon filing its application for an exploration concession, has the
right to conduct exploration activities on such property. See "Item 1.
Description of Business -- Chile -- Mining Concessions." The Company expects
this application process to be completed, and the exploration concessions
granted to MFG, in the third quarter of 1997.
General Information-- The Resguardo Property consists of 201 separate
mining concessions owned by the Hochschild family of Copiapo and applications
for 55 mining concessions on the property filed by MFG. Mining concessions
consist of either exploration concessions or exploitation concessions. See "Item
1. Description of Business--Chile." The mining concessions underlying the
Company's lease interest consist of a combination of both exploration and
exploitation concessions. MFG has submitted applications for exploration
concessions. Under the lease, the concession owners retain primary
responsibility for defending the mining concessions leased by the Company
against competing claims. However, because of the Company's interest in those
mining concessions, the Company, as it does with its directly held concessions
and applications, reviews the status of the concessions on a monthly basis and,
with the cooperation of the owners, makes application for exploitation status
for those exploration concessions which approach their expiration and assists in
the defense of mining concessions against competing claims.
The property lies in the southern part of the Atacama Desert which is
an extremely arid area with typically little or no precipitation recorded each
year. Therefore, there is only the most sparse vegetation on the property
consisting mostly of small tufts of grass.
Topographically, the property consists of a series of moderately rugged
hills rising from the flat desert floor at an altitude of about 1,000 meters to
peaks of 1,500 to 1,700 meters. The property is easily reached from Chanoval by
automobile in 40 minutes on paved and well maintained dirt roads. In addition,
the property can be easily reached from Copiapo in about two hours by four-wheel
drive vehicles along mostly dirt roads.
Geology and Mineralization-- Selective parts of the property have been
geologically mapped by the Company and the previous concession holders. In
addition, the Company has completed geochemical sampling and limited drilling on
a small area of the property. There are a series of volcanic and intrusive
rocks, mostly andesites and diorites, outcropping on the property. Adjacent
limestones have been subject to varying degrees of recrystallization and
locally,
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the development of skarn type mineralization. The local north-south orientation
of the Atacama fault system dominates the structural trends of the property as
seen by faulting, fault breccias and vein mineralization.
The Manoverde Mine, a open-pit heap-leach copper mine recently brought
into production by the Anglo-American Company, appears to be on the same
structural trend some 10 kilometers to the north of the property.
Preliminary field examination and a review of previous exploration data
have shown that there are five primary areas of interest on the property, the
Pamelita, Carbonate Hill, Main Zone, Resguardo Norte and Santa Rosa areas.
Pamelita and Carbonate Hill
The Pamelita and Carbonate Hill areas are located where the east-west
faults and shears appear to intersect the main north-south structural trends.
The north-south structural zone is about 100 meters wide in an east-west
direction, but the northern and southern limits of the mineralization are
unknown; however, small prospect pits continue for several hundred meters to the
north of an apparent structural intersection.
Host rocks for the mineralization at Pamelita and Carbonate Hill
include brecciated mylonites, limestones, skarns, altered andesite, and other
rock types. As on other areas of the Resguardo Property, mafic volcanic rocks
occur west of the limestone/skarn rocks. At least part of the gold
mineralization occurs with quartz veinlets, course crystalline calcite and
secondary iron oxide minerals after pyrite in close spaced shear zones which
both cement and enclose breccia fragments. The widths of the individual zones
vary from about one to five meters. No primary sulfide minerals have been
recognized. The elevated molybdenum values seen in the geochemical samples are
indicative of a hydrothermal system driven by a nearby igneous source.
Main Zone and Resguardo Norte
As in the Pamelita and Carbonate Hill areas, the Main Zone and
Resguardo Norte areas are characterized by a north-south trending structural
zone which appears to be approximately 50 meters wide consisting of a close
spaced fault and breccia zones cutting mylonite. Principal skarn mineralogy in
these areas includes epidote, chlorite, specular hematite, siderite, and lesser
amounts of calcite. No sulfide minerals were observed. Rocks along the west side
of the skarn include basalt and/or aphanitic diorite and gabbro. There is
evidence in the areas that small scale mineral mining and production has been
undertaken in these areas in the past. However, the type of mineralizations
which were being explored and mined is not clear.
Santa Rosa
The Santa Rosa area is located about five kilometers south of the
Pamelita area along the southward projection of the main north-south zone.
Spatial relationships among various structural features in this area are not
clear. Brecciated skarn and other types of argillic altered and silicified rocks
occur over a distance of 75 to 100 meters in an east-west direction. Large
amounts of specular hematite and lesser earthy hematite and small quartz
veinlets occur within fault and/or shear zones and cemented breccia fragments.
Secondary copper oxide and silicate minerals are associated with the hematite
breccias. Grab samples from this area were not conclusive, but did contain
elevated molybdenum which is indicative of fluid emplaced mineralization from a
close magmatic source, similar to the Pamelita area.
Exploration Potential -- The Company believes the Resguardo Property
may present a gold target based on its initial surface sampling program and
initial diamond drill results. The dimensions of the outcrop may indicate that a
resource is possible. If the structure extends to significant depth, and more
than a few hundred meters along strike, the potential may be large. The physical
layout seems amenable to both bulk surface and underground mining techniques.
Although the Company believes that the Resguardo Property structures
may host an economically minable resource, exploration programs are ongoing and
there can be no assurances that any portion of the Resguardo Property will
contain a commercially viable mineral deposit.
Exploration Program -- The Company continues its initial exploration
program consisting of geological mapping and geochemical sampling and trenching
of all five areas within the Resguardo Property.
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As of January 1, 1997, 1,300 rock chip samples have been taken along 25
east-west oriented traverses in the central part of the Resguardo Property. Rock
chip samples were taken at approximately five meter intervals, the traverses
cover a strike length of three kilometers, over the Pamelita, Carbonate Hill,
Main Zone and Resguardo Norte areas. Rock type and geological features are being
noted at each interval.
The assay results from the rock chip samples show zones 15 to 60 meters
in width with highly anomalous to ore grade gold mineralization spread over a
three kilometer strike length. A number of these intervals are open to the east
or west.
Earth moving equipment has been on site since the second week of
November 1996, to extend the exposure of bedrock for sampling and to build new
roads and drill pads.
Based on the results of its ongoing exploration, on December 10, 1996,
the Company commenced its initial diamond drill program. The Company made four
initial diamond drill holes, from 180 to 280 meters long, under mineralized
locations identified during its surface sampling program, spread over
approximately a two and one-half kilometer long segment of the identified zone
on the Atacama Fault. The purpose of these widely spaced holes was for the
Company's geological staff to gain a better understanding of the sub-surface
geology at the Resguardo Property.
The Company's geological staff analyzed the drill results from the
drilling program completed in February and all four drill holes intersected gold
mineralization. In particular, one drill hole, identified as DDH-97-3 by the
Company, located at the northern end of a belt of surface mine workings on the
property, intersected a zone averaging 4.04 g/t gold over 21.5 meters (0.118
oz/t over 69 feet). This intersection is open in all directions. Recently the
Company completed geochemical sampling which has shown anomalous gold values up
to 1.5 kilometers to the north of drill hole DDH-97-3.
Set forth below is a table summarizing the Company's initial diamond
drill results on the Resguardo Property.
Drill Hole Depth (meters) Depth Interval Average Gold Grade (g/t)
- ---------- -------------- -------------- ------------------------
DDH-96-1(1) 56.20 - 80.80 24.60 1.26
DDH-96-1 111.35 - 114.05 2.70 5.15
DDH-96-1 132.50 - 136.25 3.95 2.84
DDH-97-1 19.45 - 32.55 13.10 1.13
DDH-97-2 8.55 - 17.75 9.20 1.71
DDH-97-2 36.07 - 39.83 3.76 1.76
DDH-97-2 52.46 - 67.75 15.29 1.02
DDH-97-3 26.40 - 47.55 21.15 4.04
(1) Results include a gold value of 34.50 g/t over an interval of 0.45
meters from 68.65 meters to 69.10 meters in depth.
The Company's geological staff believes that the results from its
initial diamond drill holes support their belief that the Resguardo Property has
the potential to contain a shear hosted gold deposit which could be initially
exploited by surface mining methods. Based on these results, the Company
currently plans to begin reverse-circulation drilling on the Resguardo Property
in late April or May 1997.
Acquisition of Property -- On July 17, 1996, MFG entered into a 99-year
lease of the mining concessions totaling 3,417 hectares on the Resguardo
Property. Lease payments are to be made to the concession owners as follows:
$75,000 was paid upon execution of the lease agreement; $60,000 is payable on
the lease's first anniversary; $60,000 is payable on the lease's second
anniversary; and $80,000 is payable on the lease's third anniversary. During the
term
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of the lease, the Company has the exclusive right to exploit, benefit, explore,
develop and smelt minerals from the property.
The concession owners also are entitled to a net smelter return
production royalty equal to 5% on gold production and 1 1/2% on all other
mineral production from the property during the term of the lease.
No payments to the owners are required between the third and seventh
anniversary of the lease. If financing is not obtained to enable the Company to
place an ore body into production on the Resguardo Property before the lease's
seventh anniversary, the Company will begin paying minimum advance royalties to
the concession owners. These advance royalties will increase annually from
$150,000 per year to $250,000 per year. The first minimum advance royalty
payment may be credited to future net smelter return production royalties due
the owners.
MFG has filed applications for the balance of the mining concessions on
the property, covering 12,000 hectares. Pursuant to the Chilean mining
concession application procedures, upon submitting such applications, MFG has
the right to commence exploration activities on such property pending completion
of the application process, which takes approximately six months. Currently, the
Company expects the application process to be completed and the mining
concessions granted in the third quarter of 1997.
Cenizas Property
Summary -- The Cenizas Property covers an area of approximately 5,700
hectares (14,250 acres), on the West Fissure Fault, a regional geological
structure that controls much of the known gold and copper mineralization in
northern Chile. Located midway between, and on the same structural trend as, the
major copper deposits of La Escondida and El Salvador, the property is 20
kilometers south of the Guanaco gold mine operated by Amax Gold. The property is
in Region II of northern Chile at an altitude of approximately 3,000 meters in
the southern Atacama desert and is easily reached in a three hour drive from the
coastal town of Taltal. Gold mineralization, first discovered in the area by RTZ
with a regional geochemical survey, occurs on the property in Tertiary volcanics
and diorite intrusives. RTZ's exploration program consisted of geophysical
surveys, trenching, numerous short rotary drill holes to define gold
mineralization under shallow gravel cover and the drilling of 23
reverse-circulation drill holes. Results of this work have shown highly
anomalous to ore grade gold mineralization in trenches and drill holes in
several areas on the property. The Company's interest in the mining concessions
is held by MFG. See "--Acquisition of Property."
General Information -- The property consists of 15 mining concessions
owned by RTZ. Mining concessions may be either exploration concessions or
exploitation concessions. See "Item 1. Description of Business--Chile." The
mining concessions underlying the Company's interest consist of both exploration
and exploitation concessions. The Company reviews the status of the mining
concessions underlying its interest in the Cenizas Property on a monthly basis
and makes application for exploitation status for those exploration concessions
which approach their expiration period and assists in the defense of those
concessions against competing claims.
Geology and Mineralization -- Gold mineralization occurs in several
broad areas on the Cenizas Property in association with quartz-sericite and
quartz-chlorite-epidote-magnetite alteration in Tertiary age diorite intrusives
and volcanics. The dominant structural controls of the mineralization appear to
be related to the proximity of the north- northeast oriented West Fissure Fault
system.
Exploration Potential -- The Company's management believes that the
Cenizas Property has the potential to host one or more large scale, bulk
minable, gold deposits. This belief is based on the results of the RTZ
exploration work on the property and the field observations of the Company's
technical staff. Strong to moderate strength gold mineralization has been seen
in areas of the property despite the fact that rock outcrops are limited due to
significant areas of the property being covered by a layer of colluvium one to
three meters in depth. These areas of cover largely remain untested by previous
work.
Exploration Program -- The Company has commenced a program of
geological mapping, aerial photography, trenching and sampling. After this
initial phase of work is complete, the Company plans to start a
reverse-circulation drilling program in April or May 1997.
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Acquisition of Property -- The Company signed a Letter of Intent with
RTZ on December 13, 1996 whereby the Company can earn an initial 51% interest in
the Cenizas Property mining concessions by making cash payments totaling
$350,000 and completing at least $1,000,000 of exploration work over three
years. Payments to RTZ during the first year total $50,000 with a first year
exploration commitment by the Company of $200,000. The Company will also grant
to RTZ options to purchase shares of its Common Stock as follows: by June 13,
1997 an option to purchase 150,000 shares of Common Stock at a price of $1.50
per share, by December 13, 1997 an additional option to purchase 150,000 shares
of Common Stock at a price of $2.00.
Upon completion of the required payments to RTZ and satisfaction of the
Company's exploration commitments, the Company will be entitled to a 51%
interest in the Cenizas Property mining concessions. At that time, the project
will convert into a joint venture between the Company and RTZ with the Company
serving as manager of the joint venture. It is presently contemplated that at
such time a new entity (the exact form of which has not been specified) will be
formed to hold title to the mining concessions with the Company initially owning
51% of the entity. If at any point after the formation of the joint venture
either the Company or RTZ chooses not to contribute pro-rata to the financial
requirements of the venture, its interest can be diluted to a 2% Net Smelter
Royalty with a maximum value of $3,000,000. Within 60 days of the Company
earning its 51% interest in the Cenizas Property mining concessions, RTZ has an
option to obtain a 51% interest in the joint venture, with the Company retaining
a 49% interest, by committing to fund and complete a bankable feasibility study
within a 30 month period.
Santa Eloisa Property
Summary -- The Santa Eloisa Property covers approximately 4,700
hectares (11,600 acres) in the Maricunga Gold Mining District located in Region
II of northern Chile. The geological setting of the Santa Eloisa Property is
similar to that of several large porphyry style gold deposits that have been
discovered in the Maricunga District over the past several years. The property
is at an altitude of between 4,200 and 5,300 meters and can be reached in about
a five hour drive, along mostly dirt roads, from the nearby town of Copiapo. The
Company's interest in the Santa Eloisa Property is held by MFG. See
"--Acquisition of Property."
General Information -- The property consists of 25 exploration mining
concessions covering approximately 4,700 hectares (11,600 acres). The Company is
responsible for maintaining these mining concessions, and will review their
status on a monthly basis and will make application for exploitation status for
those concessions which approach their expiration period and defend the
concessions against competing claims. See "Item 1. Description of Business--
Chile."
The property lies in the southern part of the Atacama Desert which is
very arid area with the minimal annual precipitation occurring mostly as snow in
the winter months (May to October). There is only very sparse vegetation, mostly
consisting of small tufts of grass.
Topographically, the property is very variable but generally consists
of moderately steep, to very steep, hill slopes rising to elevations of a
maximum of about 5,300 meters from valleys at elevations of about 4,200 meters.
Geology and Mineralization -- The Santa Eloisa Property is on the
western slopes of the Jotabeche volcanic complex and therefore geologically the
area is dominated by a sequence of volcanic flows that have been intruded by a
series of Tertiary age sub-volcanic intrusives of mostly diorites and dacite
composition. Strong hydrothermal alteration, particularly argillic alteration,
has been observed over some areas of the property.
Exploration Potential -- The geological setting of the Santa Eloisa
Property is similar to the geological setting of the Refugio Mine some 20
kilometers to the north, operated by Bema Gold Corporation and Amax Gold Inc.,
and the Cerro Casale prospect some 5 kilometers to the south, and the Cerro
Roman prospect 5 kilometers to the east currently being drilled by Arizona Star
Resources Corporation and Bema Gold Corporation. These are porphyry style gold
deposits, with large gold resources in the case of Refugio and Cerro Casale,
typical of a number of deposits that have been discovered in the Maricunga
District over the past several years. Furthermore, a series of gold mineralized
veins have been actively explored from both surface and underground by several
operators on the Santa Cecilia property to the north and adjacent to the Santa
Eloisa Property.
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Exploration Program -- A property-wide exploration program consisting
of geochemical sampling and geological mapping commenced in February 1997. This
work is being guided by the use of satellite-generated imagery. The initial
phase of this work should be completed during March and April, with follow-up
work occurring thereafter.
Acquisition of Property -- On January 22, 1997 the Company entered into
an agreement ("Santa Eloisa Agreement") with certain mining concession owners
("Santa Eloisa Owners"). Pursuant to the Santa Eloisa Agreement, the Santa
Eloisa Owners will cause a new Chilean corporation to be formed, Minera Santa
Eloisa S.A. ("MSE"), and title to all of the mining concessions on the property
held by the Santa Eloisa Owners will be transferred to MSE. In return, the Santa
Eloisa Owners will receive, in the aggregate, 500 MSE series A shares and 1,500
MSE series B shares, together representing 100% of MSE's equity. The Company,
pursuant to the Santa Eloisa Agreement, will receive: (I) 500 MSE series A
shares from the Santa Eloisa Owners upon payment of $500,000 to the Santa Eloisa
Owners ("Purchase Option Payment"); $30,000 paid on January 22, 1997, $135,000
payable on April 30, 1997, $135,000 payable on November 30, 1997, $100,000
payable on March 31, 1998 and $100,000 payable on March 31, 1999, and (ii) 1,000
newly issued MSE series A shares upon its completion of funding a $1,000,000
exploration work program ("Exploration Commitment") on or before March 31, 1999.
Upon the Company's payment of the Purchase Option and funding its Exploration
Commitment, the Company will own 50% of the capital of MSE in the form of series
A shares, and the Santa Eloisa Owners will own 50% of the capital of MSE in the
form of series B shares. Thereafter, the equity interest represented by the
series B shares cannot be diluted below 25% of the total equity interest in MSE.
If the Company's exploration results justify, MSE, the Company and the
Santa Eloisa Owners will jointly implement and fund a feasibility study program
("Feasibility Study"). Upon completion of the Feasibility Study, MSE will issue
an aggregate of 3,000 series A shares to the Company and the Santa Eloisa Owners
in proportion to their relative contributions to the costs of the Feasibility
Study.
Upon completion of the Feasibility Study, MSE and the Company will
jointly seek third-party debt financing of production facilities sufficient to
bring the mining concessions into production. Should a third-party financing
source require the shareholders of MSE to provide additional capital in the form
of subordinated debt or additional equity, the Company has agreed to contribute
on behalf of the series B shareholders their proportionate share of said
additional capital ("Carried Interest"). The Carried Interest will bear an
interest rate of LIBOR plus 5% and will be repaid by the series B shareholders
out of distributions made on the series B shares by MSE. The Company will
receive all series B distributions until the Carried Interest plus accrued and
unpaid interest is paid in full.
The Company will manage the business affairs and daily operations of
MSE and will appoint its directors in proportion to its relative ownership
percentage of MSE.
Notwithstanding the above described structure for bringing the Santa
Eloisa Property into production, there can be no assurances that the Company's
exploration program will identify an ore body capable of economical production.
If at any time the Company determines to cease exploration on the property or
elects not to make payments towards to option, the Company would lose its rights
to explore and develop the property and would forfeit any Purchase Option
Payment installments already made to the Santa Eloisa Owners. During the term of
the Santa Eloisa Agreement, the Company has the exclusive right to exploit,
benefit, explore, develop and smelt minerals from the property.
ENVIRONMENTAL POLICY.
The Company is committed to balancing good stewardship in the
protection of the environment with the need for economic growth. In particular,
it is the Company's policy to measure, maintain and improve its compliance with
environmental laws and regulations, to place a high priority on environmental
considerations in planning, exploring, constructing, operating and closing
facilities. Also, the Company places primary responsibility for compliance with
environmental laws with operations management. In the absence of any regulation,
the Company's policy is to recognize environmental risks and manage these risks
in a cost-effective manner that protects the environment and the Company's
economic future. It is also the Company's policy to promote employee involvement
in implementing its environmental policy and to encourage employee reporting of
suspected environmental problems. There are no environmental regulation issues
which to the Company's knowledge have an adverse impact on the current
exploration programs of the Company. To the Company's knowledge, its proposed
operations are in compliance with applicable environmental laws.
COMPETITION.
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The mineral exploration and mining businesses are competitive in all of
their phases. The Company competes with numerous other companies and individuals
in a search for and the acquisition of attractive mineral properties. Many of
these companies possess greater financial and technical resources. The Company's
ability to develop reserves in the future will depend not only on its ability to
develop its present properties, but also on its ability to select and acquire
suitable prospects for mineral exploration.
EMPLOYEES.
At March 28, 1997, the Company employed 12 individuals on a full time
basis. In addition, the Company has two full time and several part time
geological consultants. The Company anticipates hiring one additional full time
employee during the first half of 1997. To the extent the Company is successful
in acquiring additional mineral properties, it may hire one or more employees or
consultants on a full time basis in the technical field. The Company intends to
utilize the services of outside technical and professional firms and individuals
on a contractual basis to perform specific work.
GLOSSARY OF TERMS
air photo interpretation: the study of air photos of a region of geologic
interest for the purpose of identifying large scale geologic features.
alteration: any change in the mineral composition of a rock brought about by
physical or chemical means.
andesite: a dark colored, fine grained volcanic rock.
aphanitic: a term applied to fine grained igneous rocks whose constituents are
too small to be distinguished by the unaided eye.
argillic: pertaining to clay or clay minerals.
argillic alteration: an alteration in which certain minerals are converted to
minerals of the clay group.
assay results: the results of an analysis used to determine the proportions of
metals in a rock sample.
Atacama Fault System: a well recognized, north-south trending fault system in
northern Chile, which controls a significant amount of known mineralization in
the area.
Atacama Desert: a desert region of northern Chile.
basalt: a dark colored igneous rock, commonly extrusive, composed primarily of
plagioclase and pyroxene; the fine grained equivalent of gabbro.
bedrock: the solid rock that underlies gravel, soil or other superficial
material.
breccia fragments: angular pieces of broken rock.
breccia: a coarse grained rock composed of large angular pieces of broken rock.
brecciated mylonites: a breccia in which the large angular pieces are a
compacted rock with a streaky or banded structure produced by extreme shearing
during dynamic metamorphism.
bulk minable: able to be mined in bulk, that is on a large scale, typically by
open pit methods.
calcite: calcium carbonate, a common rock forming mineral; usually white or gray
in color.
chlorite: a group of platy, greenish magnesium iron aluminum silicate minerals,
widely distributed in low grade metamorphic rocks or as alteration products of
ferromagnesian minerals.
-15-
<PAGE> 17
colluvium: a general term applied to loose and incoherent deposits, usually at
the foot of a slope or cliff, brought there chiefly by gravity.
copper oxide: a group of minerals that are ores of copper or minor ores of
copper, found in the oxidized zone of sulfide copper deposits.
coarse: as in coarse grained, said of rocks in which the individual minerals or
grains are relatively large and can be seen with the unaided eye.
crystalline: having regular molecular structure.
dacite: a fine grained volcanic rock which is similar in composition to
andesite, except for a greater abundance of quartz crystals that are frequently
visible to the naked eye.
diamond drill program: a planned sequence of drilling bore holes using bits
inset with diamonds as the rock cutting tool to produce a recoverable core of
rock for observation and assay.
diorite: a dark, coarsely crystalline igneous rock, similar in composition to
granite, which is composed principally of silica, aluminum, calcium, and iron.
earthy: said of minerals having a dull luster and a surface rough to the touch.
El Salvador: a large copper mine in Northern Chile operated by Codelco, the
national Chilean copper mining company.
epidote: a green colored, calcium aluminum iron silicate mineral which is common
in low grade metamorphic rocks derived from limestone.
epigenetic: said of a mineral deposit of origin later than that of the enclosing
rocks.
gabbro: a group of dark colored, basic intrusive igneous rocks composed
principally of two specific minerals, plagioclase and pyroxene.
geochemical sampling: the process of sampling rock or soil for the purpose of
having the sample analyzed for the distribution and amounts of the chemical
elements within it.
geological mapping: the process of recording the distribution, nature and age
relationships of rock units and the occurrence of structural features on a map.
geophysical surveys: the use of one or more geophysical techniques - electric,
gravity, magnetic, seismic, or thermal - in the search for economically valuable
mineral deposits.
grade: the relative quantity or percentage of ore mineral content.
heap-leach copper mine: a copper mine which uses a process whereby a weak
sulfuric acid solution is percolated through copper ore stacked on an impervious
liner, to dissolve minerals.
hematite: a common iron mineral which occurs as both a primary constituent of
rocks and as an alteration product.
host rocks: a body of rock serving as a host for mineral deposits.
hydrothermal: of or pertaining to hot water, to the action of hot water, or to
the products of this action, such as a mineral deposit precipitated from a hot
aqueous solution.
igneous: said of a rock or mineral that solidified from molten or partly molten
material.
intrusive: said of the process, and of rock formed by the process, of
emplacement of magma in a pre-existing rock.
-16-
<PAGE> 18
iron oxide: a common mineral found in all rock types as a primary constituent or
alteration product, also an ore of iron.
Jotabeche Volcanic Complex: a recognized set of geologic features pertaining to
the activities, structures and rock types of a volcano, located in the Maricunga
District of northern Chile.
La Escondida: a large open pit copper mine in northern Chile.
limestone: a sedimentary rock consisting chiefly of the mineral calcite.
mafic: said of an igneous rock composed chiefly of dark, ferromagnesian
minerals.
magma: naturally occurring molten rock material, generated within the earth and
capable of intrusion and extrusion, from which igneous rocks have been derived
through solidification and related processes.
magmatic: of, pertaining to, or derived from magma.
magnetite: a black, strongly magnetic opaque mineral; a very common and widely
distributed accessory mineral in rocks of all kinds.
Maricunga District: a recognized precious metal (gold, silver) mineral district
of northern Chile, named after a geographic feature, Salar Maricunga.
mineralization: the process by which a valuble mineral or minerals are
introduced into a rock, resulting in a potential or actual ore deposit.
molybdenum: a base metal element.
outcrop: that part of a geologic formation or structure that appears at the
surface of the earth.
porphyry: a medium to fine-grained intrusive rock containing numerous larger
sized phenocrysts.
porphyry style: resembles a style of mineralization in which a large body of
rock, typically a porphyry, contains dissemintaed chalcopyrite and other sulfide
minerals. Such deposits are known as porphyry copper deposits, and are mined in
bulk, on a large scale, generally in open pits, for copper and by-product,
molybdenum.
primary mineral: a mineral formed at the same time as the rock enclosing it.
pyrite: a common iron sulfide mineral with a yellow color and a brilliant
metallic luster.
quartz: crystalline silica; silicon dioxide, an important rock-forming mineral,
the most common gangue mineral of ore deposits.
recrystallization: the formation, essentially in the solid state, of new
crystalline material grains in a rock. The new grains are generally larger than
the original grains, and may have the same or a different mineralogical
composition.
Region I, II, III and IV: political/administrative divisions of the country,
Chile. Chile has 14 designated regions starting at Region I in the north and
ending with Region 14 in the south. Regions I, II, III and IV all correspond to
northern parts of the country.
reverse-circulation drilling: a drilling method using double walled drilling
rods, where compressed air is pumped down the hole through the outer annulus
flushing rock chips produced by the drill bit upward through the inner annulus
to a collection mechanism at the surface.
rock chip samples: the samples of rock produced by the reverse-circulation
drilling process.
-17-
<PAGE> 19
rotary drill holes: a drilling method where compressed air is pumped down the
drill stem and the rock chips are flushed to the surface between the drill rod
and the walls of the drill hole.
sample grids: a network composed of two sets of uniformly spaced parallel lines,
usually intersecting at right angles and forming squares, superimposed on a map,
chart, or aerial photograph, to permit identification of ground locations by
means of a system of coordinates, where rock or soil samples will be taken.
sericite: a white, fine grained potassium mica occurring in small scales and
flakes as an alteration product of various aluminosilicate minerals.
satellite-generated imagery: radar or photographically generated images produced
by satellites.
secondary minerals: a mineral formed later than the rock enclosing it, usually
at the expense of an earlier formed primary mineral.
shear zone: a tabular zone of rock that has been crushed and brecciated by many
parallel fractures due to shear strain; such an area is often mineralized by
ore-forming solution.
siderite: a brownish mineral of the calcite group; iron carbonate; also an ore
of iron.
silicate: a compound whose crystal structure contains SiO4 tetrahedra, either
isolated or joined through one or more of the oxygen atoms to form groups,
chains, sheets, or three dimensional structures with metallic elements.
silicification: the introduction of, or replacement by, silica; especially in
the form of fine grained quartz, chalcedony, or opal, which may fill pores and
replace existing minerals.
silicified: said of a rock altered by silicification.
skarn: iron-garnet, magnetite bearing contact metamorphosed rock derived from
pure limestones or dolomites.
specular hematite: a black or gray variety of hematite with a splendent metallic
luster.
strike length: the length in the strike direction, which is, the direction taken
by a structural surface as it intersects the horizontal plane.
sulfide minerals: mineral compounds characterized by the linkage of sulfur with
a metal.
surface mining: typically refers to open pit mining methods.
Tertiary: the time span between 65 million and 2 million years ago.
sub-volcanic: a term used to describe igneous rock formed at a shallow depth,
that is, in the environment below a surface volcanic environment.
trenching: the process of creating long narrow excavations in the earth's
surface to expose areas of geologic interest.
vein: an epigenetic mineral filling of a fault or other fracture, in tabular or
sheetlike form, often with associated replacement of the host rock.
veinlet: small scale vein structures.
volcanics: those igneous rocks that have reached or nearly reached the Earth's
surface before solidifying.
volcanic flows: a mass movement of unconsolidated volcanic material or magma, in
the plastic or semifluid state.
-18-
<PAGE> 20
West Fissure Fault: a well recognized north-south trending fault system in
northern Chile, which controls a significant amount of known mineralization in
the area.
ITEM 2. DESCRIPTION OF PROPERTY.
A complete description of the Company's mineral exploration properties
is set forth above in "Item 1. Description of Business -- Mineral Exploration
Properties."
The Company leases office space aggregating 12,855 square feet in Vancouver,
British Columbia (corporate headquarters, 2,303 square feet), Santiago, Chile
(MFG exploration office, 7,059 square feet) and Caldera, Chile (Resguardo field
office, 3,443 square feet). The aggregate lease payments for these properties is
$4,222 per month.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is
or is likely to be a party or of which any of its subsidiaries or properties are
or are likely to be the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
GENERAL.
The Company's authorized capital consists of 20,000,000 shares of
Common Stock, $.001 par value, of which 6,060,000 are issued and outstanding as
of March 28, 1997. In addition, 3,600,000 Shares of Common Stock are reserved
for issuance as part of the Units issuable upon conversion of the Series A
Notes, 3,600,000 shares are reserved for issuance upon the exercise of the
Warrants to be included in the Units issued upon conversion of the Series A
Notes, 85,000 shares are reserved for issuance as payment of a loan acquisition
fee in connection with the Bridge Note, 75,000 shares are reserved for issuance
as consideration for pledges of collateral to secure the Bridge Note, 650,000
shares are reserved for issuance upon exercise of the warrant issued to the
Lender in connection with the Bridge Note transaction, 1,000,000 shares are
reserved for issuance upon exercise of options granted under the Company's Stock
Option Plan, 400,000 shares are reserved for issuance upon the exercise of
warrants issued to Laminco in connection with a Loan Agreement dated June 20,
1996 and 300,000 shares will be reserved for issuance pursuant to options which
have been or will be issued pursuant to a Letter of Intent with RTZ.
Holders of shares of Common Stock are entitled to one vote for each
share of Common Stock held of record on all matters submitted to a vote of
shareholders. Each share of Common Stock is entitled to receive dividends as may
be declared by the Company's Board of Directors out of funds legally available.
In the event of liquidation, dissolution of winding up of the Company, the
holders of Common Stock are entitled to share ratable in all assets remaining
after payment in full of all creditors of the Company.
The Company's Common Stock presently is traded on the OTC-Bulletin
Board ("OTC-BB") under the symbol "FGLD." As of April 4, 1997, there were
approximately 92 holders of record of the Common Stock. In the Company's
estimation, based upon reliable information available to the Company, there are
over 500 beneficial owners of the Company's Common Stock. The last reported bid
and ask prices for the Common Stock on April 4, 1997, was $ 0.8125 and $1.375
per share, respectively. The following table sets forth the high and low prices
on the OTC-BB of the Common Stock for each quarterly period in 1995 and 1996.
-19-
<PAGE> 21
<TABLE>
<CAPTION>
BID PRICE
--------------------
CALENDAR QUARTER HIGH LOW
---------------- ---- ---
<S> <C> <C> <C>
1995
----
First Quarter $ 1.00 $ .60
Second Quarter $ 1.25 $ 1.00
Third Quarter $ 1.25 $ 1.00
Fourth Quarter $ 1.00 $ 1.00
1996
----
First Quarter $ 1.25 $ 0.63
Second Quarter $ 1.75 $ 1.00
Third Quarter $ 1.50 $ 1.25
Fourth Quarter $ 1.88 $ 1.38
</TABLE>
VOLUNTARY STOCK POOLING AGREEMENTS.
Each purchaser of the Series A Notes, as a condition precedent to his,
her or its purchase, entered into a Voluntary Pooling Agreement ("Pooling
Agreement"). Under the terms of the Pooling Agreement each purchaser of Series A
Notes severally agreed with the Company, the Trustee (as defined in the Pooling
Agreement) and each with the other, that they will deliver the certificates
representing their respective shares of Common Stock issued as part of the Units
upon conversion of the Series A Notes to the Trustee. Pursuant to the Pooling
Agreement the Trustee will hold all certificates representing the Shares subject
to release , on a pro-rata basis, as set forth below:
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
- ------------------------------- ------------
25% of Common Stock purchased April 1, 1997(1)
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
(1) Upon conversion of the Series A Notes, the first 25% of the Common
Stock to be included in the Units will be immediately released.
Shares of Common Stock held by the Trustee are not transferable. However the
owners of such shares will continue to possess all other rights, including the
right to vote, attendant to their shares.
In connection with the Company's acquisition of FHL, all FHL
shareholders executed a Pooling Agreement (the "FHL Pooling Agreement') with the
Company which restricted the transfer of the 3,560,000 shares of the Company's
Common Stock issued in the acquisition (the "Acquisition Shares"). Pursuant to
the FHL Pooling Agreement, transfer of the Acquisition Shares was prohibited.
However, on a quarterly basis commencing February 1, 1997, 25% of the
Acquisition Shares are to be released from the transfer limitations imposed by
the FHL Pooling Agreement. On November 1, 1997, all of the Acquisition Shares
will have been released. Once released, however, the Acquisition Shares may only
be transferred pursuant to an effective registration statement or an available
exemption from registration under the Act.
On December 31, 1996, in connection with a Share Purchase and Sale
Agreement between Laminco and an unaffiliated syndicate of purchasers, Laminco
sold 2,597,000 shares of the Company's Common Stock; 1,497,000 of such shares
had been released early by the Company from the transfer restrictions of the FHL
Pooling Agreement. Each purchaser in this transaction entered into a
Stockholders' Agreement with the Company, the terms of which restrict the
transferability of the shares purchased until December 20, 1997.
-20-
<PAGE> 22
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company is, and plans to continue to be, engaged in the
acquisition, exploration and, if warranted, development of mineral properties,
primarily gold and copper properties located in Latin America. The Company's
near term operational plan is to complete exploration on its three principal
mineral property interests and to pursue the identification and acquisition of
additional mineral properties. The Company has implemented an aggressive plan to
assess new opportunities for the acquisition of additional mineral properties
with the potential to be significant gold and copper producers.
During 1997, the Company will be required to pay $405,000 in lease and
purchase option payments in connection with its Resguardo, Cenizas and Santa
Eloisa properties. See "Item 1. Description of Business--Mineral Exploration
Properties." In addition, the Company is required to expend $200,000, $300,000
and $500,000 in conducting exploration on its Cenizas Property during 1997, 1998
and 1999, respectively, and $1,000,000 in conducting exploration on its Santa
Eloisa Property before April 30, 1999.
The Company also intends to expend significant additional funds on i)
exploration in excess of contractual commitments, ii) identification and
acquisition of additional mineral properties and iii) general and administrative
costs associated with the implementation of its operational plan. The Company
has the ability to exercise control over the amount and timing of a significant
portion of these additional costs.
The Company has experienced operating losses since inception, resulting
in an accumulated deficit position. These operating losses are a result of the
Company's (i) expansion of its administrative staff and technical staff to fully
support the Company's exploration and property acquisition activities, (ii)
exploration expenditures on the Company's existing properties, and (iii) cost
associated with the Company's mineral property acquisition program. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are discussed below.
It is anticipated that the proceeds from the Series A Notes and the
Bridge Note will satisfy the Company's cash requirements until June, 1997. The
Company may extend this date through reducing its current exploration budget and
acquisition activities. To the extent the additional financial resources
discussed below are not available to the Company, the Company may be required to
substantially reduce or eliminate its exploration and or acquisition activities.
The Company's current operational plan relies upon the full conversion
of all Series A Notes. The Company has been utilizing the proceeds of the Series
A Notes in connection with its business operations. Therefore, if any of the
Series A Note Holders elect not to convert, the Company may be required to use
any or all of the remaining proceeds from the offering of the Series A Notes to
repay principal and interest to those Series A Note Holders who elect not to
convert. There can be no assurance that the Company will have sufficient
remaining proceeds to repay those Series A Note Holders who elect not to
convert. The Company may be required to seek outside sources of capital to meet
its financial obligations under the Series A Notes if a sufficient number of
Series A Note Holders elect not to convert. In addition, to maintain the
Company's current level of exploration and acquisition activities, the Company
will need a significant portion of the Warrants to be exercised during 1997. The
Company currently anticipates that it will sell additional securities at a price
sufficient to raise approximately $2 million to $4 million, either pursuant to
registration or an exemption from registration under the Act within the next 12
months, however, there can be no assurance that the Company will be successful
in completing such sales. If the Company is successful in obtaining proceeds
from a significant number of Warrant exercises and it is successful in selling
additional securities, the Company likely will expand its property acquisition
program and accelerate exploration work on its current properties.
During the next 12 months the Company will focus its human and
financial resources on i) exploration of its existing properties, ii)
identification and acquisition of additional mineral properties and iii)
exploration of mineral properties subsequently acquired. The Company does not
anticipate any significant purchases or sales of plants or equipment during the
next twelve months.
Currently, the Company has 12 full time employees. The Company also has
two full time and several part time geological consultants. The Company
anticipates hiring one additional full time employee during the first half of
1997. To the extent the Company is successful in acquiring additional mineral
properties, it may hire one or more employees or consultants on a full time
basis in the technical field.
-21-
<PAGE> 23
ITEM 7. FINANCIAL STATEMENTS.
AUDITORS' REPORT
To the Shareholders
Fremont Gold Corporation
We have audited the consolidated balance sheet of Fremont Gold Corporation as at
December 31, 1996 and the consolidated statements of operations, shareholders'
deficit and cash flow for the year then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1996
and the results of its operations and its cash flow for the year then ended in
accordance with generally accepted accounting principles in the United States.
The consolidated financial statements as at December 31, 1995 and for the year
then ended were audited by another auditor who expressed an opinion with a
reservation relating to a going concern contingency on those statements in their
report dated February 20, 1996 under generally accepted auditing standards in
the United States. Had the opinion been expressed in accordance with Canadian
generally accepted auditing standards, the opinion would have been without
reservation.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
April 8, 1997
COMMENTS BY AUDITIORS FOR U.S. READERS
ON CANADA - U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph following the opinion paragraph when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described in
notes 1 and 2 to the consolidated financial statements. Our report to the
shareholders dated April 8, 1997 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditors' report when these are adequately disclosed in the
financial statements.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
April 8, 1997
-22-
<PAGE> 24
FREMONT GOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 1,014,522 $ 1,035
Accounts receivable 28,829 --
Due from related parties (note 3) 13,039 --
Amounts due on Series A Convertible Notes 30,000 --
Prepaid expenses 7,831 --
----------- -----------
1,094,221 1,035
NON-CURRENT ASSETS:
Mineral properties (note 4) 396,239 --
Property and equipment, net (note 5) 95,026 --
----------- -----------
TOTAL ASSETS $ 1,585,486 $ 1,035
=========== ===========
LIABILITIES AND STOCKHOLDERS--DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 128,837 $ --
Due to related parties (note 6) 56,854 --
Loans payable -- 5,000
Promissory note payable (note 7) 22,600 --
Series A Convertible Notes (note 8) 1,800,000 --
Current portion of capital lease obligations (note 12) 24,833 --
----------- -----------
2,033,124 5,000
NON-CURRENT LIABILITIES:
Capital lease obligations, less current portion (note 12) 11,544 --
MINORITY INTEREST 2,500 --
STOCKHOLDERS' DEFICIT
Common stock (note 9)
$.001 par value; 20,000,000 authorized; 1,000,000 and
6,060,000 issued and outstanding at December 31,1995
and 1996 respectively 25,060 20,000
Additional paid-in capital 1,004,526 471,100
Unearned compensation (134,081) --
Accumulated deficit (1,357,187) (495,065)
----------- -----------
Total Stockholders' Deficit (461,682) (3,965)
Commitments and Contingencies (notes 4, 8, 12, and 14)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,585,486 $ 1,035
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-23-
<PAGE> 25
FREMONT GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
For the Years Ended
---------------------------
December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Interest income $ 15,730 $ --
GENERAL AND
ADMINISTRATIVE EXPENSES:
Compensation expense from stock option grants 25,519 --
Salaries and consulting 235,738 --
Depreciation 6,137 --
Foreign exchange 12,153 --
Legal and accounting 101,442 --
Rent and office expenses 85,075 9,862
Investor services 43,033 --
Travel & public relations 80,751 --
----------- -----------
589,848 9,862
IMPAIRMENT OF MINERAL PROPERTIES (note 4) 153,671
General Exploration 77,123 --
----------- -----------
Loss from operations 804,912 9,862
Interest expense 57,210 --
----------- -----------
Net loss $ 862,122 $ 9,862
=========== ===========
Weighted average number
of shares outstanding 3,420,874 1,000,000
=========== ===========
Loss per common share $ (0.25) $ (0.01)
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-24-
<PAGE> 26
FREMONT GOLD CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Common Stock
$ 0.001 Par Value
--------------------------
Shares
(restated, Amount Additional Unearned Accumulated Total
note 9) Paid-In Capital Compensation Deficit
-------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 1,000,000 $ 20,000 $ 471,100 $ -- $ (485,203) $ 5,897
Net loss -- -- -- -- (9,862) (9,862)
-------------------------- ----------- ----------- ----------- -----------
Balance December 31, 1995 1,000,000 $ 20,000 $ 471,100 $ -- $ (495,065) $ (3,965)
Forgiveness of debt -- -- 12,000 -- -- 12,000
Issuance of stock options -- -- 159,600 (159,600) -- --
Amortization of unearned
compensation -- -- -- 25,519 -- 25,519
Private placement 1,000,000 1,000 199,000 -- -- 200,000
Private placement 500,000 500 139,500 -- -- 140,000
Acquisition of Flagship Holding
Ltd. (note 2(d)) 3,560,000 3,560 23,326 -- -- 26,886
Net loss -- -- -- -- (862,122) (862,122)
-------------------------- ----------- ----------- ----------- -----------
Balance December 31, 1996 6,060,000 $ 25,060 $ 1,004,526 $ (134,081) $(1,357,187) $ (461,682)
========================== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-25-
<PAGE> 27
FREMONT GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
For the Years Ended
---------------------------
December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (862,122) $ (9,862)
Adjustments to reconcile net loss to net cash used in
operating activities:
Compensation expense from stock option grants 25,519 --
Depreciation 6,137 --
Expenses paid by issuance of shares by Flagship
Holding Ltd. 24,000 --
Impairment of mineral properties 153,671 --
Increase (decrease) in
Accounts receivable (28,829) --
Due from related parties (13,039) --
Prepaid expenses (7,831) --
Accounts payable and accrued liabilities 128,837 --
----------- -----------
Net cash used in operating activities (573,657) (9,862)
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to related parties 56,854 --
Lease payments (2,030) --
Loan payable 7,000 5,000
Loan received from affiliate 200,000 --
Repayment of loan from affiliate (200,000) --
Series A Convertible Notes 1,770,000 --
Issuance of shares for cash 340,000 --
Issuance of shares for cash by Flagship Holding Ltd. 2,886 --
Increase in minority interest 2,500 --
----------- -----------
Net cash flow from financing activities 2,177,210 5,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in mineral properties (549,910) --
Investment in property and equipment (40,156) --
----------- -----------
Net cash used in investing activities (590,066) --
Net increase (decrease) in cash 1,013,487 (4,862)
Cash and cash equivalents, beginning of
period 1,035 5,897
----------- -----------
Cash and cash equivalents, end of period $ 1,014,522 $ 1,035
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-26-
<PAGE> 28
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
The Company is a Delaware corporation and its principal business activity is the
acquisition, exploration and development of mineral properties, primarily gold
and copper properties located in Latin America.
During 1996, the Company commenced a program of exploration of certain mineral
properties, and as at December 31, 1996 had not established the existence of
economically recoverable mineral reserves. Continuing operations of the Company
and the recoverability of amounts shown for mineral properties are dependent
upon the discovery of economically recoverable reserves, the ability of the
Company to obtain financing to complete exploration and development and future
profitable operations or proceeds from the disposition thereof.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
The financial statements have been prepared assuming the Company will continue
as a going concern. Certain factors, discussed below, raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The Company has a substantial working capital deficit at December 31, 1996 due
to current debt maturities, and does not have sufficient funds to meet the
exploration objectives as presently planned. Management recognizes that the
Company must generate additional resources to enable it to continue operations.
The Company is actively pursuing the sale of equity securities with funds raised
being made available to the Company. Management expects these pursuits will
result in additional resources to the Company, however, no assurance can be
given that the Company will be successful in raising additional capital.
Further, there can be no assurance, assuming the Company successfully raises
additional funds, that the Company will achieve profitability or positive cash
flows in the future.
An election by Series A Note holders (see note 8, Series A Convertible Notes)
not to convert such debt to equity would result in the Company being required to
repay the principal amount of the unconverted Series A Note, together with
accrued and unpaid interest, on June 30, 1997. The Company has been utilizing
the proceeds of the Series A Notes in connection with its business operations.
Therefore, if any of the Series A Note holders elect not to convert, the Company
may be required to repay principal and interest to those Series A Note holders
who elect not to convert. There can be no assurance that the Company will have
sufficient funds to repay those Series A Note holders who elect not to convert.
The Company may be required to seek outside sources of capital to meet its
financial obligations under the Series A Notes if a sufficient number of Series
A Note holders elect not to convert. The failure to procure such financing on
acceptable terms could have a material adverse effect on the Company's business,
financial condition and results of operations.
If the Company is unable to obtain adequate additional financing, management
will be required to curtail the Company's exploration and mineral property
acquisition programs.
(b) Use of estimates
-27-
<PAGE> 29
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) Principles of consolidation
The consolidated statements include the accounts of the Company and its 100%
owned subsidiary, Flagship Holding Ltd. ("FHL"), and 99% owned subsidiary Minera
Fremont Gold Chile S.A. ("MFG"). All significant intercompany transactions and
balances have been eliminated on consolidation.
(d) Accounting treatment of Flagship Holding Ltd. acquisition
Pursuant to a Share Purchase Agreement dated July 31, 1996, with an effective
date of July 1, 1996, the Company acquired 100% of the issued and outstanding
shares of FHL it did not previously own. The Company completed this acquisition
in consideration of the exchange of 3,560,000 shares of its Common Stock.
The acquisition of FHL by the Company has been accounted for at historical cost
in a manner similar to pooling of interest accounting. Accordingly, the
statements of operations and cash flows for the year ended December 31, 1996
include the results of FHL from its inception (June 14, 1996). The effect of the
acquisition of FHL on the number of shares and capital accounts of the Company
is shown in the statement of shareholder's deficit for the year ended December
31, 1996.
(e) Cash and cash equivalents
Cash and cash equivalents consist of highly liquid investments that are readily
convertible to known amounts of cash and generally have original maturity values
of three months or less.
(f) Mineral properties
All mineral claim acquisition costs and exploration and development expenditures
in the pre production stage relating to mineral properties, net of any
recoveries, are capitalized. General exploration expenditures which do not
relate to specific resource properties are expensed in the period incurred.
The amounts shown as deferred mineral property costs represent net costs to date
and do not necessarily represent present or future values.
On an on-going basis, the Company evaluates each property based on results to
date to determine the nature of exploration work that is warranted in the
future. If there is little prospect of further work on a property being carried
out, the deferred costs related to that property are written down to the
estimated recoverable amount.
The deferred acquisition, exploration and development costs related to a
property from which there is production will be depleted on the
unit-of-production method based upon estimated proven and probable reserves.
(g) Property and equipment
-28-
<PAGE> 30
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
Amortization of office furniture and equipment, computer hardware and software,
leased assets and leasehold improvements is provided on a straight line basis
over a period of three years.
(h) Accounting for the impairment of long-lived assets
In 1996, the Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, ("SFAS 121"). The
adoption of SFAS 121 had no effect on the Company's financial statements.
(i) Foreign currency translation
The Company and its subsidiaries use the U.S. Dollar as their functional
currency. Transactions recorded in Chilean pesos, Barbados pounds and Canadian
dollars are translated as follows:
(i) Monetary assets and liabilities at the rate prevailing at the
balance sheet date.
(ii) Non-monetary assets and liabilities at historic rates.
(iii) Income and expenses at the average rate in effect during the
period.
Exchange gains or losses are recorded in the consolidated statement of
operations.
(j) Accounting for stock based compensation
The Company uses the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for its stock-based incentive plans.
Under the intrinsic value based method, compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date over the amount an
employee or director must pay to acquire the stock.
(k) Income taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date.
-29-
<PAGE> 31
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
(l) Loss per share
Loss per share is computed by dividing the loss by the weighted average number
of common shares outstanding during the period.
3. DUE FROM RELATED PARTIES
Balance represents employee advances for expenditures made by employees on
behalf of the Company.
4. MINERAL PROPERTIES
Accumulated costs in respect to the Company's interest in mineral claims under
option consist of the following:
<TABLE>
<CAPTION>
Acquisition Balance at Dec. Additions during Written off Balance at Dec.
and 31, 1995 the period during period 31, 1996
Exploration Costs
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LOS LEONES & REMOLINO
Acquisition $ -- $130,927 $130,927 $ --
Exploration -- 22,744 22,744 --
- -----------------------------------------------------------------------------------------------------------------
-- 153,671 153,671 --
RESGUARDO
Acquisition -- 288,101 -- 288,101
Exploration -- 83,138 -- 83,138
- -----------------------------------------------------------------------------------------------------------------
-- 371,239 -- 371,239
CENIZAS
Acquisition -- 25,000 -- 25,000
- -----------------------------------------------------------------------------------------------------------------
-- 25,000 -- 25,000
- -----------------------------------------------------------------------------------------------------------------
Total $ -- $549,910 $153,671 $396,239
=================================================================================================================
</TABLE>
(a) Remolino Property
On June 17, 1996, the Company entered into a mining option on the Remolino
Property. Under the terms of the agreement, the Company shall pay a total
consideration of $105,000 plus all costs to keep the property in good standing.
The $105,000 is payable $15,000 upon execution of the mining option; $15,000 in
6 months; $25,000 on the first anniversary of the mining option; and $50,000 on
the second anniversary of the mining option. Additional option payments totaling
$135,000 are as follows: $10,000 upon execution of the mining option; $20,000 on
September 10,1996; $50,000 on December 10, 1996; and $55,000 on March 10, 1997.
In December, 1996 the Company elected to discontinue exploration on its Remolino
property and elected not to make any further payments under its June 17, 1996
option to purchase. The Company has no further financial obligations to, nor
ownership interest in the Remolino property and accordingly, exploration
expenditures on this property were written off in 1996.
-30-
<PAGE> 32
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
(b) Los Leones Property
On June 17, 1996, the Company entered into a mining option on the Los Leones
Property. Under the terms of the agreement, the Company shall pay a total
consideration of $100,000 plus all costs to keep the property in good standing.
The $100,000 is payable $10,000 upon execution of the mining option; $15,000 in
6 months; $25,000 on the first anniversary of the mining option; and $50,000 on
the second anniversary of the mining option.
In January, 1997 the Company elected to discontinue exploration on the Los
Leones property and elected not to make further payments under its June 17, 1996
option to purchase the Los Leones mining concessions. The Company has no further
financial obligations to, nor ownership interest in the Los Leones Property, and
accordingly, exploration expenditures on this property were written off in 1996.
(c) Resguardo Property
On July 17, 1996 the Company entered into a 99 year Lease Agreement on the
Resguardo Property. Lease payments are as follows: $75,000 upon execution of the
Lease Agreement; $60,000 payable on each of the lease's first and second
anniversary; and $80,000 payable on the lease's third anniversary. The Company
has the exclusive right to exploit, benefit, explore, develop and smelt minerals
from the 3,417 hectare (8,443 acre) property located on the Atacama Fault System
of northern Chile. The owners retain a net smelter return production royalty,
equal to 5% on gold and 1.5% on all other mineral production from the property,
and a minimum annual royalty payment of $300,000 is payable when the property is
in production. Subsequent to the third anniversary of the lease, the Company
must complete a feasibility study and obtain project financing to begin
production on or before the seventh anniversary of the lease. No payments to the
owners are required during this period. If production financing has not been
obtained during this period, and construction of the mine has not begun by the
seventh anniversary, the Company must pay advance royalty payments of $150,000
in first year of delay; $200,000 in the second year of delay; $250,000 in the
third year of delay; and 15% annual incremental increases for subsequent delays.
The first royalty payment may be credited to the future net smelter return
production royalty.
During the year, the Company applied for exploration claims on an additional
12,000 hectares (29,652 acres) adjacent to the leased property.
(d) Cenizas
The Company signed a Letter of Intent with RTZ Mining & Exploration Limited
("RTZ") on December 13, 1996 whereby the Company can earn an initial 51%
interest in the Cenizas Property mining concessions located on the West Fissure
Fault in northern Chile, by making cash payments totaling $350,000 and
completing at least $1,000,000 of exploration work over three years. Payments
during the first year total $50,000 with a first year exploration commitment by
the Company of $200,000. The Company will also grant to RTZ options to purchase
shares of its Common Stock as follows: by June 13, 1997 an option to purchase
150,000 shares of Common Stock at a price of $1.50 per share, by December 13,
1997 an additional option to purchase 150,000 shares of Common Stock at a price
of $2.00.
Upon completion of the required payments to RTZ and satisfaction of the
Company's exploration commitments, the Company will be entitled to a 51%
interest in the Cenizas Property mining concessions. At that time, the project
will convert into a joint venture between the Company and RTZ with the Company
serving as manager of the joint venture. It is presently contemplated that at
such time, a new entity (the exact form of which has not been specified) will be
formed to hold title to the mining concessions with the Company initially owning
51% of the entity. (If either the
-31-
<PAGE> 33
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
Company or RTZ chooses not to contribute pro-rata, their interest can be diluted
to a 2% Net Smelter Royalty with a maximum value of $3,000,000.) Within 60 days
of the Company earning its 51% interest in the Cenizas Property mining
concessions, RTZ has an option to obtain a 51% interest in the mining
concessions by committing to fund and complete a bankable feasibility study
within a 30 month period.
5. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Cost Accumulated Net
Depreciation 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office furniture and equipment $ 43,306 $ 2,012 $ 41,294 $ --
Computer hardware and software 17,285 1,372 15,913 --
Leased assets 38,407 2,633 35,774 --
Leasehold improvements 2,165 120 2,045 --
- -------------------------------------------------------------------------------------------
Total $101,163 $ 6,137 $ 95,026 $ --
===========================================================================================
</TABLE>
6. DUE TO RELATED PARTIES
On April 11, 1996 Minera Fremont Gold Chile S.A. borrowed $20,006 from Roberto
Partarrieu, an employee of the Company. The loan is non-interest bearing and is
repayable upon demand. At December 31, 1996 $20,007 was outstanding.
On June 14, 1996, FHL borrowed $60,847 from Edward M. Topham, an officer and
director of the Company, pursuant to a Loan Agreement. This loan is repayable
upon demand with interest accruing at 10%. In December, payments totaling
$25,065 ($24,000 of principal and $1,065 in interest) were made on the loan. At
December 31, 1996 the principal outstanding was $36,847. $1,964 of interest was
accrued on the loan and is included in accounts payable.
7. PROMISSORY NOTE
On October 31, 1996 the Company entered into a Promissory Note agreement with
Laminco Resources Inc. ("Laminco") for the purchase of office and computer
equipment. The note requires that monthly payments of $2,256 be made on the
first day of each month commencing January 1, 1997 until full repayment has
occurred. If payments are made when due, no interest on the principal is
applied. If payments are not made when due, an interest charge of 1% compounded
monthly applies on the aggregate unpaid principal balance plus accrued interest.
The Company has pledged the assets purchased as additional collateral and has
agreed not to dispose of the assets until the principal has been paid.
-32-
<PAGE> 34
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
8. SERIES A CONVERTIBLE NOTES
On August 28, 1996, the Company commenced an offering of $1,800,000 principal
amount of unsecured 10.5% Series A Convertible Notes ("Series A Notes"). Each
Series A Note is convertible, at the option of the holder into Equity Units at
any time after the issue date and prior to March 1, 1997 (the "Maturity Date"),
at the rate of $0.50 per Equity Unit.
Each Equity Unit is comprised of one share of the Company's Common Stock, par
value $0.001 per share, and one Redeemable Common Stock Purchase Warrant
("Warrant").
Each Warrant is exercisable until April 15, 1997 to purchase one share of Common
Stock at the greater of $1.50 or 75% of the ten day average closing prices, as
quoted on the OTC Bulletin Board, immediately preceding the notice of exercise.
The Warrants issued in connection with the conversion of the Series A Notes as a
component of the Equity Unit will be redeemable by the Company upon conversion
of the notes, and upon 15 days notice to the Warrant holder, at a redemption
price of $0.10 per Warrant.
The holders of the Series A Notes, Warrants or Common Stock issued to holders
without an effective Registration Statement under the Securities Act of 1933, as
amended, ("Act") shall have the right, at any time, to join with the Company to
register the Common Stock and the Common Stock underlying the Series A Notes and
Warrants in any Registration Statement under the Act filed by the Company with
the Securities and Exchange Commission. The Company filed a Registration
Statement on Form SB-2 with the Securities and Exchange Commission on February
12, 1997. The Registration Statement includes the Common Stock underlying the
Series A Notes and Warrants.
On August 26, 1996, Roberto L. Partarrieu, general manager of MFG, purchased
Series A Notes in the principal amount of $30,000. On September 3, 1996 HRG, a
private investment partnership, purchased Series A Notes in the principal amount
of $25,000. Michael J. Hopley, president, chief executive and director of the
Company beneficially owns one third of HRG.
Each purchaser of the Series A Notes, as a condition precedent to his, her or
its conversion into Equity Units, must enter into a Voluntary Stock Pooling
Agreement ("Pooling Agreement"). Under the terms of the Pooling Agreement each
recipient of Common Stock pursuant to conversion of the Series A Notes will
severally agree with the Company, the Trustee (as defined in the Pooling
Agreement) and each with the other, that they will deliver or cause to be
delivered to the Trustee certificates representing their respective shares of
Common Stock received in the conversion. The shares of Common Stock issuable
upon exercise of the Warrants will not be subject to the Pooling Agreement.
Pursuant to the Pooling Agreement the Trustee shall hold all certificates
subject to release, on a pro-rata basis, as follows:
PRO-RATA SHARES OF COMMON STOCK RELEASE DATE
25% of Common Stock purchased April, 1, 1997
25% of Common Stock purchased July 1, 1997
25% of Common Stock purchased October 1, 1997
the balance of Common Stock purchased January 1, 1998
On February 27, 1997, the Company made amendments to the terms and conditions of
the Series A Notes. The Company extended the expiry date of the Warrant
component of the Units from April 15, 1997 to September 30, 1997. The Company
requested that note holders extend the Maturity Date of the notes from March 1,
1997 to June 30, 1997.
-33-
<PAGE> 35
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
As at March 31, 1997, 80% of the Series A Note holders representing 89% of the
balance of the notes payable had signed and delivered to the Company, Maturity
Date Extension Agreements. While management believes that the remaining note
holders will sign and return their Agreements to the Company, the Company is in
default on the remaining Series A Notes. In the event that the remaining Series
A Note holders do not agree to the maturity date extension, these Series A Note
holders may pursue remedies under the Note, in accordance with certain terms and
conditions including earning default interest at the rate of 16% per annum. The
principal amount of Series A Notes in default is $198,000.
The interest rate of 10.5% will be paid upon the notes until they are converted.
Upon conversion of the note, the first 25% release from the Voluntary Pooling
Agreement, originally scheduled for April 1, 1997, will be immediately released.
The balance of the releases will remain unchanged at July 1, 1997, October 1,
1997 and January 1, 1998.
9. SHARE CAPITAL
On April 15, 1996, the Board of Directors of the Company and holders of a
majority of the outstanding Common Stock of the Company authorized the Company,
by written consent, to take a series of actions related to its authorized and
outstanding Common Stock. These actions included a one-for-twenty (1-for-20)
reverse stock split of the Company's Common Stock, pursuant to which each twenty
(20) shares of the Company's Common Stock outstanding immediately prior to April
30, 1996 was converted into one (1) share of the Company's Common Stock.
In connection with the reverse split the Company maintained the par value of its
Common Stock at $0.001 par value per share, and the total number of shares of
Common Stock authorized to be issued by the Company remained unchanged at
20,000,000 shares. The number of issued and outstanding shares of the Company's
Common Stock after the reverse split was 1,000,000 shares. All references to
shares of Common Stock have been retroactively adjusted to reflect this reverse
split.
In May 1996, the Company's Board of Directors approved a private placement of
1,000,000 shares of Common Stock at an offering price of $0.20 aggregating
$200,000 to the Company. This private placement was closed on July 30, 1996.
On July 31, 1996, the Board of Directors of the Company and holders of a
majority of the outstanding shares of the common stock of the Company,
authorized the Company, by written consent, to acquired 100% of FHL stock not
previously owned by the Company. The Company completed this acquisition in
consideration for the exchange of 3,560,000 shares of its Common Stock. Michael
J. Hopley, a director, president and chief executive officer of the Company,
David Shaw, a director of the Company and Edward M. Topham, chief financial
officer of the Company, received 418,000, 372,000, and 381,000 shares,
respectively, of the Company's Common Stock in the exchange.
On August 1, 1996, the Company completed a private placement of 500,000 shares
of its Common Stock to Laminco in consideration of $140,000.
-34-
<PAGE> 36
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
WARRANTS
On June 4, 1996, and June 20, 1996 Laminco, then an affiliate of the Company,
advanced loans to the Company. In consideration of these loans the Company
granted Laminco warrants to purchase 400,000 shares of the Company's Common
Stock at a purchase price of $1.00 for a period of two (2) years. Fair value of
the warrants was considered nominal by the Company. In addition, the Company
granted Laminco certain rights to participate in all future financing completed
by the Company on the same terms offered third parties. Prior to year end the
balance of the loans was repaid.
STOCK OPTIONS
The Company's stockholders have adopted the 1996 Incentive Stock Plan (the
"Plan") which allows the Board of Directors to provide the Company's key
employees with incentive compensation commensurate with their positions and
responsibilities. The Plan permits the grant of incentive equity awards covering
up to 1,000,000 shares of Common Stock and will be administered by the
Compensation Committee of the Board of Directors (the "Committee"), two or more
members of which will be independent directors. The Plan provides for the grant
of non-qualified stock options and incentive stock options (collectively, the
"Incentive Awards"). Key employees of the Company and its subsidiaries,
including officers who are not also members of the Board of Directors, will be
eligible to participate in the Plan.
The Board of Directors may at any time amend the Plan in any respect; provided,
that, without the approval of the Company's shareholders, no amendment may (i)
increase the number of shares of Common Stock that may be issued under the Plan,
(ii) materially increase the benefits accruing to individuals holding Incentive
Awards, or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
Changes in stock options for the year ended December 31, 1996 are shown in the
following table:
<TABLE>
<CAPTION>
Exercise Price Weighted Avg
Share Options Per Share Exercise Price
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at Dec. 31, 1995 -- -- --
- --------------------------------------------------------------------------------------------
Granted during the year 780,000 $1.17 to 1.28 $ 1.23
- --------------------------------------------------------------------------------------------
Outstanding at Dec. 31, 1996 780,000 $1.17 to 1.28 $ 1.23
Exercisable at Dec. 31, 1996 12,500 $ 1.17 $ 1.17
- --------------------------------------------------------------------------------------------
</TABLE>
There were no options granted during 1995 or outstanding at December 31, 1995.
Expiry dates for options granted during the year range from September 27, 2002
to November 11, 2002.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its option plan. Accordingly, compensation costs based on the difference
between the quoted market value of the stock price at the grant date and the
option exercise price has been recognized and will be amortized over the vesting
period. Had compensation cost for the Company's stock option plan been
determined based on the fair value at the grant dates, consistent with the
method of
-35-
<PAGE> 37
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", the Company's net loss and loss per share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Net loss 1996
----------
<S> <C>
As reported $ 862,122
Pro forma $1,137,153
Net loss per common share
As reported $ 0.25
Pro forma $ 0.33
</TABLE>
The estimated weighted average fair value of options granted during the year was
$0.59, assuming a risk free rate of 7%, an expected volatility of 56% and a
weighted average expected life of 2 years. The estimate was made using the
Black-Scholes Option Pricing Model. The weighted average remaining contractual
life of options outstanding at December 31, 1996 was 5 years.
10. INCOME TAXES
Tax effects of temporary differences that give rise to deferred tax assets at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carry forwards $ 293,121 $ 137,962
Valuation allowance (293,121) (137,962)
- --------------------------------------------------------------------------------
Net deferred tax asset $ -- $ --
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1996 the Company has net operating loss carry forwards for
federal income tax purposes of approximately $862,122. Operating losses of
$405,771 accumulated to December 31, 1995 are no longer available for carry
forward due to the change in the nature of the Company's business operations
that occurred in 1996.
No deferred tax benefit has been recorded due to the uncertainty of the Company
realizing these benefits through profitable operations in the future.
-36-
<PAGE> 38
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
Income tax expense attributable to net losses was nil and nil for the years
ended December 31, 1996 and 1995 respectively. The differences between the total
income tax benefit from operations and the income tax expense (benefit) computed
using the Federal income tax rate of 34% in 1996 and 34% in 1995 were as
follows:
1996 1995
- --------------------------------------------------------------------------------
Computed "expected" tax benefit $(293,121) $ (3,353)
Change in valuation allowance 293,121 3,353
- --------------------------------------------------------------------------------
$ -- $ --
- --------------------------------------------------------------------------------
Effective tax rate 0% 0%
- --------------------------------------------------------------------------------
11. SEGMENTED INFORMATION
<TABLE>
<CAPTION>
1996 1995
---- ----
Loss for the Year Identifiable Assets Loss for the Year Identifiable Assets
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
United States $ -- $ -- $ 9,862 $ 1,035
Canada 579,829 969,968 -- --
Barbados 38,430 2,019 -- --
Chile 243,863 613,499 -- --
- -----------------------------------------------------------------------------------------------------
Consolidated $ 862,122 $1,585,486 $ 9,862 $ 1,035
=====================================================================================================
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
The Company is committed under an operating lease to pay for office space in
Vancouver, British Columbia, Canada. The lease is for a term of five years
commencing on the 1st day of August, 1996 and ending on the 30th day of July
2001. The minimum lease payments for the next five years are as follows:
<TABLE>
<CAPTION>
YEAR Amount
<S> <C>
1997 $ 20,174
1998 20,174
1999 20.174
2000 20,174
2001 11,768
--------
Total $ 92,464
========
</TABLE>
-37-
<PAGE> 39
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
The Company leases vehicles under agreements which are classified as capital
leases. Leased capital assets included in Property and equipment at December 31,
1996 are as follows:
<TABLE>
<S> <C>
Leased Vehicles $38,407
Less: Accumulated Depreciation 2,633
- --------------------------------------------------------------------------------
Total $35,774
================================================================================
</TABLE>
Following is a summary of future minimum payments under capitalized leases that
have initial or remaining noncancelable lease terms in excess of one year at
December 31, 1996:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1997 $24,833
1998 16,555
- --------------------------------------------------------------------------------
Total minimum lease payments 41,388
Less: interest 5,011
- --------------------------------------------------------------------------------
Present value of minimum lease payments 36,377
Current portion 24,833
Long term obligation $11,544
================================================================================
</TABLE>
13. SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Increase in Paid-In Capital $ 12,000 $ --
Forgiveness of Debt (12,000) --
Property and equipment acquired 22,600 --
Promissory note payable (22,600) --
- --------------------------------------------------------------------------------
Cash received (paid) $ -- $ --
================================================================================
</TABLE>
14. SUBSEQUENT EVENTS
(a) The Company granted 170,000 employee stock options to five new employees in
January, 1997 at an option price of $1.17 exercisable until January, 2002. The
option price was based on 85% of ;the market price of $1.38. One quarter of
these options vest 3 months from the date of grant, a further 25% of the options
vest 6 months from the date of grant, a further 25% of the options vest 9 months
from the date of grant, and the remaining options will vest on the anniversary
of the date of grant.
(b) On January 22, 1997 the Company entered into an agreement ("Santa Eloisa
Agreement") with certain mining concession owners ("Santa Eloisa Owners").
Pursuant to the Santa Eloisa Agreement the Santa Eloisa Owners will cause a new
Chilean corporation to be formed, Minera Santa Eloisa S.A. ("MSE") and 100% of
the mining concessions
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<PAGE> 40
FREMONT GOLD CORPORATION
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
covering approximately 4,700 hectares in the Maricunga Gold Mining District of
northern Chile to be transferred to MSE in consideration of 500 series A shares
and 1,500 series B shares representing 100% of MSE. The Company, pursuant to the
Santa Eloisa Agreement may: (i) purchase 500 series A shares from the Santa
Eloisa Owners upon payment to the Santa Eloisa Owners of $500,000 ("Purchase
Option"); $30,000 paid on January 22, 1997, $135,000 payable on April 30, 1997,
$135,000 payable on November 30, 1997, $100,000 payable on March 31, 1998 and
$100,000 payable on March 31, 1999, and (ii) purchase from MSE 1,000 series A
shares in consideration of funding a $1,000,000 exploration work program
("Exploration Commitment") on or before March 31, 1999. Upon the Company's
exercise of its Purchase Option and funding its Exploration Commitment the
Company will own 50% of the share capital of MSE in the form of series A Shares,
the Santa Eloisa Owners will own 50% of the share capital of MSE in the form of
series B shares. The series B shares cannot be diluted below 25% of the total
share capital of MSE.
The Company will manage the business affairs and daily operations of MSE and
will appoint its directors in proportion to its relative ownership percentage of
MSE.
(c) On April 1, 1997, the Company borrowed $650,000 from an unaffiliated lender
("Lender") pursuant to a Promissory Note. The Promissory Note provided for an
interest rate of 12% per annum and a maturity date of July 31, 1997, at which
point, principal and accrued and unpaid interest shall be paid. The Promissory
Note is secured by a pledge agreement ("Pledge Agreement"). Under the terms of
the Pledge Agreement, Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, a director and chief
financial officer of the Company and David Shaw, a director of the Company,
granted the Lender a security interest in 1,088,412 shares of Common Stock of
the Company. As additional consideration, the Company issued the Lender a
warrant to purchase 650,000 shares of the Company's Common Stock for a period of
two years at a price of $1.50 per share. In connection with this transaction the
Company granted an unaffiliated individual a loan organization fee consisting of
a warrant to purchase 85,000 shares of the Company's Common Stock for a period
of two years at a price of $1.50 per share. In consideration of providing the
security interest to facilitate this loan, the Company has agreed to issue
Messieurs Hopley, Topham and Shaw an aggregate of 75,000 shares of the Company's
Common Stock.
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<PAGE> 41
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Pursuant to Board of Directors action on February 12, 1997, the Company
dismissed Thomas W. Klash as its principal independent accountant to audit its
financial statements. Mr. Klash opined on the Company's financial statements for
the years ended December 31, 1994 and 1995. This dismissal arose out of the
change in control of the Company on June 4, 1996 and the subsequent relocation
of the Company's headquarters from Florida to Vancouver, British Columbia,
Canada.
Other than expressing substantial doubt as to the ability of the
registrant to continue as a going concern, Mr. Klash's report on the financial
statements for 1994 and 1995 did not contain an adverse opinion or a disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope, or
accounting principles. During 1994 and 1995 and for the interim period ending
February 12, 1997 (i) there were no disagreements with the former accountant on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure and (ii) there were no "reportable
events" (as defined in Regulation S-K Item 304). This dismissal was previously
reported on Form 8-K and the former accountant has provided the Securities and
Exchange Commission a letter stating that he does not disagree with the
statements contained therein.
On April 8, 1997 the Company engaged KPMG, chartered accountants, as
its accountants to audit its financial statements. KPMG served as the
accountants of FHL prior to its acquisition by the Company. Subsequent to such
acquisition, the Company consulted KPMG on the accounting treatment of that
acquisition. KPMG has reviewed the statements made in this paragraph and has
been given the opportunity to furnish the Company a letter containing any
additional information, clarifications or disagreements with such statements. No
such letter has been provided.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company. A summary of the background and
experience of each of these individuals is set forth after the table.
<TABLE>
<CAPTION>
NAME AGE POSITION SERVED SINCE
- ---- --- -------- ------------
<S> <C> <C> <C>
Michael J. Hopley 50 Chairman of the Board, Chief Executive Officer 1996
and President
Edward M. Topham 39 Director, Chief Financial Officer, Secretary, 1996
Treasurer
David Shaw 44 Director 1996
Roberto Ossandon 39 President--MFG 1996
</TABLE>
Michael J. Hopley, has been a Director, Chief Operating Officer and
President of the Company since June 4, 1996. On July 23, 1996, Mr. Hopley become
the Company's Chief Executive Officer. From 1989 to May 1996, Mr. Hopley served
as Vice President of Exploration and Corporate Development for Bema Gold
Corporation, a publicly held exploration and development company with operations
in Chile, Argentina, Venezuela and the United States. Mr. Hopley is a geologist
with over 25 years experience in gold exploration worldwide. After graduating in
1970 with an honors degree in geology from London University he spent eight
years with Consolidated Gold Fields in Great Britain, the United States and
Canada.
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<PAGE> 42
Edward M. Topham, has been Chief Financial Officer, Secretary and
Treasurer since August 1, 1996 and a Director since January 22, 1997. From March
of 1995 through March 1996, Mr. Topham was a director and chief financial
officer of Range Star Telecommunications, Ltd., a publicly held wireless
communications company. Mr. Topham is co-founder of Motorsports Development
Corporation and served as director and chief financial officer from January 1994
through March 1996. From June 1992 through January 1994, Mr. Topham was
executive vice president, chief financial officer and a director of Action
Performance Companies, Inc., a publicly held company engaged in manufacturing
and marketing of motor sports related products. From April 1989 to June 1992,
Mr. Topham was a principal in the investment banking firm of Kachina Capital
Corporation. From March 1988 to April 1989, he was president and director of
International Leisure Enterprises, Inc., a publicly held company engaged in the
development, ownership and sales of resort properties. From December 1984 to
March 1988, he was vice president of corporate finance of Fitzgerald De Armann
and Roberts, Inc. and its predecessor, Century Capital Corporation, an
investment banking and securities brokerage firm. Prior to that time, Mr. Topham
was engaged in public accounting with Peat Marwick Mitchell & Co. (now KPMG Peat
Marwick L.L.P.).
David Shaw, has been a Director of the Company since June 4, 1996. From
December 1995, to present Mr. Shaw has served as President of Yuma Gold Mines,
Inc., a publicly held exploration and development company. In addition, Mr. Shaw
holds board positions with Kilimantan Gold Ltd. and Keylock Resources Ltd., both
publicly held exploration and development companies. From November 1993 to
December 1995, Mr. Shaw served as Senior Mining Analyst, Corporate Finance,
Natural Resource Group, Yorkton Securities Ltd. From August 1991 to November
1993, Mr. Shaw served as President of Bema Resource Management Ltd. a mineral
exploration and development company. From January 1990, to November 1991, Mr.
Shaw was in independent consultant providing technical and financial evaluation
services of base and precious metal exploration and development projects.
Previously Mr. Shaw served eight years with Chevron Canada Resources Ltd. Mr.
Shaw graduated with a B.S. from the University of Sheffield, U.K. and Ph.D.
Structural Geology from Carlton University, Ottawa, Canada.
Roberto Ossandon, has been President and Director of Minera Fremont
Gold Chile S.A. since January 1996. Mr. Ossandon, since January 1981, has been
senior partner of the law firm Ossandon, Uribe & Hubner located in Santiago,
Chile. Mr. Ossandon's law firm is legal counsel to Placer Dome Sud America
Limited, Baker Hughes Corporation (Houston), Citibank N.A., Data General S.A.,
Keystone Food Corporation (Pennsylvania), Kintetsu World Express (New York),
McDonalds Corporation and Merrill Lynch Multinational Investment Portfolio
(Luxemburgo). Mr. Ossandon is a member of the Chilean Bar Association,
International Bar Association and the International Association of Young Lawyers
(AIYA). Mr. Ossandon is a board member of numerous corporations and former
General Secretary and currently Vice President of Renovacion National political
party in Chile. Mr. Ossandon is a member of the American and Canadian Chamber of
Commerce. Mr. Ossandon graduated from the University of Chile Law School (LL.B.
Maximum Distinction.).
No disclosure is required with respect to Item 405 of Regulation S-B,
"Section 16(a) Beneficial Ownership Reporting Compliance."
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<PAGE> 43
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information concerning the compensation
received for services rendered in all capacities to the Company for the years
ended December 31, 1994, 1995, and 1996 by Michael J. Hopley, current CEO and
President and Mr. Norman Becker, former President. No other executive officer's
compensation exceeded $100,000 during these time periods. No restricted stock
awards, stock options, long term incentive plan payouts or stock appreciation
rights were granted for the years ended December 31, 1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payments
------ --------
Restricted Shares
Name of Individual Other Annual Stock Underlying LTIP All Other
and Principal Position Year Salary Bonus Compensation Award(s) Options Payouts Compensation
- ---------------------- ---- ------ ----- ------------ -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Hopley(1) 1996(2) $57,557 -0- -0- -0- 150,000 -0- -0-
President, CEO
Norman H. Becker 1996(4) -0- -0- -0- -0- -0- -0- -0-
President(3) 1995 -0- -0- -0- -0- -0- -0- -0-
1994 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
- ----------
(1) Mr. Hopley has been an executive officer of the Company since June 4, 1996.
(2) Represents compensation for the period beginning June 4, 1996.
(3) Mr. Becker resigned as President of the Company on June 4, 1996.
(4) Represents compensation for period ending June 4, 1996.
The following table sets forth the options granted to the Company's
executive officers during 1996 pursuant to its 1996 Stock Option Plan. See "Item
10. Executive Compensation -- Stock Option Plan".
OPTION GRANTS DURING FISCAL YEAR 1996
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE PRICE
NAME OPTIONS IN FISCAL YEAR 1996 ($/SH) EXPIRATION DATE
---- ------- ------------------- ------ ---------------
<S> <C> <C> <C> <C>
Michael J. Hopley 150,000 15.7% $1.28 11/11/01
Edward M. Topham 150,000 15.7% $1.28 11/11/01
</TABLE>
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<PAGE> 44
No options to purchase Common Stock were exercised by executive
officers of the Company in 1996. The following table sets forth information
regarding (i) the number of shares of Common Stock underlying unexercised
options held by executive officers and (ii) the aggregate value of in-the-money,
unexercised options held by executive officers based upon the final reported
trade of Common Stock on December 31, 1996.
1996 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Name Number of Securities Underlying Value of Unexercised In-the-
---- Unexercised Options at FY-End (#) Money Options at FY-End ($)
(Exercisable/Unexercisable) (Exercisable/Unexercisable)
--------------------------- ---------------------------
<S> <C> <C>
Michael J. Hopley 0/150,000 $0/$108,000
Edward M. Topham 0/150,000 $0/$108,000
</TABLE>
EMPLOYMENT AGREEMENTS.
On June 4, 1996, the Company entered into an employment agreement with
Michael J. Hopley. The agreement is for a one year term and provides for the
payment of an annual salary of $97,200 to Mr. Hopley. After one year the
agreement may be terminated without cause by either party. Mr. Hopley may
terminate upon 30 days notice. The Company may terminate subject to a severance
salary equal to one month's salary for each two months of engagement to a
maximum of six months' salary. Further, the agreement provides for the payment
of a two years salary if Mr. Hopley is terminated without cause in connection
with a change in control, as defined by the agreement, of the Company and
related change in the constitution of the member of the board of directors of
the Company.
On November 20, 1996, MFG entered into an employment agreement with
Robert Partarrieu. The agreement may be terminated by either part upon 30 days
written notice. Further, the agreement provides for an annual salary of $80,000
and a severance salary of one month salary for each year employment if the
agreement is terminated by Mr. Partarrieu and six months salary if terminated by
MFG.
DIRECTORS FEES.
Directors do not receive compensation for serving as members of the
Company's Board of Directors, but are reimbursed for their expenses in attending
meetings of the Board.
STOCK OPTION PLAN.
The Company's stockholders have adopted the 1996 Incentive Stock Plan
(the "Plan") which allows the Board of Directors to provide the Company's key
employee with incentive compensation commensurate with their positions and
responsibilities. The Plan permits the grant of incentive equity awards covering
up to 1,000,000 shares of Common Stock and will be administered by the
Compensation Committee of the Board of Directors (the "Committee"), two or more
members of which will be independent directors. The Plan provides for the grant
of non-qualified stock options and incentive stock options (collectively, the
"Incentive Awards"). At December 31, 1996, 780,000 non-qualified stock options
have been granted and are exercisable between $1.17 and $1.28 per share and
expire between September and December 2001. Key employees of the Company and its
subsidiaries, including officers who are not also members of the Board of
Directors, will be eligible to participate in the Plan.
The Board of Directors may at any time amend the Plan in any respect;
provided, that, without the approval of the Company's shareholders, no amendment
may (i) increase the number of shares of Common Stock that may be issued under
the Plan, (ii) materially increase the benefits accruing to individuals holding
Incentive Awards, or (iii) materially modify the requirements as to eligibility
for participation in the Plan.
Except in certain limited cases, the exercise price of each incentive
stock option ("ISO") granted under the Plan will be the fair market value (as
defined in the Plan) of a share of Common Stock on the date on which such ISO is
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<PAGE> 45
granted. The exercise price of each non-qualified stock option ("NQO") granted
under the Plan will be determined by the Committee. NQO's and ISO's are referred
to herein as "Options". Except in certain limited cases regarding grants of
ISO's, each ISO and NQO is exercisable for a period not to exceed ten years. The
Committee will establish (i) the term of each Option and (ii) the time or period
of time in which the Option will vest.
On a change in control of the Company (a "Change in Control"), all
Options then issued and outstanding will become immediately exercisable. A
Change in Control is (i) a "change in control" as that term is defined in the
federal securities laws, (ii) the acquisition by any person, after the effective
date of the Plan, of 20% or more of the shares of voting securities of the
Company, (iii) certain changes in the composition of the Board of Directors as a
result of a contested election for positions on the Board of Directors or (iv)
any other event which the Committee determines to constitute a change in control
of the Company.
INDEMNIFICATION.
The Company's Amended and Restated Certificate of Incorporation and
Bylaws require the Company to indemnify each of its past, present and future
officers and directors against liabilities and reasonable expenses incurred in
any action or proceeding by reason of such persons being or having been an
officer or director of the Company, of any other corporation for which he of she
serves as such at the request of the Company, to the fullest extent permitted by
Delaware law, including those circumstances in which indemnification would
otherwise be discretionary. However, indemnification is limited to officers and
directors who have acted in good faith and in a manner they reasonably believed
to be in the best interest of the Company and with respect to any criminal
action had no reasonable cause to believe the conduct was unlawful.
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<PAGE> 46
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 1, 1997 by each
person known by the Company to own more than 5% of the Common Stock. Shares are
beneficially owned by a person if he, she or it currently owns such shares or
has or will have the right to acquire such shares within 60 days.
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Owner Amount and Nature of Percent of
Beneficial Owner(1) Class
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Tom Wikstrom 706,000(2) 11.1%
17 Rue Arthur Herchen
Luxembourg L-1727
Germany
Common Stock Robertson Stephens Orphan Fund 1,993,333(3) 25.8%
555 California St., Suite 2600
San Francisco, CA 64104
Common Stock Robertson Stephens Offshore Orphan Fund 406,667(4) 6.4%
c/o Citco Fund Services Limited
Corporate Center
West Bay Road
Georgetown, Grand Cayman
Cayman Islands, B.W.I.
Common Stock Regional Investments, Inc. 606,000 10.0%
17 Rue Arthur Herchen
Luxembourg L-1727
Germany
Common Stock Rapid Capital, Inc. 372,000 6.1%
17 Rue Arthur Herchen
Luxembourg L-1727
Germany
Common Stock Legal Tender Ltd. 375,000(5) 6.0%
Design House, Suite 201
Providencials. Turks & Caicos Island
B.W.I.
Common Stock Private Banking Advisory Services, Ltd. 1,000,000(6) 14.2%
100 Rue du Rone
1204 Geneva
Switzerland
Common Stock Roberto L. Patarrieu 370,000(7) 5.9%
San Crescente 400
Santiago, Chile
</TABLE>
1. Unless otherwise noted, each person or entity named in the table has sole
voting and investment power with respect to the shares shown as beneficially
owned.
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<PAGE> 47
2. Includes 150,000 shares of Common Stock to be issued as part of the Units
upon conversion of the Series A Notes held by Tom Wikstrom and 150,000 shares
of Common Stock issuable upon exercise of Warrants included in such Units.
3. Includes 830,000 shares of Common Stock to be issued as part of the Units
upon conversion of the Series A Notes held by Robertson Stephens Orphan Fund
and 830,000 shares of Common Stock issuable upon exercise of Warrants
included in such Units.
4. Includes 170,000 shares of Common Stock to be issued as part of the Units
upon conversion of the Series A Notes held by Robertson Stephens Offshore
Orphan Fund and 170,000 shares of Common Stock issuable upon exercise of
Warrants included in such Units.
5. Includes 100,000 shares of Common Stock to be issued as part of the Units
upon conversion of the Series A Notes held by Legal Tender Ltd. and 100,000
shares of Common Stock issuable upon exercise of Warrants included in such
Units.
6. Includes 500,000 shares of Common Stock to be issued as part of the Units
upon conversion of the Series A Notes held by Private Banking Advisory
Services, Ltd. and 500,000 shares of Common Stock issuable upon exercise of
Warrants included in such Units.
7. Includes 50,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan, 60,000
shares of Common Stock to be issued as part of the Units issuable upon
conversion of the Series A Notes held by Mr. Partarrieu and 60,000 shares of
Common Stock issuable upon exercise of the Warrants included in such Units.
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<PAGE> 48
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 1, 1997 by each
director and executive officer and all of the directors and officers as a group.
Shares are beneficially owned by a person if he, she or it currently owns such
shares or has or will have the right to acquire such shares within 60 days.
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Amount and Nature of Percent of Class
Owner(1) Beneficial Owner(2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Michael J. Hopley 655,973(3) 10.6%
Common Stock Edward M. Topham 456,310(4) 7.4%
Common Stock Roberto Ossandon 40,000(5) 0.7%
Common Stock David Shaw 510,603(6) 8.3%
Common Stock All directors and executive 1,662,886 25.3%
officers as a group
</TABLE>
1. Unless otherwise indicated, the address of the beneficial owners listed
below is the address for the Company's headquarters: 777 Hornby Street,
Suite 2000, Vancouver, British Columbia, Canada V6Z 1S4.
2. Except as otherwise noted below, each person or entity named in the
table has the sole voting and investment power with respect to all
Common Stock shown as beneficially owned, subject to applicable
community property laws.
3. Includes a one-third interest in 50,000 shares of Common Stock to be
issued as part of the Units issuable upon conversion of Series A Notes
held by HRG, an investment partnership between Mr. Hopley and two other
individuals otherwise unaffiliated with the Company, a one-third
interest in 50,000 shares of Common Stock issuable upon exercise of
Warrants included in such Units held by HRG, 75,000 shares of Common
Stock issuable upon exercise of stock options granted to Mr. Hopley
pursuant to the Company's 1996 Stock Option Plan, and 25,000 shares of
Common Stock issuable in connection with loan guarantees provided in
connection with the Bridge Note.
4. Includes 75,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan, and
25,000 shares of Common Stock issuable in connection with loan
guarantees provided in connection with the Bridge Note.
5. Includes 20,000 shares of Common Stock issuable as part of the Units
issuable upon conversion of Series A Notes held by Mr. Ossandon and
20,000 shares of Common Stock issuable upon exercise of the Warrants
included in such Units.
6. Includes 75,000 shares of Common Stock issuable upon exercise of stock
options granted pursuant to the Company's 1996 Stock Option Plan, and
25,000 shares of Common Stock issuable in connection with loan
guarantees provided in connection with the Bridge Note.
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<PAGE> 49
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On June 4, 1996, Laminco Resources, Ltd. ("Laminco"), in a privately
negotiated transaction, purchased 600,000 shares of the Company's Common Stock
(representing 60% of the Company's then issued and outstanding Common Stock)
from unaffiliated group of individuals. In connection with the completion of
this share acquisition, all of the members of the Company's board of directors
and all of the Company's officers resigned and were replaced by new appointees
and the Company implemented a new business plan discussed above under "Item 1.
Description of Business - Background and Capital Structure" and "Current
Operations." Mr. Hopley was appointed president and chief executive officer of
the Company at this time.
On June 4, 1996, the Company entered into an employment agreement with
Michael J. Hopley. The agreement is for a one year term and provides for the
payment of an annual salary of $97,200 to Mr. Hopley. See "Item 10. Executive
Compensation--Employment Agreements."
On June 14, 1996, FHL, now a wholly owned subsidiary of the Company,
entered into an employment agreement with Michael J. Hopley. The agreement was
for a one year term and provided for the payment of an annual salary of $60,000.
Further, the agreement provided for a $15,000 one time bonus, payable upon
execution of the employment agreement by FHL. The agreement also provided for
the issuance of 418,000 shares of FHL stock in lieu of the bonus payment. In
connection with the Company's July 31, 1996 acquisition of FHL, Mr. Hopley
agreed to waive payment of any salary under the employment agreement for the
remainder of its term.
On June 14, 1996, Edward M. Topham, now a director and chief financial
officer of the Company, advanced FHL $60,487 pursuant to a loan agreement. The
loan agreement provided for repayment upon demand with interest accruing at 10%
per annum. In consideration of this loan, Edward M. Topham was issued 60,000
shares of FHL's common stock. On July 31, 1996, the Company acquired 100% of
FHL. On December 5, 1996, December 6, 1996 and January 15, 1997 the Company, on
behalf of FHL, its wholly owned subsidiary, paid $12,000, $12,000 and $12,000
respectively plus $1,065.20 accrued interest to Mr. Topham.
On June 4, 1996 and June 20, 1996, Laminco, a significant shareholder
of the Company until December 31, 1996, advanced the Company an aggregate of
$200,000 pursuant to a loan agreement. Pursuant to the terms of the loan
agreement, the Company issued Laminco a promissory note repayable upon demand
with interest accruing at the rate of 10% annually. As additional consideration,
the Company issued Laminco a warrant to purchase 400,000 shares of the Company's
Common Stock for a period of two years at a price of $1.00 per share and granted
Laminco certain rights to participate in all future financing completed by the
Company on the same terms offered third parties, subject to termination under
certain conditions relating to changes in control and management of Laminco. The
Company repaid $100,000, on both July 31, 1996 and October 3, 1996 plus, in the
aggregate, $2,547.60 accrued interest to Laminco.
On July 30, 1996 the Company completed a private placement of 1,000,000
shares of Common Stock at an offering price of $.20 aggregating $200,000 in
proceeds to the Company. Michael J. Hopley, a director, president and chief
executive officer of the Company, Edward M. Topham, director, chief financial
officer, secretary and treasurer of the Company and David Shaw, a director of
the Company, purchased 154,000, 73,310 and 138,603 shares, respectively, of the
Company's Common Stock in this placement.
On July 30, 1996, Laminco purchased 500,000 shares of the Company's
Common Stock for an aggregate purchase price of $140,000.
On July 31, 1996, the Company acquired 3,560,000 of the issued and
outstanding shares of FHL common stock not previously owned by the Company. The
shares of FHL common stock were acquired directly from the FHL shareholders in
exchange for 3,560,000 shares of the Company's Common Stock which were issued to
FHL stockholders. All 3,560,000 shares of Common Stock issued by the Company
were subject to restrictions on transfer pursuant to a pooling arrangement
between the FHL shareholders and the Company. See Item 5. Market for Common
Equity and Related Stockholder Matters -- Voluntary Stock Pooling Arrangements."
Upon completion of the share exchange, the Company directly owned all of the
issued and outstanding shares of FHL's common stock. Michael J. Hopley, a
director,
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<PAGE> 50
president and chief executive officer of the Company, Edward M. Topham, a
director and chief financial officer of the Company and David Shaw, a director
of the Company, received 418,000, 256,000 and 372,000 shares, respectively, of
the Company's Common Stock in the exchange. These interests in FHL were
disclosed to the members of the Company's board and the acquisition of FHL was
approved by the holders of a majority of the issued and outstanding Common Stock
of the Company.
In September 3, 1996, MFG paid Roberto L. Partarrieu, general manager
of MFG, $140,000 as reimbursement of costs incurred over the period April 1994
through July 31, 1996 associated with identifying mineral property acquisition
targets in Chile. The expense reimbursement was used by Mr. Partarrieu to repay
advances made by Laminco to Mr. Partarrieu to perform those services.
On April 1, 1997, the Company borrowed $650,000 from a Lender pursuant
to the Bridge Note. The Bridge Note provides for an interest rate of 12% (per
annum) and is due on July 31, 1997. The Bridge Note is secured by a Pledge
Agreement. Under the terms of the Pledge Agreement, Michael J. Hopley, a
director, president and chief executive officer of the Company, Edward M.
Topham, a director, chief financial officer, secretary and treasurer of the
Company and David Shaw, a director of the Company, pledged, in the aggregate,
1,088,412 shares of Common Stock of the Company owned by them to the Lender as
security for the Bridge Note. The Company also issued the Lender a warrant to
purchase 650,000 shares of the Company's Common Stock for a period of two years
at a price of $1.50 per share. In connection with this transaction the Company
granted an unaffiliated individual a loan acquisition fee consisting of a
warrant to purchase 85,000 shares of the Company's Common Stock for a period of
two years at a price of $1.50 per share. In consideration of pledging their
Common Stock as security to facilitate this loan, the Company has agreed to
issue Messrs. Hopley, Topham and Shaw an aggregate of 75,000 shares of the
Company's Common Stock.
On December 31, 1996, Laminco, pursuant to a Share Purchase and Sale
Agreement, sold 2,597,000 of the Company's Common Stock, representing 100% of
the Common Stock owned by Laminco. Each of the purchasers of these shares
entered into a Stockholders Agreement with the Company, the terms of which
restrict the transferability of the shares purchased until December 20, 1997.
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<PAGE> 51
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
The following is a list of the financial statements of Fremont Gold
Corporation included at Item 7 of Part II.
FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants 22
Financial Statements:
Balance Sheets - December 31, 1996 and 1995 23
Statements of Operations - For the Years Ended December 31, 1996 and 24
1995
Statements of Shareholders' Deficit - For the Years Ended December 31, 25
1996 and 1995
Statements of Cash Flows - For the Years Ended December 31, 1996 26
and 1995
Notes to Financial Statements - December 31, 1996 and 1995 27
</TABLE>
(a) EXHIBITS.
<TABLE>
<CAPTION>
No. Description Reference
- ----------- ----------------------------------------------------------------------------------- -------------
<S> <C> <C>
2.1 Stock Purchase Agreement between Laminco Resources, Inc., The Rothchild (1)
Companies, Inc. and the Selling Shareholders listed therein dated June 6, 1996
2.2 Stock Purchase Agreement by and between Fremont Gold Corporation, Flagship (3)
Holding Ltd. and the Selling Shareholders listed therein dated July 31, 1996
3.1 Certificate of Incorporation of Fremont Gold Corporation, as amended and (2)
restated
3.2 Bylaws of Fremont Gold Corporation (5)
4.1 Form of Common Stock Certificate (5)
4.2 Form of Common Stock Warrant (5)
4.3 Form of 10.5% Series A Convertible Note (4)
4.4 Form of Maturity Date Extension Agreement between the Company and 10.5% *
Series A Convertible Note Holders
4.5.1 $650,000 Promissory Note, dated April 1, 1997 issued by Company in favor of *
International Freedom
4.5.2 Warrant to purchase 650,000 shares of Common Stock, dated April 1, 1997, *
issued to International Freedom
10.1 Fremont Gold Corporation Stock Option Plan (3)
</TABLE>
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<PAGE> 52
<TABLE>
<CAPTION>
No. Description Reference
- ----------- ----------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.2 Bases of Agreement between Minera Fremont Gold Chile, S.A. and Alejandro (5)
Moreno P. and Others, dated January 22, 1997 (Santa Eloisa Property)
10.3 Letter of Intent between RTZ Mining and Exploration Limited and Fremont Gold (5)
Corporation, dated December 12, 1996 (Cenizas Property)
10.4 Agreement by and between Sali Hochschild S.A. and Inversiones Mineras AyL (5)
S.A., dated July 19, 1996 (Resguardo Property)
10.5 Employment Agreement, dated June 4, 1996, by and between Fremont Gold (5)
Corporation and Michael J. Hopley
10.6 Employment Agreement, dated November 20, 1996, by and between Minera (5)
Fremont Gold Chile, S.A. and Roberto E. Partarrieu
10.8 Form of Series A Note Voluntary Stock Pooling Agreement *
10.9.1 Form of Stock Purchase Agreement by and between Laminco and Non-U.S. *
Person Purchasers
10.9.2 Form of Stock Purchase Agreement by and between Laminco and U.S. Person *
Purchasers
10.9.3 Form of Stockholders Agreement by and between the Company and Laminco *
Purchasers
10.10 Pledge Agreement dated April 1, 1997 by and between Messers. Hopley, Shaw *
and Topham
10.11 Form of Voluntary Stock Pooling Agreement dated July 31, 1997, by and *
between the Company and former FHL Shareholders
16 Letter of Thomas W. Klush re: Change in accountants (6)
22 List of Subsidiaries of Fremont Gold Corporation (5)
</TABLE>
- ----------
* Filed herewith
(1) Filed with current report on Form 8-K, dated June 7, 1996.
(2) Filed with current report on Form 8-K, dated July 29, 1996.
(3) Filed with Form 10-Q quarterly report, dated June 30, 1996.
(4) Filed with Form 10-Q quarterly report, dated September 30, 1996.
(5) Filed with Registration Statement on Form SB-2, Reg. No. 333-21665,
filed February 12, 1997.
(6) Filed with Current Report on Form 8-K, dated February 12, 1997 (as
amended March 7, 1997).
(b) REPORTS ON FORM 8-K
None.
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<PAGE> 53
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report on Form 10-KSB to
be signed on its behalf by the undersigned, thereunto duly authorized, this 14th
day of April, 1997.
FREMONT GOLD CORPORATION
By: /s/ Michael J. Hopley
_________________________________
Michael J. Hopley, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-KSB has been signed below by the following persons on
behalf of the Company and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael J. Hopley Chairman of the Board, Chief Executive April 14, 1997
______________________________ Officer and President
Michael J. Hopley
/s/ Edward M. Topham Director, Chief Financial Officer, April 14, , 1997
______________________________ Secretary and Treasurer
Edward M. Topham
/s/ David Shaw Director April 14, 1997
______________________________
David Shaw
</TABLE>
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<PAGE> 1
EXHIBIT 4.4
FREMONT GOLD CORPORATION
10.5% SERIES A CONVERTIBLE NOTE EXTENSION AGREEMENT
NO. []
ISSUE DATE: [] $[]
The undersigned holder of the above noted 10.5% Series A Convertible
Note hereby agrees and consents to the extension of the Maturity Date as set
forth in paragraph 2 "Pre-Payment and Maturity Date" to June 30, 1997.
Accordingly, the March 1, 1997 Extended Maturity Date shall be replaced with
the date of June 30, 1997.
[holder name]
By __________________________________
If Corporation, its:
___________________________
Mailing address of Holder:
[ADDRESS OF HOLDER]
Agreed to and accepted by FREMONT GOLD CORPORATION
_________________________________________
Edward M. Topham, Chief Financial Officer
PLEASE RETURN FAX TO 604-682-6508
<PAGE> 1
Exhibit 4.5.1
FREMONT GOLD CORPORATION
PROMISSORY NOTE
$650,000.00US APRIL 1, 1997
FOR VALUE RECEIVED, the undersigned, FREMONT GOLD CORPORATION, a Delaware
corporation ("Maker"), promises to pay to INTERNATIONAL FREEDOM., a TURKS &
CAICOS corporation (together with its successors and assigns, "Payee,") or
order, in the manner and at the place hereinafter provided, the principal amount
of SIX HUNDRED FIFTY THOUSAND DOLLARS US ($650,000.00US), on the Maturity Date
(capitalized terms used herein and not otherwise defined herein shall have the
meanings provided in Article VII below). On the Maturity Date, the entire
remaining unpaid principal balance of this Promissory Note (this "Note"),
together with any and all costs and expenses and other amounts provided for
hereunder and accrued and unpaid interest, shall be due and payable.
Maker also promises to pay interest on the unpaid principal amount hereof
from the date hereof until paid in full at the rate of twelve percent (12%) per
annum. Interest on this Note shall be payable in arrears on the Maturity Date.
All computations of interest shall be made by Payee on the basis of a 365-day
year, for the actual number of days elapsed in the relevant period (including
the first day but excluding the last day). In no event shall the interest rate
payable on this Note exceed the maximum rate of interest permitted to be charged
under applicable law.
ARTICLE I
TERMS OF PAYMENT
1.1 Payments. Each payment under this Note shall first be credited against
costs and expenses provided for hereunder, second to the payment of accrued and
unpaid interest, and the remainder shall be credited against principal. All
amounts due hereunder shall be payable in lawful money of the United States of
America, and in same day funds and delivered to Payee by wire transfer to
Payee's account, as set forth in the wire instructions below, or at such other
place as Payee or any holder hereof shall designate in writing for such purpose
from time to time. If a payment hereunder otherwise would become due and payable
on a Saturday, Sunday or legal holiday, the due date thereof shall be extended
to the next succeeding Business Day, and interest shall be payable thereon
during such extension.
<PAGE> 2
PAYEE WIRE INSTRUCTIONS
BARCLAYS BANK PLC, NEW YORK, NY
PBA 026 002 574
FOR TRANSMISSION TO: BARCLAYS BANK
PROVIDENCIALES, TURKS & CAICOS ISLANDS.
FOR CREDIT TO: SALEM MANAGEMENT CO. LTD.
ACCOUNT # 158-7010
REFERENCE: INTERNATIONAL FREEDOM
1.2 Prepayments. This Note may be prepaid in whole or in part at any time
without penalty.
1.3 Exemption from Restrictions. It is the intent of Maker and Payee in
the execution of this Note and the other Loan Documents that the indebtedness
hereunder be exempt from the restrictions of the usury laws of any applicable
jurisdiction. Maker and Payee agree that none of the terms and provisions
contained herein or in any of the other Loan Documents shall be construed to
create a contract for the use, forbearance or detention of money requiring
payment of interest at a rate in excess of the maximum interest rate permitted
to be charged by the laws of any applicable jurisdiction. In such event, if any
holder of this Note shall collect monies which are deemed to constitute interest
which would otherwise increase the effective interest rate on this Note to a
rate in excess of the maximum rate permitted to be charged by the laws of any
applicable jurisdiction, all such sums deemed to constitute interest in excess
of such maximum rate shall, at the option of such holder, be credited to the
payment of the sums due hereunder or returned to Maker.
ARTICLE II
GENERAL
2.1 Security. This Note is secured under the Pledge Agreement. Reference
is hereby made to the Pledge Agreement for a description of the nature and
extent of the security for the Note and the rights of the holder of this Note
with respect to such security. Nothing herein shall be deemed to limit the
rights or remedies of Payee hereunder under the Pledge Agreement, or under
applicable law, all of which rights and remedies are cumulative.
ARTICLE III
CONDITIONS
3.1 Conditions to Effectiveness. The obligation of Payee to extend credit
under this Note is subject to the prior or concurrent satisfaction of the
following conditions precedent (the date of satisfaction of such conditions
being referred to herein as the "Closing Date"). On or before the Closing Date,
Maker shall deliver to Payee the following with respect to Maker unless
otherwise noted, dated the Closing Date:
-2-
<PAGE> 3
(a) Executed originals of the Loan Documents (including this
Note); and
(b) Such other documents as Payee may reasonably request.
Upon satisfaction of such conditions, Payee shall deliver $650,000.00US payable
in lawful money of the United States of America, and in same day funds, to Maker
by wire transfer to Maker's account, as set forth in the wire instructions
below, or at such place as Maker may designate in writing.
MAKER WIRE INSTRUCTIONS
FREMONT GOLD CORPORATION
BANK OF MONTREAL, VANCOUVER MAIN BRANCH
FIRST BANK TOWER, 595 BURRAND STREET
VANCOUVER, B.C.
ACCOUNT NO: 4653-934
TRANSIT NO: 0004
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Maker hereby represents and warrants to Payee, as of the date hereof, as
follows:
4.1 Organization. Maker is a corporation, duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
full corporate power and authority to conduct its business and to own and lease
its properties.
4.2 Authorization. The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary corporate action of the
Maker. The Loan Documents executed on or prior to the date of this Note are, and
the Loan Documents executed subsequent thereto will be, legal, valid and binding
obligations of the Maker to the extent it is a party thereto, enforceable
against it with their respective terms.
4.3 Consents and Approvals. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
the Maker in connection with the execution, delivery and performance of the Loan
Documents and the consummation of the transactions contemplated thereby, except
those which have been obtained or made.
4.4 Disclosure. No representation or warranty of the Maker contained in
any Loan Document or any other document, certificate or written statement
furnished to Payee by or on behalf of the Maker for use in connection with the
transactions contemplated by the Loan Documents contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
-3-
<PAGE> 4
ARTICLE V
COVENANTS
5.1 Affirmative Covenants. So long as any amount under this Note or any
other Loan Document shall remain unpaid, Maker will, unless Payee otherwise
consents in writing:
(a) Accounting Records. Maintain, and cause each of its Subsidiaries
to maintain, a system of accounting established and administered in
accordance with sound business practices to permit preparation of
financial statements in conformity with generally accepted accounting
principles ("GAAP").
(b) Litigation. Promptly upon any officer of Maker obtaining
knowledge of (i) the institution of any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Maker
or any property of the Maker where alleged damages or the amount in
controversy exceeds $100,000 or the imposition of any administrative
penalty or fine in excess of $25,000 or (ii) any material development in
any action, suit, proceeding, governmental investigation or arbitration at
any time pending against or affecting the Maker or any property of the
Maker which is reasonably likely to have a material adverse effect, Maker
will, within three Business Days, give written notice thereof to Payee and
provide such other information as may be reasonably available to it to
enable Payee and its counsel to evaluate such matter.
(c) Payment of Taxes and Claims. Pay, and cause each of its
Subsidiaries to pay, (i) all taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or with respect
to any of its franchises, business, income or property before any penalty
accrues thereon and (ii) all claims (including claims for labor, services,
materials and supplies) for sums that have become due and payable and that
by law have or may become a lien upon any of its properties or assets
before any penalty or fine is incurred with respect thereto; provided that
no such tax, charge or claim need be paid if Maker or such Subsidiary is
contesting same in good faith by appropriate proceedings promptly
instituted and diligently conducted.
(d) Compliance with Laws. (i) Comply with, and cause each of its
Subsidiaries to comply in all material respects with, the requirements of
all applicable laws, rules, regulations and orders of any governmental
authority as now in effect and which may be imposed in the future in all
jurisdictions in which it or any such Subsidiary is now doing business or
may hereafter be doing business, and (ii) maintain and will cause each of
its Subsidiaries to maintain all licenses and permits now held or
hereafter acquired by Maker or any such Subsidiary.
(e) Notices. Promptly (but in no event more than two Business Days
after the occurrence of each such event or matter) give written notice to
Payee in
-4-
<PAGE> 5
reasonable detail of the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default.
5.2 Negative Covenants. So long as any amounts under this Note or any
other Loan Document shall remain unpaid, Maker will not, without the written
consent of Payee:
(a) No Restrictions on Distributions to Maker. Except pursuant to
the Loan Documents, create or otherwise cause or suffer to exist or become
effective, or permit any of its Subsidiaries to create or otherwise cause
or suffer to exist or become effective, any consensual encumbrance or
restriction of any kind on the ability of any such Subsidiary to: (i) pay
dividends or make any other distribution on any of such Subsidiary's
capital stock owned by Maker or any Subsidiary; (ii) pay any indebtedness
owed to Maker or any Subsidiary of Maker; (iii) make loans or advances to
Maker or any Subsidiary of Maker; or (iv) transfer any of its property or
assets to Maker or any Subsidiary of Maker.
(b) Disposal of Stock. Permit any of its Subsidiaries to issue,
sell, assign, pledge or otherwise encumber or dispose of, any shares of
capital stock or other equity securities in any of its Subsidiaries
including warrants, rights or options to acquire shares or other equity
securities of any of its Subsidiaries, except to Maker or any wholly-owned
Subsidiary of Maker.
ARTICLE VI
EVENTS OF DEFAULT
6.1 If any of the following events (each an "Event of Default") shall
occur and be continuing:
(a) Failure of Maker to pay any principal or fee, under this Note
when due, whether at stated maturity, by declaration, acceleration, demand
or otherwise, or failure of Maker to pay any interest or other amount
under this Note within five Business Days after the date due; or
(b) Any default by any Loan Party in the performance of or
compliance with any obligation, covenant, agreement or other provision
contained herein or in any other Loan Document, which if reasonably
susceptible to cure, is not cured within 30 days after the Maker has
knowledge thereof or Maker receives written notice thereof from Payee; or
(c) Maker or any of its Subsidiaries shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver,
trustee, custodian or liquidator of itself or any of its property, or
shall generally fail to pay its debts as they
-5-
<PAGE> 6
become due, or shall make a general assignment for the benefit of
creditors; Maker or any of its Subsidiaries shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a
plan or other arrangement with creditors or any other relief under Title
11 of the United States Code entitled "Bankruptcy," as amended or ratified
from time to time (the "Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect, or
take any action in furtherance of the foregoing; or any involuntary
petition or proceeding pursuant to said Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors is filed or commenced against Maker or any of its
Subsidiaries, and such proceeding continues undischarged, undismissed or
unstayed for a period of 30 days (or 45 days, if such event occurs during
the Term Period, if any), or Maker or any of its Subsidiaries shall file
an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Maker or any of its
Subsidiaries shall be adjudicated a bankrupt, or an order for relief shall
be entered by any court of competent jurisdiction under said Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors; or
(d) The dissolution or liquidation of the Maker, or if any of the
respective directors or stockholders of the Maker, shall take action
seeking to effect the dissolution or liquidation of the Maker; or
(e) Maker shall cease to own directly 100% of the outstanding
Capital stock of Flagship; or
(f) Flagship shall cease to own directly at least 90% of the
outstanding capital stock of Minera;
then, and in any such event, (A) Payee may, by notice to Maker, declare this
Note, all interest thereon and all other amounts payable under this Note to be
forthwith due and payable, whereupon this Note, all such interest and all such
amounts shall become and be forthwith due and payable in full, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by Maker, and (B) Payee shall have all rights, powers
and remedies available hereunder and under each of the other Loan Documents, or
accorded by law or otherwise.
ARTICLE VII
DEFINITIONS
7.1 Definitions. The following terms used in this Note shall have the
following meanings (and any of such terms may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference):
"Bankruptcy Code" has the meaning specified in Section 7.1(g).
-6-
<PAGE> 7
"Business Day" means any day other than a Saturday, Sunday or legal
holiday under the laws of the State of Arizona or any other day on which banking
institutions located in such state are authorized or required by law or other
governmental action to close.
"Closing Date" has the meaning specified in Section 3.1.
"Event of Default" means any of the events set forth in Article VI.
"Flagship" means Flagship Holding Ltd., a Barbados corporation.
"GAAP" has the meaning specified in Section 5.1(a).
"Loan Documents" means and includes this Note, the Pledge Agreement, the
Warrant and all other instruments, documents and agreements executed by or on
behalf of any Loan Party and delivered concurrently with this Note or at any
time thereafter to or for the benefit of Payee in connection with the extensions
of credit evidenced by this Note and other transactions contemplated by this
Note, all as amended, supplemented or modified from time to time.
"Loan Parties" means Maker, David Shaw, an individual, Michael Hopley, an
individual, and Edward Topham, an individual and any Subsidiary of Maker which
hereafter becomes a party to any Loan Document.
"Maker" has the meaning specified in the first paragraph of this Note.
"Maturity Date" means JULY 31, 1997.
"Minera" means Minera Fremont Gold Corporation S.A., a Chile corporation.
"Note" has the meaning specified in the first paragraph of this document.
"Payee" has the meaning specified in the first paragraph of this Note.
"Pledge Agreement" means the Pledge Agreement dated as of the date hereof
among Payee, David Shaw, an individual, Michael Hopley, an individual, and
Edward Topham, an individual, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary" means, with respect to Maker, any corporation, association,
partnership, joint venture or other business entity of which 50% or more of the
voting stock or other equity interests is owned or controlled directly or
indirectly by Maker.
"Warrant" means that certain warrant, dated APRIL 1, 1997, issued by Maker
to Payee, to purchase 650,000 shares of Maker's Common Stock, par value $.001,
at $1.50US per share for a period expiring APRIL 1, 1999.
-7-
<PAGE> 8
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments, Etc. No amendment or waiver of any provision of this Note,
nor consent to any departure by Maker herefrom, shall in any event be effective
unless the same shall be in writing and signed by Payee, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
8.2 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including telecopier communication) and mailed,
telecopied, or delivered, to Maker or Payee, as applicable, at their respective
addresses specified on the signature pages hereof, or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when mailed or
telecopied, be effective when deposited in the mails or telecopied with receipt
confirmed, respectively.
8.3 No Waiver; Remedies. No failure on the part of Payee to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. All
rights, powers and remedies of Payee in connection with each of the Loan
Documents are cumulative and not exclusive, and shall be in addition to any
other rights, powers or remedies provided by law or equity.
8.4 Severability; Headings. In the event that any one or more provisions
of this Note shall be held to be illegal, invalid or otherwise unenforceable,
the same shall not affect any other provisions of this Note and the remaining
provisions of this Note shall remain in full force and effect. Section and
subsection headings in this Note are included herein for convenience of
reference only and shall not constitute a part of this Note for any other
purpose or be given any substantive effect.
8.5 Binding Effect, Etc. This Note shall be binding upon and inure to the
benefit of Maker and Payee and their respective successors and assigns. Payee
may assign or otherwise transfer, or grant participations in, this Note or all
or any portion of its rights hereunder or its interest herein to any person or
entity, but Maker may not assign or otherwise transfer its rights or obligations
hereunder or any interest herein without the prior written consent of Payee and
any attempted assignment by Maker shall be null and void and of no force or
effect.
8.6 Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ARIZONA
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.7 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another
-8-
<PAGE> 9
covenant shall not avoid the occurrence of an Event of Default or event which
with notice or lapse of time or both would become an Event of Default if such
action is taken or condition exists.
8.8 Representation of Payee. By its acceptance of this Note, Payee hereby
represents that (i) it is an "accredited investor" as defined in Rule 501
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and (ii) it is acquiring this Note and the Warrant for
investment purposes and without a view to, or for resale in connection with, any
public distribution.
8.9 Interpretation. Payee hereby waives the benefit of any statute or rule
of law or judicial decision which would otherwise require that the provisions of
this Note be construed or interpreted more strongly against the party
responsible for the drafting thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
-9-
<PAGE> 10
IN WITNESS WHEREOF, Maker has caused this Note to be executed by its
officer thereunto duly authorized, as of the date first written above.
FREMONT GOLD CORPORATION, a Delaware
corporation
By:___________________________________
Name: Edward M. Topham
Title: Chief Financial Officer
Notice Address: 777 Hornby Street, Suite 2000
Vancouver, British Columbia V6Z1S4
ACCEPTED AND AGREED as of
this _____ day of _______________,
1997:
____________________________, a
_____________ corporation
By:______________________________
Name:____________________________
Title:___________________________
Notice Address: P.O. Box 150
Design House
Suite 201
Providenciales
Turks & Caicos Island, B.W.I.
-10-
<PAGE> 1
Exhibit 4.5.2
THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE "ACTS").
NEITHER THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE PROPOSED TRANSACTION DOES NOT
REQUIRE REGISTRATION OR QUALIFICATION UNDER ALL OF THE APPLICABLE ACTS, OR AN
OPINION OF COUNSEL SATISFACTORY TO NIPF HOLDING COMPANY TO THE EFFECT THAT SUCH
REGISTRATIONS ARE NOT REQUIRED OR THE PROPOSED TRANSACTION IS REGISTERED OR
QUALIFIED AS REQUIRED BY ANY APPLICABLE ACTS. THIS WARRANT IS SUBJECT TO OTHER
LIMITATIONS ON TRANSFER.
WARRANT
TO PURCHASE COMMON STOCK OF
FREMONT GOLD CORPORATION
EXPIRING ON APRIL 1, 1999
Fremont Gold Corporation ("Company"), a Delaware corporation, hereby
certifies that, for value received, INTERNATIONAL FREEDOM, a TURKS & CAICOS
corporation ("Holder"), whose address is P.O. BOX 150, DESIGN HOUSE, SUITE 201,
PRIVDENCIALES, TURKS & CAICOS ISLAND, B.W.I., is entitled, subject to the terms
set forth below at any time or from time to time after the date hereof and
before the Expiration Date (as defined below), to purchase from the Company
650,000 shares ("Shares") of Common Stock ("Common Stock"), par value $.001 per
share, at a purchase price per Share of US$1.50 (the purchase price per Share,
as adjusted from time to time pursuant to the provisions herein set forth, is
referred to in this Warrant as the "Purchase Price").
This Warrant is being issued to the Holder pursuant to the terms of that
certain Promissory Note in the original principal amount of US$650,000.00, dated
APRIL 1, 1997, issued by the Company in favor of Holder.
1. TERM OF THE WARRANT.
1.1 Time of Exercise. Subject to the provisions of Sections 1.5, "Transfer
and Assignment," this Warrant may be exercised at any time and from time to time
after its issuance but no later than 5:00 p.m., M.S.T., APRIL 1, 1999
("Expiration Date"), at which point it shall become void and all rights under
this Warrant shall cease.
1.2 Manner of Exercise.
1.2.1 The holder of this Warrant ("Holder") may exercise this
Warrant, in whole or in part, upon surrender of this Warrant with the form of
subscription attached hereto duly
<PAGE> 2
executed, to the Company at its corporate office at 777 Hornby Street, Suite
2000, Vancouver, British Columbia, Canada V62 1S4, together with the full
Purchase Price for each Share to be purchased in lawful money of the United
States, or by certified check, bank draft or postal or express money order
payable in United States dollars to the order of the Company, and upon
compliance with and subject to the conditions set forth in this Warrant.
1.2.2 Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates or other evidence of ownership, for the total number
of whole Shares for which this Warrant is being exercised in such denominations
as are required for delivery to the Holder, and the Company shall thereupon
deliver such documents to the Holder or its nominee.
1.2.3 If the Holder exercises this Warrant with respect to fewer than
all of the Shares that may be purchased under this Warrant, the Company shall
execute a new Warrant for the balance of the Shares that may be purchased upon
exercise of this Warrant and deliver such new Warrant to the Holder.
1.2.4 The Company covenants and agrees that it will pay when due and
payable any and all taxes which may be payable in respect of the issue of this
Warrant, or the issue of any Shares upon the exercise of this Warrant. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of the Shares in a name other than that of the Holder at the time of surrender,
and until the payment of such tax, the Company shall not be required to issue
such Shares.
1.2.5 Holder understands and agrees that the Shares issued upon
exercise hereof will be "restricted securities," as that term is defined in the
Securities and Exchange Commission's Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act), and as such will be subject to
the restrictions on transfer and sale.
1.3 Exchange of Warrant. This Warrant may be split-up, combined or
exchanged for another Warrant or Warrants of like tenor to purchase a like
aggregate number of Shares. If the Holder desires to split-up, combine or
exchange this Warrant, he shall make such request in writing delivered to the
Company at its corporate office and shall surrender this Warrant and any other
Warrants to be so split-up, combined or exchanged, the Company shall execute and
deliver to the person entitled thereto a Warrant or Warrants, as the case may
be, as so requested. The Company shall not be required to effect any split-up,
combination or exchange which will result in the issuance of a Warrant entitling
the Holder to purchase upon exercise a fraction of a Share. The Company may
require the Holder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any split-up, combination or
exchange of Warrants. The term "Warrant" as used herein includes any Warrants
issued in substitution for or replacement of this Warrant, or into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction of reasonably
satisfactory indemnification, including a surety bond if required
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<PAGE> 3
by the Company, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will cause to be executed and delivered a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
1.4 Holder as Owner. Subject to the limitations on transfer pursuant to
Section 1.5 hereof, prior to due presentment for registration of transfer of
this Warrant, the Company may deem and treat the Holder as the absolute owner of
this Warrant (notwithstanding any notation of ownership or other writing hereon)
for the purpose of any exercise hereof and for all other purposes, and the
Company shall not be affected by any notice to the contrary. Irrespective of the
date of issue and delivery of certificates for any Common Stock issuable upon
the exercise of the Warrant, each person in whose name any such certificate is
issued shall be deemed to have become the holder of record of the Shares
represented thereby on the date on which all or a portion of the Warrant
surrendered in connection with the subscription therefor was surrendered and
payment of the purchase price was tendered. No surrender of all or a portion of
the Warrant on any date when the stock transfer books of the Company are closed,
however, shall be effective to constitute the person or persons entitled to
receive Shares upon such surrender as the record holder of such Shares on such
date, but such person or persons shall be constituted the record holder or
holders of such Shares at the close of business on the next succeeding date on
which the stock transfer books are opened. Each person holding any Shares
received upon exercise of Warrant shall be entitled to receive only dividends or
distributions payable to holders of record on or after the date on which such
person shall be deemed to have become the holder of record of such Shares.
1.5 Transfer and Assignment. This Warrant may not be sold, hypothecated,
assigned or transferred in any other manner except with the prior written
consent of the Company. All requests for the Company's written consent to the
sale, hypothecation, assignment or transfer, in any manner (each a "Transfer")
of this Warrant shall be made in a writing delivered to the Company at its
corporate office located at 777 Hornby Street, Vancouver, British Columbia,
Canada V6Z 1S4. The Company shall be entitled, for any reason or no reason, to
refuse to grant consent to the Transfer of this Warrant and nothing contained
herein shall be deemed to obligate the Company, in any manner, to grant its
consent to any Transfer of this Warrant. Prior to any Transfer of this Warrant,
the registered holder of this Warrant agrees to deliver to the Company an
opinion of counsel, concurred in by the reasonable opinion of Counsel to the
Company, that the proposed transfer may be effected without registration or
qualification under the Securities Act and any other applicable securities laws.
1.6 Method for Assignment. Any Transfer permitted under this Warrant shall
be made by surrender of this Warrant to the Company at its corporate office with
the form of assignment attached hereto duly executed and funds sufficient to pay
any transfer tax. In such event, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee designated in such instrument
of assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation thereof at the corporate office of the Company together with a
written notice signed by the Holder, specifying the names and denominations in
which such new Warrants are to be issued.
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<PAGE> 4
1.7 Rights of Holder. Nothing contained in this Warrant shall be construed
as conferring upon the Holder the right to vote or consent or receive notice as
a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
this Warrant and prior to its exercise, any of the following shall occur:
1.7.1 The Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings; as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
1.7.2 The Company shall offer to the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or exchangeable for shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
1.7.3 There shall be proposed any capital reorganization or
reclassification of the Common Stock, or a sale of all or substantially all of
the assets of the Company, or a consolidation or merger of the Company with
another entity; or
1.7.4 There shall be proposed a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, at the earliest practicable time (and, in any event, not less than
thirty (30) days before any record date or other date set for definitive
action), written notice of the date on which the books of the Company shall
close or a record shall be taken to determine the stockholders entitled to such
dividend, distribution, convertible or exchangeable securities or subscription
rights, or entitled to vote on such reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be. Such notice shall also set forth such facts as shall indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Purchase Price and the kind and amount of the Common Stock and other
securities and property deliverable upon exercise of this Warrant. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said distribution or subscription rights or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be (on which
date, in the event of voluntary or involuntary dissolution, liquidation or
winding up of the Company, the right to exercise this Warrant shall terminate).
Without limiting the obligation of the Company to provide notice to the Holder
of actions hereunder, it is agreed that failure of the Company to give notice
shall not invalidate such action of the Company.
1.8 Lost Warrant Certificate(s). If this Warrant is lost, stolen,
mutilated or destroyed, the Company shall, on such reasonable terms as to
indemnity or otherwise as it may impose, which shall, in the case of a mutilated
Warrant, include the surrender thereof, issue a new Warrant of like
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<PAGE> 5
denomination and tenor as, and in substitution for, this Warrant, which shall
thereupon become void. Any such new Warrant shall constitute an additional
contractual obligation of the Company, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
2. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE UPON
EXERCISE.
2.1 Recapitalization. If the Company shall, while this Warrant remains
unexercised, in whole or in part, and in force effect a recapitalization of such
character that the Shares purchasable hereunder shall be changed into or become
exchangeable for a larger or smaller number of Shares, then, after the date of
record for effecting such recapitalization, the number of Shares which the
Holder hereof shall be entitled to purchase hereunder shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason such recapitalization, and of
the Purchase Price, whether or not in effect immediately prior to the time of
such recapitalization, of such recapitalized Common Stock shall in the case of
an increase in the number of such Shares be proportionately reduced, and in the
case of a decrease in the number of such Shares shall be proportionately
increased. For the purposes of this Section 2.1, a stock dividend, stock
split-up or reverse split shall be considered as a recapitalization and as an
exchange for a larger or smaller number of shares, as the case may be.
2.2 Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company into, any other corporation, or in case of any
sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company,
then, as a condition of such consolidation, merger or sale or conveyance,
adequate provision shall be made whereby the Holder shall thereafter have the
right to purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented by this
Warrant, such shares of stock or securities as may be issued in connection with
such consolidation, merger, or sale or conveyance with respect to or in exchange
for the number of outstanding shares of Common Stock equal to the number of
Shares immediately theretofore purchasable and receivable upon the exercise of
the rights represented by this Warrant had such consolidation, merger, sale or
conveyance not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder of this Warrant to
the end that the provisions of this Warrant shall be applicable as nearly as may
be in relation to any Shares thereafter deliverable upon the exercise hereof.
2.3 Notice of Dissolution or Liquidation. Except as otherwise provided in
Section 2.2, "Merger or Consolidation," in the case of any sale or conveyance of
all or substantially all of the assets of the Company in connection with a plan
of complete liquidation of the Company, or in the case of the dissolution,
liquidation or winding-up of the Company, all rights under this Warrant shall
terminate on a date fixed by the Company, such date so fixed to be not earlier
than the date of the commencement of the proceedings for such dissolution,
liquidation or winding-up and not later than thirty (30) days after such
commencement date. Notice of such termination of purchase rights shall be given
to the Holder at least thirty (30) days prior to such termination date.
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<PAGE> 6
2.4 Statement of Adjustment. Any adjustment pursuant to the provisions of
this Section 2 shall be made on the basis of the number of Shares which the
Holder would have been entitled to acquire by exercise of this Warrant
immediately prior to the event giving rise to such adjustment and, as to the
Purchase Price in effect immediately prior to the rise to such adjustment.
Whenever any such adjustment is required to be made, the Company shall forthwith
determine the new number of Shares which the Holder hereof shall be entitled to
purchase hereunder and/or such new Purchase Price and shall prepare, retain on
file and transmit to the Holder within ten (10) days after such preparation a
statement describing in reasonable detail the method used in calculating such
adjustment.
2.5 No Fractional Shares. The Company shall not issue any fraction of a
Share in connection with the exercise of this Warrant, and in any case where the
Holder would, except for the provisions of this Section 2.5, be entitled under
the terms of this Warrant to receive a fraction of a Share upon such exercise,
the Company shall upon the exercise and receipt of the Purchase Price, issue the
largest number of whole Shares purchasable upon exercise of this Warrant. The
Company shall not be required to make any cash or other adjustment in respect of
such fraction of a Share to which the Holder would otherwise be entitled. The
Holder, by the acceptance of this Warrant, expressly waives his right to receive
a certificate for any fraction of a Share upon exercise hereof.
2.6 No Change in Form Required. The form of Warrant need not be changed
because of any change pursuant to this Section 2 in the Purchase Price or in the
number of Shares purchasable upon the exercise of a Warrant, may state the same
Purchase Price and the same number of shares of Common Stock as are stated in
the Warrants initially issued pursuant to the Agreement.
3. RESERVATION OF SHARES. The Company shall at all times reserve, for the
purpose of issuance on exercise of this Warrant such number of shares of Common
Stock or such class or classes of capital stock or other securities as shall
from time to time be sufficient to comply with this Warrant and the Company
shall take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized and unissued shares of Common Stock or such
other class or classes of capital stock or other securities to such number as
shall be sufficient for that purpose. All Shares issued upon exercise of this
Warrant shall be duly authorized, validly issued and outstanding, fully paid and
non-assessable.
4. SURVIVAL. All agreements, covenants, representations and warranties herein
shall survive the execution and delivery of this Warrant and any investigation
at any time made by or on behalf of any parties hereto and the exercise, sale
and purchase of this Warrant (and any other securities or property) issuable on
exercise hereof.
5. REMEDIES. The Company agrees that the remedies at law of the Holder, in
the event of any default or threatened default by the Company in the performance
or compliance with any of the terms of this Warrant, may not be adequate and
such terms may, in addition to and not in lieu of any other remedy, be
specifically enforced by a decree of specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
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<PAGE> 7
6. OTHER MATTERS.
6.1 Binding Effect. All the covenants and provisions of this Warrant by or
for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
6.2 Notices. Notices or demands pursuant to this Warrant to be given or
made by the Holder to or on the Company shall be sufficiently given or made if
sent by certified or registered mail, return receipt requested, postage prepaid,
and addressed, until another address is designated in writing by the Company, as
follows:
Fremont Gold Corporation
777 Hornby Street
Suite 2000
Vancouver, British Columbia, Canada V6Z 1S4
Attn: Chief Financial Officer
Notices to the Holder provided for in this Warrant shall be deemed given or made
by the Company if sent by certified or registered mail, return receipt
requested, postage prepaid, and addressed to the Holder at the Holder's last
known address as it shall appear on the books of the Company.
6.3 Governing Law. The validity, interpretation and performance of this
Warrant shall be governed by the laws of the State of Delaware.
6.4 Parties Bound and Benefitted. Nothing in this Warrant expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company and the Holder any right, remedy or claim under promise or
agreement hereof, and all covenants, conditions, stipulations, promises and
agreements contained in this Warrant shall be for the sole and exclusive benefit
of the Company and its successors and of the Holder, its successors and, if
permitted, its assignees.
6.5 Headings. The Article headings herein are for convenience only and are
not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the _____ day of ______________, 1997.
FREMONT GOLD CORPORATION
By:_________________________________________
Edward M. Topham, Chief Financial Officer
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<PAGE> 8
FREMONT GOLD CORPORATION
ASSIGNMENT
FOR VALUE RECEIVED, and with the prior written consent of Fremont Gold
Corporation, hereby sells, assigns and transfers unto __________________________
the right to purchase _____ shares subject to ____________________ the within
Warrant and the rights represented thereby, and does hereby irrevocably
constitute and appoint ________________________ Attorney, to transfer said
Warrant, or portion thereof, on the books of the Company, with full power of
substitution.
Dated:______________ Signed:_____________________________________
Print Name:_________________________________
<PAGE> 9
SUBSCRIPTION FORM
FREMONT GOLD CORPORATION
777 HORNBY STREET
SUITE 2000
VANCOUVER, BRITISH COLUMBIA, CANADA V62 1S4
The undersigned hereby irrevocably subscribes for the purchase of _____
shares of Common Stock ("Shares"), pursuant to and in accordance with the terms
and conditions of this Warrant, and herewith makes payment, covering the
purchase of the Shares, which should be delivered to the undersigned at the
address stated below, and, if such number of Shares shall not be all of the
Shares purchasable hereunder, then a new Warrant of like tenor for the balance
of the remaining Shares purchasable under this Warrant be delivered to the
undersigned at the address stated below.
Dated:________________________ Signed:_____________________________________
Address:____________________________________
____________________________________________
<PAGE> 1
EXHIBIT 10.8
FORM OF VOLUNTARY STOCK POOLING AGREEMENT
THIS VOLUNTARY POOLING AGREEMENT ("Pooling Agreement") is made and entered
into this _____ day of __________, 1996 by and between FREMONT GOLD CORPORATION,
a Delaware corporation (the "Issuer") and the UNDERSIGNED SHAREHOLDERS of the
Issuer listed on Schedule "A" (the "Undersigned").
RECITALS:
A. The Undersigned have received shares of common stock ("Shares") of the
Issuer pursuant to a certain Offering Circular ("Offering Circular") dated
_______________, 1996, as filed with the Securities and Exchange Commission as a
part of a filing made on _______________, 1996 on Form I-A under Regulation A of
the Securities Act of 1933, as amended;
B. In order to maintain an orderly market for the common stock in the
Issuer, the Undersigned have agreed to place the Shares in a pool to be release
as set out herein;
In consideration of the mutual covenants, and agreements, the receipt and
sufficiency of which each party acknowledges, the parties hereto agree as
follows:
AGREEMENT:
1. In this Pooling Agreement "Exchange Date" shall mean __________, 1996.
2. The Undersigned hereby severally agree each with the other and with the
Trustee that they will deliver or cause to be delivered to the Trustee
certificates representing their respective Shares in the Issuer, as set forth in
Schedule "A" to the Offering Circular, to be held by the Trustee and, unless
then prohibited by a court of competent jurisdiction, released, subject as
hereinafter provided, on a pro-rata basis as follows:
(a) 25 percent of the Shares April 1, 1997;
(b) 25 percent of the Shares on July 1, 1997;
(c) 25 percent of the Shares on October 1, 1997; and
(d) 25 percent of the Shares on January 1, 1998;
3. Each of the Undersigned shall be entitled to a letter or receipt from
the Trustee stating the number of Shares represented by certificates held for it
by the Trustee subject to the terms of this Pooling Agreement, but such letter
or receipt shall not be assignable.
<PAGE> 2
4. During that period which the Shares are held in trust by the Trustee
as set forth in Paragraph 3 of this Pooling Agreement: (i) the Undersigned shall
not sell, deal in, assign, transfer in any manner whatsoever or agree to sell,
deal in, assign or transfer in any manner whatsoever any of the Shares or
beneficial ownership of or any interest in the Shares, (ii) neither the Issuer
nor the Trustee shall accept or acknowledge any transfer, assignment,
declaration of trust or any other document evidencing a change in legal and/or
beneficial ownership or of interest in the Shares, except as may be required by
reason of the bankruptcy of any one or more of the Undersigned subject to this
Pooling Agreement, for whatever person or persons, firm or corporation may
thereby become legally entitled thereto; and (iii) the Undersigned shall
continue to be the registered and beneficial holders of the Shares, and shall be
entitled to all rights as such, including voting and distribution rights.
5. Upon delivery of all the Shares by the Trustee to either of the
Undersigned or a court in compliance with the provision of paragraph 6, this
escrow will terminate.
6. if the Trustee is prohibited from acting under this Pooling Agreement
by an order of a court of competent jurisdiction, the Trustee will immediately
put into court the Shares in its possession at such time.
7. The Trustee may act in this Pooling Agreement on the advice of legal
counsel but will not be responsible for acting or failing to act on the advice
of legal counsel. The Trustee will not have any duties or responsibilities
except those set out in this Agreement and will not incur any liability in
acting upon any signature, notice, statutory declaration, notice of dispute or
other paper believed by the Trustee to be genuine and the Trustee may assume
that any person purporting to give any such notice, statutory declaration,
notice of dispute or other paper has been duty authorized to do so. The Trustee
will be automatically released from all responsibility and liability under this
Pooling Agreement upon termination of the escrow in accordance with the terms of
this Pooling Agreement.
8. In the event the Trustee fails or refuses to act under this Pooling
Agreement, the Issuer may appoint a substitute trustee and the Issuer and the
Undersigned will provide a joint direction in writing to the Trustee to
authorize the Trustee to deliver the Shares to the substitute trustee.
9. The Trustee may withdraw from its position under this Pooling
Agreement effective immediately upon service of written notice of withdraw on
the Undersigned and the Issuer. Upon withdrawal, the Trustee will have no
further responsibilities or liabilities other than to deliver the Shares to the
substitute trustee in accordance with paragraph 6, unless then prohibited by an
order of a court of competent jurisdiction. In the event the Trustee wishes to
withdraw and no substitute trustee has been appointed, the Trustee may put the
Shares into court, pending resolution of the matter preventing appointment of a
substitute trustee and thereafter may resign.
10. The parties hereto acknowledge and agree that the Issuer shall have
the fight, at its sole discretion, to accelerate the releases referred to herein
on a pro-rata basis and may from time
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<PAGE> 3
to time notify the Trustee of such acceleration. Such acceleration may be based
on whatever consideration the Issuer, in its sole discretion, considers
advisable, provided however that in all cases the releases shall be on a
pro-rata basis.
11. This Pooling Agreement shall inure to the benefit of and be binding
upon the parties hereto, their and each of their heirs, executors,
administrators, successors and permitted assigns.
12. This Pooling Agreement may be executed in one or more counterparts.
Each such counterpart shall constitute an original document and such
counterparts taken together shall constitute one and the same agreement.
13. The Issuer will be responsible for, and will pay from time to time,
the reasonable fees and expenses of the Trustee in connection with the
performance of its duties under this Pooling Agreement. The Issuer and the
Undersigned will jointly and severally indemnify and save harmless the Trustee
of and from all claims, demands, damage, loss, cost, including solicitor and own
client costs, and expenses arising out of its performance or lack of performance
of its duties under this Pooling Agreement.
14. It is further agreed by and between the parties hereto, without
restricting the foregoing indemnity-, that in case proceedings should hereafter
be taken in any Court respecting the Shares hereby pooled, the Trustee shall not
be obliged to defend any such action or submit its rights to the Court until it
shall have been indemnified by other good and sufficient security in addition to
the indemnity hereinbefore given against cost of such proceedings.
TO EVIDENCE THEIR AGREEMENT each of the parties has executed this Pooling
Agreement on the date first above written.
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<PAGE> 1
EXHIBIT 10.9.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of DECEMBER 17,
1996 is entered into by and between Laminco Resources, Inc., a British Columbia
corporation and a citizen and resident of Canada, (the "SELLER") and
______________________________, a citizen/corporation and resident/domicile of
______________________________, (the "PURCHASER").
The Seller has offered for sale outside the United States (as that term is
defined in Regulation S ("Regulation S") under the United States Securities Act
of 1933, as amended (the "ACT"), to the Purchaser __________ (UD$__________)
shares of the Common Stock, $.001 par value, of Fremont Gold Corporation, a
Delaware corporation (the "COMPANY").
Capitalized terms used herein and not defined herein shall have the
meanings given to them in Regulation S.
THE PARTIES HERETO AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF SHARES. Upon the basis of the representations and
warranties, and subject to the terms and conditions, set forth in this
Agreement, the Seller covenants and agrees to sell to the Purchaser on the
Closing Date (as hereinafter defined), __________ (UD$__________) shares of the
Common Stock, $.001 par value, of the Company (the "SHARES") at a price equal to
$.42 per Share on the Closing Date (the "PURCHASE PRICE"), and upon the basis of
the representations and warranties, and subject to the terms and conditions, set
forth in this Agreement, the Purchaser covenants and agrees to purchase from the
Seller on the Closing Date the Shares at the Purchase Price.
2. CLOSING. The settlement of the purchase and sale of the Shares pursuant
to Section 1, "Purchase and Sale of Shares," shall take place on or before
DECEMBER 20, 1996 (the "CLOSING DATE"), or such later date as Purchaser and
Seller agree. The certificates representing the Shares to be purchased by the
Purchaser shall be delivered by, or on behalf of, the Seller to a closing trust
account at __________________________________________________ and the Purchaser
shall deliver payment of the Purchase Price therefor in immediately available
UNITED STATES FUNDS to its account at________________________________. Delivery
of the Shares shall be in accordance with the instructions of the Purchaser, and
in such names as the Purchaser shall instruct, subject to customary settlement
procedures, at the end of business on the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
understands, and represents and warrants to, and agrees with, the Seller (all
such representations and warranties being made to and for the benefit of the
Company and any transfer agent of the Company employed for that purpose):
3.1. The Purchaser is a ________________________citizen/corporation
and resident/domicile of _________________________________.
3.2. This Agreement has been duly authorized, executed and delivered
by the Purchaser and is a valid and binding agreement enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar law of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity; and the Purchaser has full power and
authority necessary to enter into this Agreement and to perform his
obligations
<PAGE> 2
hereunder.
3.3. No consent, approval, authorization, or order of any court,
governmental agency or body, or arbitrator having jurisdiction over the
Purchaser is required for execution of this Agreement, including, without
limitation, the purchase of the Shares, or the performance of the
Purchaser's obligations hereunder.
3.4. Neither the purchase of the Shares pursuant to, nor the performance of its
obligations under, this Agreement by the Purchaser will:
3.4.1. violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or
the lapse of time or both would constitute a default) under (i) any
decree, judgment, order, law, treaty, rule, regulation, or
determination applicable to the Purchaser of any court, governmental
agency or body, or arbitrator having jurisdiction over the Purchaser
or over the properties or assets of the Purchaser; (ii) the terms of
any bond, debenture, note, or any other evidence of indebtedness, or
any agreement, stock option, or other similar plan, indenture,
lease, mortgage, deed of trust, or other instrument to which the
Purchaser is a party, by which the Purchaser is bound, or to which
any of the properties of the Purchaser is subject; or (iii) the
terms of any "lock-up" or similar provision of any underwriting or
similar agreement to which the Purchaser is a party; or
3.4.2. result in the creation or imposition of any lien,
charge, or encumbrance upon the Shares or any of the assets of the
Purchaser.
3.5. The Purchaser understands that no federal or state agency has
passed on or made any recommendation or endorsement of the Shares.
3.6. The Purchaser acknowledges that, in making the decision to
purchase the Shares, he has relied solely upon independent investigations
made by him and not upon any representations made by the Seller with
respect to the Company or the Shares.
3.7. The Purchaser understands that the Shares are being offered and
sold to him in reliance on specific exemptions or non-application from the
registration requirements of federal and state securities laws and that
the Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments, and understandings of the
Purchaser set forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Shares.
3.8. The Purchaser is not a U.S. Person (as defined in Regulation S)
and is not an affiliate of the Issuer.
3.9. No offer of the Shares was made to the Purchaser in the United
States.
3.10. At the time the buy order for the Shares was originated the
Purchaser was located outside the United States.
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<PAGE> 3
3.11. The Purchaser is aware that the Shares have not been and will not be
registered under the Act and may only be offered or sold pursuant to
registration under the Act or an available exemption therefrom. Purchaser,
in connection with this Agreement, has entered into a Stockholders
Agreement which, under certain terms and conditions, grants Purchaser the
right to join the Company to register the Shares in any registration
statement under the Securities Act of 1933, as amended, filed by the
Company with the Securities and Exchange Commission.
3.12. The Purchaser:
3.12.1. will not, during the period commencing on the Closing
Date and ending on the day 40 days after the Closing Date (the
"RESTRICTED PERIOD"), offer or sell the Shares in the United States,
to a U.S. Person or for the account or benefit of a U.S. Person or
other than in accordance with Rule 903 or 904 of Regulation S; and
3.12.2. will, after the expiration of the Restricted Period,
offer, sell, pledge, or otherwise transfer the Shares only pursuant
to registration under the Act or an available exemption therefrom
and, in any case, in accordance with applicable state and foreign
securities laws. Notwithstanding the above the Purchaser, in
connection with this Agreement, has entered into a Stockholders
Agreement, the terms of which will restrict transfer of the Shares
for a period of one (1) year from the date of this Agreement.
3.13. None of the Purchaser, its affiliates or any person acting on
behalf of the Purchaser or any such affiliate has engaged, or will engage,
in any Directed Selling Efforts with respect to the Shares or any
distribution, as that term is used in the definition of Distributor, with
respect to the Shares.
3.14. The transactions contemplated by this Agreement:
3.14.1. have not been pre-arranged with a purchaser located in
the United States or who is a U.S. Person, and
3.14.2. are not part of a plan or scheme to evade the
registration provisions of the Act.
3.15. The Purchaser has not entered, or has no intention of
entering, into any put options and short positions or other similar
instruments with respect to the Shares or securities of the same class.
3.16. If the Purchaser offers and sells the Shares during the
Restricted Period, then it will do so only in accordance with the
provisions of Regulation S; pursuant to registration of the Shares under
the Act; or pursuant to an available exemption from the registration
requirements of the Act.
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<PAGE> 4
3.17. Purchaser understands that the Company will place the following legend on
the Shares to be purchased under this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED ("ACT"), AND HAVE NOT BEEN REGISTERED
UNDER THE ACT. THESE SHARES MAY NOT BE OFFERED OR SOLD WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, A "U.S.
PERSON" (AS THAT TERM IS DEFINED IN REGULATION S) UNTIL AFTER
FORTY (40) DAYS FOLLOWING TERMINATION OF THE OFFERING. AFTER
SUCH DATE, THE COMPANY WILL, AT THE REQUEST OF THE PURCHASER,
CAUSE ITS TRANSFER AGENT TO ISSUE CERTIFICATES REPRESENTING
THE COMMON STOCK WITHOUT ANY RESTRICTIVE LEGEND OR STOP
TRANSFER INSTRUCTIONS.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and
warrants to and agrees with the Purchaser that (all such representations and
warranties being made to and for the benefit of any transfer agent of the
Company employed for that purpose):
4.1. The Shares are free and clear of any security interests, liens,
claims, or other encumbrances;
4.2. The Shares have been duly and validly authorized and issued and
are, and on the Closing Date will be, fully paid and non-assessable;
4.3. The Shares will not have been, individually and collectively,
issued or sold in violation of any pre-emptive or other similar rights of
the holders of any securities of the Company;
4.4. The Shares will not subject the holders thereof to personal
liability by reason of being such holders; and
4.5. The Shares are quoted on, and will be, following the completion
of the Restricted Period (if sold in accordance with the provisions of
this Agreement), eligible for trading through the OTC Bulletin Board of
National Association of Securities Dealers.
4.6. There is no pending or, to the best knowledge of the Seller,
threatened action, suit, proceeding, or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the
Seller or any of his affiliates that would materially affect the execution
by the Seller of, or the performance by the Seller of his obligations
under, this Agreement.
4.7. The Company is a reporting issuer as defined in Regulation S.
4.8. The Seller is an affiliate of the Company.
4.9. The sale of the Shares pursuant to this Agreement will be made
in accordance with
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<PAGE> 5
the provisions and requirements of Regulation S and applicable to state or
foreign law.
4.10. No offer to buy the Shares was made to the Seller by any
person in the United States.
4.11. None of the Seller, any affiliate of the Seller, or any person
acting on behalf of the Seller or any such affiliate has engaged, or will
engage, in any Directed Selling Efforts with respect to the Shares or any
distribution, as that term is used in the definition of Distributor, with
respect to the Shares.
4.12. The transactions contemplated by this Agreement:
4.12.1. have not been pre-arranged with a purchaser who is in
the United States or who is a U.S. Person; and
4.12.2. are not part of a plan to evade the registration
provisions of the Act.
4.13. Neither the Seller, nor any affiliate of the Seller, nor any
person acting on their behalf has undertaken or carried out any activity
for the purpose of, or that could reasonably be expected to have the
effect of, conditioning the market in the United States for any of the
Shares, including, but not limited to, general solicitation activities or
advertising.
4.14. The Seller is not an officer or director of the Company.
4.15. The Seller has not made within the six months prior hereto,
nor will make within the six months following the date hereof, any offer
or sale of the securities of the Company except for the offers or sales of
securities that are registered with the Securities and Exchange Commission
(the "SEC") or not registered with the SEC upon the advice of counsel.
5. COVENANTS OF THE SELLER. The Seller covenants and agrees with the
Purchaser to refrain from engaging, and insure that none of its affiliates will
engage, in any Directed Selling Efforts with respect to the Shares or any
distribution, as that term is used in the definition of Distributor, with
respect to the Shares.
6. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. The obligations of
the Purchaser hereunder are subject to the performance by the Seller of its
obligations hereunder and to the satisfaction of the following additional
condition precedent:
6.1. The representations and warranties made by the Seller in this
Agreement shall, unless waived by the Purchaser, be true and correct as of
the date hereof and at the Closing Date, with the same force and effect as
if they had been made on and as of the Closing Date.
6.2. After the date hereof until the Closing Date there shall not
have occurred:
6.2.1. any change, or any development involving a prospective
change, in either (i) the condition, financial or otherwise, or in
the earnings, business or operations, or in or affecting the
properties of the Company of (ii) the financial or market conditions
or circumstances in the United States, in either case which, in the
Purchaser's judgment, is material and adverse and makes it
impractical or inadvisable to proceed with the offering, sale, or
delivery of the Shares;
6.2.2. an imposition of a new legal or regulatory restriction
not in effect on the
5
<PAGE> 6
date hereof, or any change in the interpretation of existing legal
or regulatory restrictions, that materially and adversely affects
the offering, sale or delivery of the Shares; or
6.2.3. a suspension, or material limitation of, trading (i)
generally on or by the NASD's OTC Bulletin Board or (ii) of any
securities of the Company on any exchange or in any over-the-counter
market.
7. CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATIONS. The obligations of
the Seller hereunder are subject to the performance by the Purchaser of its
obligations hereunder and to the satisfaction of the following additional
condition precedent:
The representation and warranties made by the Purchaser in this
Agreement shall, unless waived by the Seller, be true and correct at the
Closing Date, with the same force and effect as if they had been made on,
and as of, the Closing Date.
8. FEES AND EXPENSES. Each of the Purchase and the Seller agrees to pay
its own expenses incident to the performance of its obligations hereunder,
including, but not limited to, the fees, expenses, and disbursements of such
party's counsel.
9. INDEMNIFICATION.
9.1. If the Purchaser becomes involved in any capacity in any
action, proceeding, or investigation in connection with any matter
referred to in or relating to this Agreement (except as expressly provided
for in paragraph 9.3 of this Section 9), the Seller will reimburse the
Purchaser for his reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as
such expenses are incurred, and will indemnify and hold the Purchaser
harmless from and against any losses, claims, damages, or liabilities to
which Purchaser may become subject in connection with any such action,
proceeding, investigation, or matter, unless such loss, claim, damage, or
liability results primarily from the Purchaser's negligence, recklessness,
or bad faith in performing the services which are the subject of this
Agreement.
9.2. If the Seller becomes involved in any capacity in any action,
proceeding, or investigation in connection with any matter referred to in
or relating to this Agreement (except as expressly provided for in
paragraph 9.3 of this Section 9), the Purchaser will reimburse the Seller
for his reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred, and will indemnify and hold the Seller harmless
from and against any losses, claims, damages, or liabilities to which
Seller may become subject in connection with any such action, proceeding,
investigation, or matter, to the extent, but only to the extent, that such
loss, claim, damage, or liability results primarily from the Purchaser's
negligence, recklessness, or bad faith in performing the services which
are the subject of this Agreement.
9.3. Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified
party shall notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which his may have
pursuant to this Section 9 unless, due to the failure to be so notified,
the indemnifying party is unable to contest the losses or claims
indemnified against, and such omission shall in no event relieve the
indemnifying party from any liability which he may have to any indemnified
party otherwise than under this Section 9. In case any such action shall
be brought against any indemnified party and he shall notify the
indemnifying party
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<PAGE> 7
of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it may elect by written notice
delivered to such indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party, (who shall not,
except with the consent of the indemnified party, which consent shall not
be unreasonably withheld, be counsel to the indemnifying party); provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available
to the indemnified party and/or other indemnified parties which are
different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and otherwise to participate in the
defense of such action on behalf of such indemnifying party to such
indemnified party of its election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 9 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall
have employed separate counsel in connection with the assertion of legal
defenses in accordance with the provision to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel for each
indemnified party), (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying
party; provided further, however, that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel
referred to in such clauses (i) or (iii).
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<PAGE> 8
10. SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC. The respective agreements,
representations, warranties, indemnities, and other statements made by or on
behalf of the Seller and Purchaser, respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the other party to this Agreement or any officer, director, or
employee of, or person controlling or under common control with, such party and
will survive delivery of any payment of the Shares.
11. NOTICES. All communications hereunder shall be in writing, and, if
sent to the Purchaser shall be sufficient in all respects if delivered, sent by
registered mail, or by telecopy and confirmed to the Purchaser at:
_________________________________
_________________________________
_________________________________
_________________________________
or, if sent to the Seller, shall be delivered, sent by registered mail, or by
telecopy and confirmed to the Seller at:
LAMINCO RESOURCES, INC.
DAVID ALEXANDER
777 HORNBY STREET, SUITE 2000
VANCOUVER, BRITISH COLUMBIA, CANADA, V6Z 1S4
12. MISCELLANEOUS.
12.1. This Agreement may be executed in one or more counterparts and
it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement.
12.2. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their respective successors and, with respect to
Section 9, "Indemnification," the officers, directors, and controlling persons
thereof and each person under common control therewith, and no other person
shall have any right or obligation hereunder.
12.3. This Agreement shall be governed by, and construed in
accordance with, the laws of the state of Delaware.
12.4. The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement, all as of the day and year first above written.
LAMINCO RESOURCES, INC.
_____________________________________
by _____________________________
Its ____________________________
PURCHASER
_____________________________________
(Print Name)
_____________________________________
"Purchaser" signature
_____________________________________
"If corporation; official capacity"
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<PAGE> 1
EXHIBIT 10.9.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of this
____ day of _____________, 1996, by and between Laminco Resources, Inc.
("Seller") whose address is 777 Hormby Street, Suite 2000, Vancouver, British
Columbia, Canada, V6Z 1S4 and _________________ ("Buyer"), whose address is
___________________________________________________.
RECITALS:
A. Seller owns shares of Common Stock, par value $.001 per share issued by
Fremont Gold Corporation ("Shares").
B. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, Shares in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and undertakings herein, the parties hereto agree as follows:
COVENANTS:
1. Purchase and Sale. Seller hereby sells, assigns and transfers to Buyer
all of Seller's right, title and interest in and to ____________________________
(______) Shares and Buyer hereby purchases the Shares from Seller. Seller agrees
to execute such stock powers or other documents as may be required by the duly
authorized officers of the Company in order to effect the transfer of the Shares
on the books of the Company in accordance with this Agreement.
2. Purchase Price and Payment for Shares. The settlement of the purchase
and sale of the Shares pursuant to Section 1, "Purchase and Sale of Shares,"
shall take place on or before DECEMBER 20, 1996 (the "CLOSING DATE"), or such
later date as Purchaser and Seller agree. The certificates representing the
Shares to be purchased by the Purchaser shall be delivered by, or on behalf of,
the Seller to a closing trust account at________________________________________
________________________________________________________ and the Purchaser shall
deliver payment of the Purchase Price therefor in immediately available UNITED
STATES FUNDS to its account at __________________________________. Delivery of
the Shares shall be in accordance with the instructions of the Purchaser, and in
such names as the Purchaser shall instruct, subject to customary settlement
procedures, at the end of the business on the Closing Date.
3. Transfer of Shares. Upon Seller's receipt of the payment provided in
Paragraph 2, "Purchase Price and Payment for Shares," Seller shall assign to
Buyer all of Seller's rights to the Shares and shall execute an Irrevocable
Stock Power, which is attached hereto as Exhibit A, to cause legal title and
ownership of the Shares to be transferred to Purchaser.
4. Representations of Buyer. Buyer understands that the Shares have not
been registered under the Securities Act of 1933 ("Act") or any applicable state
securities law in reliance on the exemptions provided by Section 4(2) of the Act
and by the various applicable state securities acts relating to transactions not
involving a public offering. Buyer hereby warrants that such representation
shall be true and accurate as of the date hereof and as of the date of the
payment of the purchase price and transfer of the Shares and shall survive the
closing of the transaction contemplated hereby.
5. Representations and Warranties of Seller. Seller hereby represents and
warrants as follows, which representations and warranties shall be true and
<PAGE> 2
accurate as of the date hereof and shall survive the closing of the transaction
contemplated hereby:
5.a. The Shares are owned of record and beneficially by Seller free
and clear of all claims, liens, encumbrances, subscriptions, options, warrants,
calls, contracts, commitments, convertible rights or other agreements or
arrangements whatsoever under which Seller is or may be obligated to assign or
transfer any of the Shares;
5.b. The Shares are fully paid and nonassessable;
5.c. At no time did Seller solicit by any leaflet, public
promotional meeting, circular, newspaper or magazine article, radio or
television advertisement or any other general form of advertisement or
solicitation in connection with the offer or sale of the Shares;
6. Indemnification.
6.a. If the Purchaser becomes involved in any capacity in any
action, proceeding, or investigation in connection with any matter referred to
in or relating to this Agreement (except as expressly provided for in paragraph
6.3 of this Section 6), the Seller will reimburse the Purchaser for his
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred,
and will indemnify and hold the Purchaser harmless from and against any losses,
claims, damages, or liabilities to which Purchaser may become subject in
connection with any such action, proceeding, investigation, or matter, unless
such loss, claim, damage, or liability results primarily from the Purchaser's
negligence, recklessness, or bad faith in performing the services which are the
subject of this Agreement.
6.b. If the Seller becomes involved in any capacity in any action,
proceeding, or investigation in connection with any matter referred to in or
relating to this Agreement (except as expressly provided for in paragraph 6.3 of
this Section 6), the Purchaser will reimburse the Seller for his reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred,
and will indemnify and hold the Seller harmless from and against any losses,
claims, damages, or liabilities to which Seller may become subject in connection
with any such action, proceeding, investigation, or matter, to the extent, but
only to the extent, that such loss, claim, damage, or liability results
primarily from the Purchaser's negligence, recklessness, or bad faith in
performing the services which are the subject of this Agreement.
6.c. Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
shall notify the indemnifying party in writing of the commencement thereof; but
the omission so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which his may have pursuant to this
Section 6 unless, due to the failure to be so notified, the indemnifying party
is unable to contest the losses or claims indemnified against, and such omission
shall in no event relieve the indemnifying party from any liability which he may
have to any indemnified party otherwise than under this Section 6. In case any
such action shall be brought against any indemnified party and he shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it may elect by
written notice delivered to such indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party, (who shall not,
except with the consent of the indemnified party, which consent shall not be
unreasonably withheld, be counsel to the indemnifying party); provided, however,
that if the
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<PAGE> 3
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to the indemnified party and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and otherwise to
participate in the defense of such action on behalf of such indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 6 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the provision to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel for each indemnified party), (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party; provided further, however, that, if clause
(i) or (iii) is applicable, such liability shall be only in respect of the
counsel referred to in such clauses (i) or (iii).
7. Restrictive Legend. Buyer acknowledges and consents to the placement of
the following restrictive legend on the certificate, evidencing the Notes:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO
THE COMPANY OF AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THAT SUCH TRANSFER WILL
NOT RESULT IN ANY VIOLATION OF THE LAW.
8. Assignment. Buyer agrees not to transfer or assign this Agreement, or
any of Buyer's interest herein and further agrees that any assignment or
transfer of the Shares acquired pursuant hereto shall be made only in accordance
with this Agreement.
9. Revocation. The parties hereto shall not cancel, terminate or revoke
this Agreement or any agreement of the parties made hereunder.
10. Notices. All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, to Buyer or to Seller at their
respective addresses set forth above.
11. Counterparts. This Agreement may be executed in any number of
counterparts and all such other counterparts shall be considered to constitute
one in the same instrument in each of said counterparts shall be deemed an
original hereof.
12. Governing Law and Successors. The sale contemplated under this
Agreement shall be construed in accordance with and governed by the laws of the
state of Delaware and shall be binding upon and inure to the benefit of the
parties and their heirs, legal representatives, successors and assigns.
13. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all parties.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto or their duly authorized
representatives, having represented that they have the authority to do so, have
executed this Agreement on the day, month and year first above written.
Laminco Resources, Inc.
_____________________________________
By ___________________________
Its __________________________
_____________________________________
Buyer (Print Name)
_____________________________________
Buyer (Signature)
If Corporation By ___________________
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<PAGE> 1
EXHIBIT 10.9.3
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT ("STOCKHOLDER AGREEMENT") is made and entered
into this 17TH day of DECEMBER, 1996 by and between FREMONT GOLD
CORPORATION, a Delaware corporation (the "ISSUER") and the UNDERSIGNED
STOCKHOLDER of the Issuer listed hereinafter (the "UNDERSIGNED").
RECITALS:
A. The Undersigned has received shares of common stock ("SHARES") of the Issuer
pursuant to a certain Stock Purchase Agreement ("PURCHASE AGREEMENT") dated
December 17, 1996 between the Undersigned and Laminco Resources, Inc.;
In consideration of the mutual covenants, and agreements, the receipt and
sufficiency of which each party acknowledges, the parties hereto agree as
follows:
AGREEMENT
1. TRANSFER RESTRICTION.
The Undersigned understands and agrees that the Issuer will place the
following legend on the Shares to be purchased under the Purchase Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDER AGREEMENT AND MAY NOT BE TRANSFERED UNTIL DECEMBER 20,
1997.
2. REGISTRATION RIGHTS.
2.1 The Undersigned Stockholders who purchase the Shares without an
effective Registration Statement under the Act ("RESTRICTED SHARES") shall have
the right, at any time, to join with the Company to register the Restricted
Shares in any Registration Statement under the Securities Act 1993, as amended
("Act"), filed by the Company with the Securities and Exchange Commission
("Commission"), which includes a public offering of equity securities for cash,
either for the account of the Company or for the account of any other person.
This right to join with the Company in a Registration Statement under the Act is
not applicable to a Registration Statement filed by the Company with the
Commission on Form S-4, S-8, or any other inappropriate form. If, at any time,
the Company proposes to file a Registration Statement as described above with
the Commission, it shall, at least thirty (30) days prior to such filing, give
written notice of such proposed filing to the Holder and its designees at their
addresses appearing on the records of the Company and shall offer to include in
any such filing any proposed disposition of the Restricted Shares. Within
fifteen (15) days of receipt of the Company's notice of filing, the owners of
the Restricted Shares may request registration of the Restricted Shares pursuant
to a written request setting forth the intended method of distribution and such
other data or information as the Company or its counsel shall reasonably require
and such Restricted Shares shall be included in the Registration Statement under
the Act to the maximum extent permissible. The Company shall supply said
owner(s) with copies of such Registration Statement, and of the prospectus
included therein, in such quantities as may be reasonably necessary for the
purpose of the proposed disposition.
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<PAGE> 2
2.2 The Company shall use its best efforts to have such Registration
Statement declared effective by the Commission as soon as practicable after
filing. The Company agrees to use its reasonable best efforts to keep the
Registration Statement continuously effective, and to take any and all other
actions reasonably necessary in order to permit the public resale of the Shares
covered by the Registration Statement for a period of 120 days. The Company
further agrees, if necessary, to supplement or amend the Registration Statement,
if required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Registration Statement or by the
Act or by any other rules or regulations for registration, including any
registration statements filed pursuant to State securities laws, and the Company
agrees to furnish to the Undersigned copies of any such supplement or amendment
promptly after its being used or filed with the Commission. The Company shall
pay all registration expenses in connection with the registration pursuant to
this paragraph. Such reasonable expenses shall include all registration of
filing fees, all fees and expenses of compliance with securities or blue sky
laws, including reasonable fees and disbursements of one firm of counsel for the
Undersigned and any placement agents in connection with blue sky qualifications
of the securities being registered, printing expenses and reasonable fees and
disbursements of counsel for the Company and its independent certified public
accountants, the fees and expenses associated with any required filing with the
National Association of Dealers, Inc. ("NASD"). The Company is not required to
pay any fees or expenses of Undersigneds=, placement agents of Undersigneds= or
placement agent's counsel, other than the blue sky counsel referred to above, or
accountant or any other advisors, including any transfer taxes, underwriting,
brokerage or other discounts and commissions and finder's or similar fees
payable with respect to the Shares registered in the Registration Statement.
2.3 Each Undersigned shall pay all costs and expenses incurred by such
Undersigned, including all transfer taxes, underwriting, brokerage and other
discounts and commissions and finder's and similar fees payable with respect to
the Restricted Shares registered pursuant to this Paragraph 2, "Registration
Rights." To the extent any registration expenses are incurred, assumed or paid
by any Undersigned or any placement or sales agent thereof or underwriter
thereof with the Company's prior consent, the Company shall reimburse such
person for the full amount of the registration expenses so incurred, assumed or
paid within a reasonable time after receipt of a written request for the same.
Any registration expenses submitted by any Undersigned, placement agent, sales
agent or underwriter on behalf of any such person for payment by the Company
shall be itemized in detail and contain clear and accurate receipts of all
expenditures made by such parties.
2.4 The Company and the Undersigned shall indemnify and hold harmless each
other and their respective Affiliates from and against any loss, liability,
claim, damage and expense (including reasonable attorneys' fees) to the extent
resulting from any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement pursuant to which the Restricted
Shares were registered under the Act, or any amendment thereto, including all
documents incorporated by reference, or from the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statement not misleading; provided that the obligations of any Undersigned
to indemnify the Company and its Affiliates shall be limited to the proceeds
received by such Undersigned from the sale of the Restricted Shares pursuant to
the Registration Statement and shall only apply with respect to the information
furnished in writing by such Undersigned or on such Undersigned's behalf
expressly for use in the Registration Statement or any prospectus relating to
the Restricted Shares or any amendment or supplement thereto. The
indemnification required by this subparagraph 2.4 shall be in a form typical for
transactions of such nature.
2
<PAGE> 3
2.5 Should the Issuer engage the services of a securities underwriter
(AUnderwriter@) in connection with distribution of its securities pursuant to
the Registration Statement, the Undersigned agrees that the Underwriter in its
sole discretion may elect to include all, none, or a portion of the Restricted
Shares in the Registration Statement. Should the Underwriter elect to include
only a portion of the Restricted Shares, the amount of Restricted Shares
included shall be allocated on a pro rata basis among the Undersigned and
certain other Buyers (as defined in Stock Purchase Agreement) of Issuers shares
sold by Laminco Resources Inc., pursuant to separate Stock Purchase Agreements
in the aggregate amount of 2,597,000 shares.
3. MISCELLANEOUS.
3.1. This Agreement may be executed in one or more counterparts and
it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement.
3.2. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their respective successors.
3.3 This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
3.4 The headings of the sections of this document have been inserted
for convenience of reference only and shall not be deemed to be part of this
Stockholders Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
UNDERSIGNED STOCKHOLDER ADDRESS RESTRICTED SHARES
----------------------- ------- -----------------
________________________________
Stockholder Signature
________________________________
If corporation; official capacity
FREMONT GOLD CORPORATION
777 Hornby Street, Suite 2000
Vancouver, B.C. V6Z 1S4
Tel: 604-682-4606 Fax: 604-682-6508
Edward M. Topham, its Chief Financial Officer
3
<PAGE> 1
Exhibit 10.10
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is made and entered into
as of APRIL 1, 1997 by MICHAEL HOPLEY, an individual ("Hopley"), DAVID SHAW an
individual ("Shaw") and EDWARD TOPHAM, an individual ("Topham") (together,
Hopley, Shaw and Topham are referred to herein as "Pledgors"), in favor of
INTERNATIONAL FREEDOM, a TURKS & CAICOS corporation (together with its
successors and assigns, "Pledgee", and each is a "Pledgor"), having an address
at P.O. BOX 150, DESIGN HOUSE, SUITE 201, PROVIDENCIALS, TURKS & CAICOS ISLAND,
B.W.I. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Note (as defined below).
WITNESSETH:
WHEREAS, Pledgors are directors and/or officers of Fremont Gold
Corporation, a Delaware corporation (the "Borrower");
WHEREAS, Pledgors are the legal and beneficial owners of the shares of
common stock, par value $.001, issued by Borrower and described on Schedule I
hereto;
WHEREAS, the Borrower has executed and delivered that certain Promissory
Note dated APRIL 1, 1997 made by Borrower in favor of Pledgee in the original
principal amount of $650,000.00US (as amended from time to time, the 'Note").
WHEREAS, as directors, officers and stockholders of the Borrower, Pledgors
shall receive benefits due to the Borrower's use of the proceeds of the
extension of credit evidenced by the Note for general corporate purposes,
including, but not limited to, administrative, property acquisition and mineral
exploration expenditures;
WHEREAS, Pledgee has required, as a condition to the extensions of credit
under the Note, that the Pledgors make the pledge contemplated by this Pledge
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, receipt of which is hereby acknowledged, and in order to
induce Pledgee to extend credit under the Note, Pledgors hereby agrees with
Pledgee:
SECTION 1. Pledge. Pledgors hereby pledge to Pledgee, and grant to Pledgee
a security interest in, the following collateral to secure the Secured
Obligations (as defined in Section 2) (the "Pledged Collateral"):
<PAGE> 2
a. the shares of stock issued by the Borrower identified on Schedule
I hereto held by each of the Pledgors (the "Pledged Shares") and the
certificates representing the Pledged Shares, and all stock dividends, cash
dividends, all other dividends, cash, instruments, chattel paper, warrants,
options and other rights, property or proceeds and products from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
b. all additional shares of stock of the Borrower at any time
acquired by Pledgors in any manner, and all securities convertible into and
warrants, options and other rights to purchase any shares of stock and the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights (and any such additional shares
shall constitute part of the Pledged Shares under this Pledge Agreement), and
all stock dividends, cash dividends, cash, instruments, chattel paper, warrants
and any other rights, property or proceeds and products from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all such shares, securities, warrants, options or other rights; and
c. all proceeds of any of the foregoing. The term "proceeds" shall
have the meaning assigned to that term under the Uniform Commercial Code as in
effect in any relevant jurisdiction.
SECTION 2. Security for Obligations. This Pledge Agreement and all of the
Pledged Collateral secure the payment when due of all obligations, liabilities
and indebtedness of every nature of Borrower to Pledgee, whether at stated
maturity, on mandatory prepayment, by acceleration or otherwise, now or
hereafter existing under or arising out of or in connection with the Note and
all renewals, extensions, restructurings and refinancings of the foregoing,
whether for principal, interest, fees, expenses or otherwise, and all
obligations or liabilities of Pledgors now or hereafter existing under this
Pledge Agreement (all such debts, obligations and liabilities being collectively
called the "Secured Obligations"). This Pledge Agreement is not a guaranty of
the Secured Obligations and is without recourse to Pledgors individually.
Nothing contained herein shall give cause of action to Pledgee to collect the
Secured Obligations, from Pledgors other than by retention of , or execution and
foreclosure upon, the Pledged Collateral.
SECTION 3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of Pledgee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed undated
instruments of transfer or assignment in blank with signatures guaranteed, all
in form and substance acceptable to Pledgee. Pledgee shall have the right, at
any time in its discretion and without notice to Pledgor following the
occurrence of an Event of Default under the Note, to transfer to or to register
in the name of Pledgee or any of its nominees any or all of the Pledged
Collateral.
SECTION 4. Representations and Warranties. In order to induce Pledgee to
enter into this Pledge Agreement, each of the Pledgors represents and warrants
severally, but not jointly, that the following statements are, true, correct and
complete as follows:
-2-
<PAGE> 3
a. Schedule I hereto completely and accurately sets forth the number
of shares of the issued and outstanding stock of the Borrower pledged hereby and
held, beneficially or of record, by Pledgor as of the Closing Date. All shares
of such stock owned by Pledgor have been, or will be upon issuance, duly
authorized and validly issued in compliance with all applicable securities laws
and are or will be, as the case may be, fully paid and nonassessable. There are
no outstanding warrants, options, subscriptions or other contractual
arrangements for the purchase of any other shares of stock or any securities
convertible into shares of stock of any of the issuers of the Pledged Shares,
and there are no preemptive rights with respect to the shares of stock of any
such issuer.
b. Pledgor is the legal, record and beneficial owner of the Pledged
Collateral.
c. No consent of any other party (including, without limitation, any
stockholder or creditor of Pledgor) and no consent, authorization, approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution, delivery or
performance of this Pledge Agreement by Pledgor or (ii) for the exercise by
Pledgee of the voting or other rights provided for in this Pledge Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such disposition of any
Pledged Collateral by laws affecting the offering and sale of securities
generally).
d. This Pledge Agreement is the legal, valid and binding obligation
of Pledgor, enforceable against it in accordance with its terms.
e. All information heretofore, herein or hereafter supplied to
Pledgee by or on behalf of Pledgor with respect to the Pledged Collateral is and
will be accurate and complete in all material respects.
SECTION 5. Further Assurances.
a. Pledgors will, from time to time, at their expense, promptly
execute and deliver all further instruments and documents and take all further
action that may be necessary or desirable, or that Pledgee may request, in order
to protect any security interest granted or purported to be granted hereby, to
enable Pledgee to exercise and enforce the rights and remedies of Pledgee
hereunder with respect to any Pledged Collateral or to carry out the provisions
and purposes hereof.
b. Pledgors will, promptly upon request, provide to Pledgee all
information and evidence it may reasonably request concerning the Pledged
Collateral to enable Pledgee to enforce the provisions of this Pledge Agreement.
c. Pledgors will, immediately upon the purchase or acquisition of
any additional shares of stock of the issuers identified on Schedule I hereto,
deliver to Pledgee such Pledged Shares as required by Section 3 above, together
with a proxy substantially in the form attached hereto as Exhibit A, and a
pledge amendment, duly executed by Pledgor, in substantially the form of Exhibit
B
-3-
<PAGE> 4
hereto (a "Pledge Amendment"), in respect of the additional shares which are to
be pledged pursuant to this Pledge Agreement. Pledgors hereby authorize Pledgee
to attach each Pledge Amendment to this Pledge Agreement and agrees that all
shares listed on any Pledge Amendment delivered to Pledgee shall for all
purposes hereunder be considered Pledged Collateral.
SECTION 6. Negative Covenants. So long as any Secured Obligation shall
remain unpaid, Pledgors shall not:
a. create, incur, assume or suffer to exist any security interest,
lien or other encumbrance on any of the Pledged Collateral now owned or
hereafter acquired other than pursuant to this Pledge Agreement;
b. convert any of the Pledged Collateral into other stock or
securities (including any warrants, options, subscriptions or other contractual
arrangements for the purchase of stock or securities convertible into stock).
SECTION 7. Voting Rights, Dividends, Etc.
a. So long as no Event of Default shall have occurred and be
continuing (and in the case of subsection 7(a)(i) hereof, so long as Pledgee
shall not have made the election to exercise the rights set forth in subsection
(c) below):
i. Pledgors shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Pledge Agreement or the Note; and
ii. Pledgee shall execute and deliver (or cause to be executed
and delivered) to Pledgors all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgors to
exercise the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above, and to receive the dividends which it is
authorized to receive.
b. Upon the occurrence and during the continuance of an Event of
Default:
i. All rights of Pledgor to receive and retain any cash
dividends and distributions on the Pledged Shares shall cease and become
vested solely in Pledgee, who shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends.
ii. Upon the election by Pledgee in accordance with subsection
7(c) below, all rights of Pledgors to exercise the voting and other
consensual rights pursuant to subsection 7(a)(i) above shall cease and be
vested solely in Pledgee, who shall thereupon have the exclusive right to
exercise such voting and other consensual
-4-
<PAGE> 5
rights. In order to effect such transfer of rights, Pledgors, at the
written request of Pledgee, shall execute and present to the issuer of the
Pledged Shares a form of irrevocable proxy substantially in the form
attached hereto as Exhibit A (a "Proxy").
iii. All dividends which are received by Pledgors contrary to
the provisions of subsection 7(b)(i) shall be received in trust for the
benefit of Pledgee, shall be segregated from other funds of Pledgors as
Pledged Collateral.
c. Notwithstanding anything to the contrary contained in this
Section 7, the rights of Pledgee to exercise voting and other consensual rights
pursuant to subsection 7(b)(ii) hereof without regard to directions from
Pledgors shall arise only upon the election by Pledgee from and after the
occurrence and during the continuance of any Event of Default to exercise such
rights. The exercise by Pledgee of its rights hereunder shall not constitute an
election by Pledgee to retain the Pledged Collateral in satisfaction of the
Secured Obligations.
SECTION 8. Subsequent Changes Affecting Collateral, Transfers and Other
Liens, Additional Shares.
a. Each of the Pledgors agrees not to (i) sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with respect
to, any of the Pledged Collateral or (ii) enter into any other contractual
obligations which could reasonably be expected to restrict or inhibit Pledgee's
rights or ability to sell or otherwise dispose of the Pledged Collateral or any
part thereof after the occurrence of an Event of Default.
b. Each of the Pledgors agree (i) not to cause the issuer of the
Pledged Shares to issue any stock or other securities (including any warrants,
options, subscriptions or other contractual arrangements for the purchase of
stock or securities convertible into stock) in addition to or in substitution
for the Pledged Shares except to Pledgors, and (ii) to deliver hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
writings evidencing any additional Pledged Collateral.
SECTION 9. Pledgee Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints Pledgee as Pledgor's attorney-in-fact effective upon the occurrence of
an Event of Default, with full authority in the place and stead of Pledgor and
in the name of Pledgor, Pledgee or otherwise, from time to time in Pledgee's
discretion to take any action (including completion and presentation of the
Proxy) and to execute any instrument that Pledgee may deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including,
without limitation, to (i) receive, indorse and collect all instruments made
payable to Pledgor representing any dividend or other distribution in respect of
the Pledged Collateral or any part thereof and (ii) to exercise the voting and
other consensual rights pertaining to the Pledged Collateral; and (iii) sell,
transfer, pledge, make any agreement with respect to or otherwise deal with any
of the Pledged Collateral as fully and completely as though Pledgee were the
absolute owner thereof for all purposes, and to do, at Pledgee's option and
Pledgor's expense, at any time and from time to time, all acts and things that
Pledgee deems necessary to protect, preserve or realize upon the Pledged
Collateral. Pledgor hereby
-5-
<PAGE> 6
ratifies and approves all acts of Pledgee made or taken pursuant to this Section
9. This power of attorney is coupled with an interest and shall be irrevocable
until all Secured Obligations shall have been paid in full and the Loan
Documents shall have been terminated.
SECTION 10. Pledgee May Perform. If Pledgors fail to perform any agreement
contained herein, Pledgee may itself perform, or cause performance of, such
agreement, and the expenses of Pledgee incurred in connection therewith shall be
payable by Pledgors.
SECTION 11. Remedies upon Event of Default. If any Event of Default shall
have occurred:
a. Pledgee may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the Uniform
Commercial Code (the "UCC") in effect in the State of Arizona at that time,
whether or not the UCC applies to the affected Pledged Collateral, and Pledgee
may also, without notice except as specified below, sell the Pledged Collateral
or any part thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at any of Pledgee's offices or elsewhere, for cash,
on credit, or for future delivery, at such price or prices and upon such other
terms as Pledgee deems commercially reasonable; provided, however, any such sale
of the Pledged Shares shall be pursuant to an effective Registration Statement
under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant
to an exemption from registration pursuant to the Securities Act.
b. If Pledgee determines to exercise its right to sell any or all of
the Pledged Collateral, upon written request, Pledgor shall and shall cause the
issuer of the Pledged Shares from time to time to furnish to Pledgee all such
information Pledgee may request in order to determine the number of shares and
other instruments included in the Pledged Collateral which may be sold by
Pledgee as exempt transactions under the Securities Act and the rules of the
Securities and Exchange Commission thereunder, as the same are from time to time
in effect, and any other applicable laws.
c. Any cash held by Pledgee as Pledged Collateral and all cash
proceeds received by Pledgee in respect of any sale of, collection from, or
other realization upon all or any part of the Pledged Collateral may, in the
discretion of Pledgee, be held by Pledgee as collateral for, and/or then or at
any time thereafter applied (after payment of any amounts payable to Pledgee
pursuant to Section 14) in whole or in part by Pledgee against, all or any part
of the Secured Obligations in such order as Pledgee shall elect. Any surplus of
such cash or cash proceeds held by Pledgee and remaining after payment in full
of all the Secured Obligations shall be paid over to Pledgors or to whomsoever
may be lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct.
SECTION 12. Remedies Cumulative. No failure on the part of Pledgee to
exercise, and no delay in exercising and no course of dealing with respect to,
any power, privilege or right under the Note or this Pledge Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise by Pledgee
of any power, privilege or right under the Note or this Pledge Agreement
-6-
<PAGE> 7
preclude any other or further exercise thereof or the exercise of any other such
power, privilege or right. The powers, privileges and rights in this Pledge
Agreement and the Note are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 13. Application of Proceeds. Upon the occurrence of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Pledged Collateral shall be applied: first to all reasonable fees, costs
and expenses incurred by Pledgee with respect to the Note or the Pledged
Collateral, including, without limitations those described in Section 14 herein;
second, to accrued and unpaid interest on the Secured Obligations; third, to the
principal amounts of the Secured Obligations outstanding; and fourth, to the
Pledgors.
SECTION 14. Expenses. Pledgors shall promptly pay to Pledgee all
reasonable out-of-pocket costs and expenses of Pledgee (after the execution of
this Pledge Agreement) in connection with protecting Pledgee's security interest
in the Pledged Collateral or in connection with any matters contemplated by or
arising out of this Pledge Agreement.
SECTION 15. Termination of Security Interests, Release of Collateral. Upon
payment in cash and performance in full of all Secured Obligations, the security
interests shall terminate and all rights to the Pledged Collateral shall revert
to Pledgors. Upon such termination of the security interests or release of any
Pledged Collateral, Pledgee will, at its own expense, execute and deliver to
Pledgors such documents as Pledgors shall reasonably request to evidence the
termination of the security interests or the release of such Pledged Collateral
which has not yet theretofore been sold or otherwise applied or released. Such
release shall be without recourse or warranty to Pledgee.
SECTION 16. Amendments, Waivers and Consents. No amendment, modification,
termination or waiver of any provision of this Pledge Agreement, or consent to
any departure by Pledgors herefrom, shall in any event be effective without the
written concurrence of Pledgee and Pledgors.
SECTION 17. Notices. Any notice, approval, request, demand, consent or
other communication hereunder, including any notice of default or notice of
sale, shall be given to Pledgors at their addresses indicated on Schedule I
hereto and to Pledgee, Attention: CATHERINE BRUCE, at the address set forth
above (or to such other address previously designated by written notice to the
serving party) in accordance with the notice provisions of the Note.
SECTION 18. Continuing Security Interest, Successors and Assigns. This
Pledge Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until payment and
performance in full in cash of the Secured Obligations, (ii) be binding upon
Pledgors, their successors and assigns, and (iii) inure, together with the
rights and remedies of Pledgee hereunder, to the benefit of Pledgee and its
successors and assigns. Without limiting the generality of the foregoing clause
(iii), Pledgee may assign or otherwise transfer the Note or any interest therein
held by it to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to Pledgee herein or
otherwise. Until Pledgors receive written notice of such assignment or transfer,
Pledgor may continue to deal solely and
-7-
<PAGE> 8
directly with the existing Pledgee in connection with this Pledge Agreement.
Pledgors may not assign or transfer any of its interests or obligations
hereunder without the prior consent of Pledgee.
SECTION 19. Severability. The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision of this Pledge
Agreement in any jurisdiction.
SECTION 20. Interpretation. Time is of the essence of each provision of
this Pledge Agreement of which time is an element. All terms not defined herein
or in the Note shall have the meanings set forth in the UCC, except where the
context otherwise requires.
SECTION 21. Survival of Provisions. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Pledge
Agreement and the Note, the extension of credit thereunder and the execution and
delivery of the Note.
SECTION 22. Headings Descriptive. The headings in this Pledge Agreement
are for convenience of reference only and shall not constitute a part of this
Pledge Agreement for any other purpose or be given any substantive effect.
SECTION 23. Entire Agreement. This Pledge Agreement is intended by the
parties as a final expression of their agreement with respect to the matters
covered hereby and is intended as a complete and exclusive statement of the
terms and conditions thereof.
SECTION 24. Counterparts. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same agreement.
SECTION 25. Governing Law. THIS PLEDGE AGREEMENT IS GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ARIZONA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS GRANTED HEREBY, OR THE
REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF ANOTHER JURISDICTION.
-8-
<PAGE> 9
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be duly
executed and delivered as of the day and year first above written.
_____________________________________
MICHAEL HOPLEY
_____________________________________
EDWARD TOPHAM
By acceptance hereof as of the day and year first above written, Pledgee
agrees to be bound by the provisions hereof.
Salem Management Company Ltd., a Turks &
Caicos corporation
By:__________________________________
Name:________________________________
Title:_______________________________
-9-
<PAGE> 10
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be duly
executed and delivered as of the day and year first above written.
_____________________________________
DAVID SHAW
By acceptance hereof as of the day and year first above written, Pledgee agrees
to be bound by the provisions hereof.
Salem Management Company Ltd., a Turks &
Caicos corporation
By:__________________________________
Name:________________________________
Title:_______________________________
-10-
<PAGE> 11
SCHEDULE I
TO
PLEDGE AGREEMENT
<TABLE>
<CAPTION>
STOCK
CERTIFICATE NUMBER OF
PLEDGOR ISSUER CLASS OF STOCK NUMBERS SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael Hopley Fremont Gold Common 49 104,500
777 Hornby Corporation 50 104,500
Street, #2000 51 104,500
Vancouver, B.C. -------
V6Z 1S4 313,500
- --------------------------------------------------------------------------------
Edward Topham Fremont Gold Common 53 49,000
777 Hornby Corporation 54 49,000
Street, #2000 55 49,000
Vancouver, B.C. 116 15,000
V6Z 1S4 19 73,309
125 16,250
56 12,000
122 16,250
123 16,250
124 16,250
117 15,000
118 15,000
119 15,000
-------
357,309
- --------------------------------------------------------------------------------
David Shaw Common 41 93,000
777 Hornby Fremont Gold 42 93,000
Street, #2000 Corporation 43 93,000
Vancouver, B.C. 17 138,603
-------
V6Z 1S4 417,603
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
EXHIBIT A
IRREVOCABLE PROXY
The undersigned hereby appoints ____________________ ("Pledgee") as Proxy
with full power of substitution, and hereby authorizes Pledgee to represent and
vote all of the shares of the capital stock of Fremont Gold Corporation held of
record by the undersigned on the date of exercise hereof or at any meeting or at
any other time chosen by Pledgee in its sole discretion.
________________________________________,
an individual
Date:___________________________
<PAGE> 13
EXHIBIT B
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________________ is delivered pursuant
to Section 5(c) of the Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Pledge
Agreement, dated as of ________________, 1997, between the undersigned and
________________________, as Pledgee (the "Pledge Agreement"; capitalized terms
defined therein being used herein as therein defined) and that the shares listed
on this Pledge Amendment shall be deemed to be part of the Pledged Collateral
and shall secure all Secured Obligations.
_________________________________________,
an individual
By:_______________________________________
Name:_____________________________________
Title:____________________________________
STOCK
CERTIFICATE NUMBER OF
PLEDGOR ISSUER CLASS OF STOCK NUMBERS SHARES
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<PAGE> 1
Exhibit 10.11
VOLUNTARY STOCK POOLING AGREEMENT
THIS VOLUNTARY POOLING AGREEMENT ("Pooling Agreement") is made and entered into
this 31ST DAY OF JULY, 1996 by and between FREMONT GOLD CORPORATION, a Delaware
corporation (the "Issuer") and the UNDERSIGNED SHAREHOLDERS of the Issuer listed
on Schedule "A" (the "Undersigned").
RECITALS:
A. The Undersigned have received shares of common stock ("SHARES") of the
Issuer pursuant to a certain Stock Purchase Agreement ("STOCK PURCHASE
AGREEMENT") dated July 31, 1996, between the Undersigned and the Issuer.
B. In order to maintain an orderly market for the common stock in the
Issuer, the Undersigned have agreed to place the Shares in a pool to be released
as set out herein;
In consideration of the mutual covenants and agreements, the receipt and
sufficiency of which each party acknowledges, the parties hereto agree as
follows:
AGREEMENT:
1. In this Pooling Agreement "EXCHANGE DATE" shall mean July 31, 1996.
2. The undersigned acknowledge that the securities represented by the
Shares have not been registered under the United States Securities Act of 1933,
as amended (the "SECURITIES ACT"), or under the securities law of any State of
the United States, that the securities shall be sold under the Securities Act in
reliance on Rule 701 with respect to Messrs. Hopley and Topham and Rule 903 of
Regulation S with respect to all others, that the transfer of the securities
represented by the Shares is prohibited except in accordance with the provisions
of Regulation S. and that the securities are subject to a restricted period.
3. The Undersigned hereby severally agree each with the other and with the
Trustee that they will deliver or cause to be delivered to the Trustee
certificates representing their respective Shares in the Issuer, as set forth in
Schedule "A" to the Stock Purchase Agreement, to be held by the Trustee and,
unless then prohibited by a court of competent jurisdiction, released, subject
as hereinafter provided, on a pro-rata basis as follows:
a. 25 percent of the Share February 1, 1997;
b. 25 percent of the Shares on May 1, 1997;
c. 25 percent of the Shares on August 1, 1997; and
<PAGE> 2
d. 25 percent of the Shares on November 1, 1997;
4. Each of the Undersigned shall be entitled to a letter or receipt from
the Trustee stating the number of Shares represented by certificates held for it
by the Trustee subject to the terms of this Pooling Agreement, but such letter
or receipt shall not be assignable.
5. During that period which the Shares are held in trust by the Trustee as
set forth in Paragraph 3 of this Pooling Agreement: (i) the Undersigned shall
not sell, deal in, assign, transfer in any manner whatsoever or agree to sell,
deal in, assign or transfer in any manner whatsoever any of the Shares or
beneficial ownership of, or any interest in the Shares; (ii) neither the Issuer
nor the Trustee shall accept or acknowledge any transfer, assignment,
declaration of trust or any other document evidencing a change in legal and/or
beneficial ownership or of interest in the Shares, except as may be required by
reason of the bankruptcy of any one or more of the Undersigned subject to this
Pooling Agreement, for whatever person or persons, firm or corporation may
thereby become legally entitled thereto; and (iii) the Undersigned shall
continue to be the registered and beneficial holders of the Shares, and shall be
entitled to all rights as such, including voting and distribution rights.
6. Upon delivery of all the Shares by the Trustee to either of the
Undersigned or a court in compliance with the provision of paragraph 7, this
escrow will terminate.
7. If the Trustee is prohibited from acting under this Pooling Agreement
by an order of a court of competent jurisdiction, the Trustee will immediately
put into court the Shares in its possession at such time.
8. The Trustee may act in this Pooling Agreement on the advice of legal
counsel but will not be responsible for acting or failing to act on the advice
of legal counsel. The Trustee will not have any duties or responsibilities
except those set out in this Agreement and will not incur any liability in
acting upon any signature, notice, statutory declaration, notice of dispute or
other paper believed by the Trustee to be genuine and the Trustee may assume
that any person purporting to give any such notice, statutory declaration,
notice of dispute or other paper has been duly authorized to do so. The Trustee
will be automatically released from all responsibility and liability under this
Pooling Agreement upon termination of the escrow in accordance with the terms of
this Pooling Agreement.
9. In the event the Trustee fails or refuses to act under this Pooling
Agreement, the Issuer may appoint a substitute trustee and the Issuer and the
Undersigned will provide a joint direction in writing to the Trustee to
authorize the Trustee to deliver the Shares to the substitute trustee.
10. The Trustee may withdraw from its position under this Pooling
Agreement effective immediately upon service of written notice of withdrawal on
the Undersigned and the Issuer. Upon withdrawal, the Trustee will have no
further responsibilities or liabilities other than to deliver the Shares to the
substitute trustee in accordance with paragraph 9, unless then prohibited by an
order
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<PAGE> 3
of a court of competent jurisdiction. In the event the Trustee wishes to
withdraw and no substitute trustee has been appointed, the Trustee may put the
Shares into court, pending resolution of the matter preventing appointment of a
substitute trustee and thereafter may resign.
11. The parties hereto acknowledge and agree that the Issuer shall have
the right, at its sole discretion, to accelerate the releases referred to herein
on a pro-rata basis and may from time to time notify the Trustee of such
acceleration. Such acceleration may be based on whatever consideration the
Issuer, in its sole discretion, considers advisable, provided however that in
all cases the releases shall be on a pro-rata basis.
12. This Pooling Agreement shall inure to the benefit of and be binding
upon the parties hereto, their and each of their heirs, executors,
administrators, successors and permitted assigns.
13. This Pooling Agreement may be executed in one or more counterparts.
Each such counterpart shall constitute an original document and such
counterparts taken together shall constitute one and the same agreement.
14. The Issuer will be responsible for, and will pay from time to time,
the reasonable fees and expenses of the Trustee in connection with the
performance of its duties under this Pooling Agreement. The Issuer and the
Undersigned will jointly and severally indemnify and save harmless the Trustee
of and from all claims, demands, damage, loss, cost, including solicitor and own
client costs, and expenses arising out of its performance or lack of performance
of its duties under this Pooling Agreement.
15. It is further agreed by and between the parties hereto, without
restricting the foregoing indemnity; that in case proceedings should hereafter
be taken in any Court respecting the Shares hereby pooled, the Trustee shall not
be obliged to defend any such action or submit its rights to the Court until it
shall have been indemnified by other good and sufficient security in addition to
the indemnity hereinbefore given against cost of such proceedings.
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<PAGE> 4
TO EVIDENCE THEIR AGREEMENT each of the parties has executed this Pooling
Agreement on the date first above written.
W. FRED CARLSILE
___________________
Trustee
FREMONT GOLD CORPORATION, DAVID BAUMANN, an individual
a Delaware corporation
_________________________________
By:_____________________________ David Baumann
Its:____________________________
JOSEPH CHARLAND, an individual LUIS MIGUEL GARCIA DELGADO,
an individual
________________________________ _________________________________
Joseph Charland Luis Miguel Garcia Delgado
KARL VOGLER, an individual ALICIA CASTRO, an individual
________________________________ _________________________________
Karl Vogler Alicia Castro
MICHAEL J. HOPLEY, an individual ERICA OCHOA HURTADO, an individual
________________________________ _________________________________
Michael J. Hopley Erica Ochoa Hurtado
DAVID SHAW, an individual EDWARD M. TOPHAM, an individual
________________________________ _________________________________
David Shaw Edward M. Topham
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
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0
0
<COMMON> 25,060
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<INCOME-PRETAX> (862,122)
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<CHANGES> 0
<NET-INCOME> (862,122)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
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