THE ROYAL BANK ACTION.
On December 13, 1995, the Company entered into an agreement (the "Royal
Bank Agreement") to settle an action commenced by the Royal Bank of Scotland,
et al. by delivering to the plaintiffs in such suit (the "Royal Bank
Plaintiffs") 216,667 shares of the Company's Common Stock and cash in the
amount of $241,000. The Company also assigned to the Royal Bank Plaintiffs a
portion of its interest in any total recovery from claims against the law firm
formerly known as Bartel, Eng, Miller & Torngren, the Company's formal legal
counsel ("Bartel, Eng"). On December 13, 1996, the
Company was further required to deliver to each of the Royal Bank Plaintiffs,
at his or her option, additional shares of the Company's common stock or
additional cash. The number of shares of Common Stock or the amount of cash
each Royal Bank Plaintiff would be entitled to receive is based on the amount
of his or her pro rata interest in amounts paid by the Company pursuant to the
Royal Bank Agreement. If all Royal Bank Plaintiffs would elect to receive
Common Stock, the Company would be required to issue and deliver a maximum of
300,000 shares in the aggregate and if all Royal Bank Plaintiffs elect to
receive cash, the Company would be required to deliver cash in the maximum
aggregate amount of $600,000.
Prior to December 13, 1996, the Royal Bank Plaintiffs elected to receive
$600,000 in cash pursuant to the term of the Royal Bank Agreement. On or about
December 17, 1996, the Company received notice from the Royal Bank Plaintiffs
that the Company was in default of its obligation to pay them $600,000 on
December 13, 1996. Under the Royal Bank Agreement, such default caused the
Company to incur an immediate $3.25 million debt to the Royal Bank Plaintiffs.
Subsequently, in January 1997, the Company entered into a Forbearance
Agreement (the "Forbearance Agreement") with the Royal Bank Plaintiffs which
provided that notwithstanding the $3.25 million obligation, the Royal Bank
Plaintiffs will forbear from exercising their rights and remedies against the
Company provided the Company makes a payment of $629,100 on or before March
20, 1997 and a payment of $175,000 on or before July 1, 1997. The Company has
the option to postpone the second payment ($175,000) by delivering written
notice to the Royal Bank Plaintiffs no later than June 25, 1997 whereupon the
second payment shall be paid no later than December 15, 1997 and the amount
shall be increased to $250,000. The Company also agreed to reimburse the Royal
Bank Plaintiffs for their attorney fees and costs. Thereafter, the Royal Bank
Plaintiffs agreed to extend the time period for paying the $629,100 to them
until May 15, 1997. In addition, the second payment was increased to $225,000
to be payable July 1, 1997 provided it may be postponed until December 15,
1997 in which event the amount shall be increased to $300,000. The amount
which was due May 15, 1997 was not paid by such date. However, as of June 2,
1997, the Company entered into an Amendment No. 2 to the Forbearance Agreement
("Amendment No. 2") which, among other things, provided that the Royal Bank
Plaintiffs shall continue to forbear from exercising its rights and remedies
under the Royal Bank Agreement and related Forbearance Agreement, provided the
Company performs the following: (a) pay $896,000 in eight installments of
$112,000 each on May 31, July 31, September 30 and November 30, 1997 and
January 31, March 31, May 31 and July 31, 1998 (the "Periodic Payments"), (b)
pay $250,000 on or before September 30, 1998, (c) makes payments of $25,000
within five business days after any closing(s) since March 20, 1997, of any
single or series of sale-leaseback transaction(s) which the Company shall have
received in the aggregate of at least $65,000 in proceeds, and (d) makes a
final payment on or before September 30, 1998 of the Judgment Amount (as
defined in the Forbearance Agreement) less the aggregate amount of the
Periodic Payments previously paid, provided, however, that if the Company has
timely performed its obligations under its settlement documents with the
Plaintiffs and either (i) Plaintiffs have received all of the Periodic
Payments, or (ii) the Company makes one final payment in an amount set forth
in Amendment No. 2 which amount ranges from $950,000 if such final payment is
paid on or before May 31, 1997 to $350,000 if such final payment is paid after
May 31, 1998 and on or before July 31, 1998 (and assuming all Periodic
Payments coming due prior to the final payment has been made), and in such
event the Plaintiffs shall waive the enforceability of the Judgment Amount
against the Company and no further payments shall be required of the Company.
In addition, the Company has agreed that upon the execution of a Joint Venture
Agreement, the Company shall pay the final payment within 90 days after the
earlier of the date such joint venture is signed or effective date of a Joint
Venture Agreement. The Company has paid all Periodic Payments due to date.
The Company has also agreed to issue 433,334 shares (the "Forbearance
Agreement Shares") of its Common Stock to the Royal Bank Plaintiffs. The
Company has agreed to register such shares for resale pursuant to a
Registration Statement to be filed with the Securities and Exchange
Commission. Also, the Company has agreed to issue to the Plaintiffs, from time
to time until the payments referred to above have been completed, .025 shares
of its Common Stock for each share issued in excess of 24,000,000 of the
Company's outstanding shares. Amendment No. 2 also provides that the Company
reimburse Plaintiffs for attorneys' fees and costs incurred in connection with
the preparation and negotiation of Amendment No. 2.
The Company's obligations under the Royal Bank Agreement are secured by
(1) a deed of trust on all real property and patented and unpatented mineral
claims owned by the Company; (2) a first priority security interest in all of
the Company's right, title and interest in and to any and all goods, products,
yield, receivables, inventory (including any gold from any mines), any and all
exploration and drilling information, data, maps, reports or surveys, and any
and all income and proceeds derived from the Company's mining operations on
property which the Company presently or subsequently owns or leases; (3) a
first-priority security interest in the Company's right, title and interest in
and to any total recovery by the Company on the claims against Bartel, Eng;
and (4) a stipulated judgment in the amount of $3,250,000.
In fiscal 1996, the Company registered the 1,616,667 shares of Common
Stock to be issued and delivered pursuant to the Zuri Agreement and the Royal
Bank Agreement, which included the 300,000 additional shares that may have
been issued pursuant to the Royal Bank Agreement as described above. This
number does not include the Forbearance Agreement Shares (as described above). |
