PRELIMINARY PROXY MATERIALS
NOVA NATURAL RESOURCES CORPORATION
789 Sherman Street, Suite 550
Denver, Colorado 80203
________________________________________
PROXY STATEMENT
________________________________________
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April, 1997
________________________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Nova Natural Resources
Corporation (the "Company") of proxies for use at the Annual
Meeting of Shareholders of the Company to be held on __________,
_____________, 1997, at 10:30 o'clock a.m., Mountain Standard Time,
at the Company's principal offices located at 789 Sherman Street,
Suite 550, Denver, Colorado. This Proxy Statement and the
accompanying form of Proxy were mailed to the Company's
Shareholders on or about ____________, 1997.
If the accompanying Proxy form (Attachment No. 1) is signed, dated
and returned, the shares represented thereby will be voted in
accordance with the specifications therein. If no choice is
specified, the shares will be voted FOR the election of the five
(5) nominees for Director listed in this Proxy Statement and FOR
approval of the agreement between the Company and Northern Con-Agg,
Inc. ("NCA"), an unaffiliated Minnesota corporation, for the sale
by the Company to NCA of the Company's cement-grade kaolin mine and
related assets, located in Minnesota. Your executed Proxy may be
revoked at any time before it is exercised by filing with the
Secretary of the Company, 789 Sherman Street, Suite 550, Denver,
Colorado 80203, a written notice of revocation or a duly executed
Proxy bearing a later date. The execution of the enclosed Proxy
will not affect your right to vote in person should you find it
convenient to attend the Annual Meeting and desire to vote in
person. To the Company's knowledge, the Directors of the Company
and the nominees intend to vote for the election of such nominees
and for approval of the contract between the Company and NCA.
SOLICITATION OF PROXY
The expense of soliciting these Proxies will be borne by the
Company. It is contemplated that the Proxies will be solicited
principally through the use of the mails, but officers and regular
employees of the Company may solicit Proxies personally, by
telephone or by special letter. Although there is no formal
agreement to do so, the Company may reimburse banks, brokerage
houses and other custodians, nominees and fiduciaries for their
reasonable expenses of forwarding Proxy materials to their
principals.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF SUCH SECURITIES
On February 28, 1997, the record date for determination of
Shareholders entitled to vote at the Annual Meeting of
Shareholders, 5,985,846 shares of the Company's Common Stock and
1,792,267 of the Company's Convertible Preferred Stock, $1.00 par
value, were outstanding. Each share of Common Stock is entitled to
one vote, and one share of convertible Preferred Stock is entitled
to two votes on all matters voted upon at the Annual Meeting. The
presence, in person or by proxy, of a majority of the outstanding
shares of Common and Preferred Stock in the aggregate is necessary
to constitute a quorum at the Meeting. Cumulative voting in the
election of Directors is not permitted. Any votes withheld from
voting (whether by abstention, broker non-votes or otherwise) will
not be counted and will have no legal affect on the vote.
The following table sets forth the only persons known to the
Company, as of February 28, 1997, to own beneficially more than 5%
of the Company's Preferred Stock and of the Company's Common Stock,
its only classes of issued and outstanding voting securities.
Except as otherwise noted in the footnotes to the table, each
person named has sole voting and investment powers relating to such
shares.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
Preferred Stock
Robert E. McDonald 794,421(1) 44.32%
P.O. Box 481243
Denver, CO 80248-1243
Karen McDonald 794,420(3) 44.32%
1177 Race, Apt. 801
Denver, CO 80206
Brian B. Spillane 203,426(2) 11.35%
255 S. Eudora
Denver, CO 80222
Common Stock
Robert E. McDonald 484,851(1) 8.10%
P.O. Box 481243
Denver, CO 80248-1243
Karen McDonald 484,850(3) 8.10%
1177 Race, Apt. 801
Denver, CO 80206
Milton O. Childers 431,494(5) 7.21%
179 E. Brown Place
Aurora, CO 80013
James E. Taets 411,427(4) 6.87%
7979 S. Jasmine Circle
Englewood, CO 80112
Brian B. Spillane 514,153(2) 8.59%
255 S. Eudora
Denver, CO 80222
(1) The preferred and common shares are held by the REM Family
Trust, of which Mr. McDonald is the Trustee. Does not include
200,000 shares underlying stock options held by Mr. McDonald.
Includes options held by two officers and directors and one
director of the Company to purchase an aggregate of 561,788 shares
of Common Stock directly from Mr. McDonald, all exercisable at $.10
per share at any time on or before April 3, 2003. Does not include
62,500 shares which would be issued if Mr. McDonald elects to
convert all of his $9,375 principal amount of convertible
subordinated debentures to Common Stock.
(2) Consists of 398,211 shares vested in his account under the
Company's Employee Stock Ownership Plan (the "ESOP"), but does not
include options owned by Mr. Spillane to purchase 250,000 shares
directly from Mr. McDonald, options to purchase 250,000 shares
directly from Ms. McDonald, or options to purchase 200,000 shares
from the Company. Does not include 83,333 shares which would be
issued if Mr. Spillane elects to convert all of his $12,500
principal amount of convertible subordinated debentures to Common
Stock.
(3) The preferred and common shares are held by the Karen McDonald
Trust, of which Ms. McDonald is Trustee. Includes options held by
two officers and one director of the Company to purchase an
aggregate of 561,787 shares of Common Stock directly from Ms.
McDonald, all exercisable at $.10 per share at any time on or
before April 3, 2003. Does not include 62,500 shares which would
be issued if Ms. McDonald elects to convert all of her $9,375
principal amount of convertible subordinated debentures to Common
Stock.
(4) Mr. Taets is a former employee and officer of the Company.
Consists of 411,278 shares vested in his account under the ESOP and
149 shares owned directly.
(5) Consists of 225,154 shares owned by Mr. Childers, 4,843 shares
held by Mr. Childers' wife and 201,497 shares vested under the
ESOP, but does not include options to purchase 186,789 shares
directly from Mr. McDonald, options to purchase 186,788 shares from
Ms. McDonald, or options to purchase 200,000 shares from the
Company. Does not include 62,500 shares which would be issued if
Mr. Childers elects to convert all of his $9,375 principal amount
of convertible subordinated debentures to Common Stock.
The following table shows, at February 28, 1997, the shares of the
Company's outstanding Common Stock (5,985,846 shares), beneficially
owned by each of the officers and directors of the Company and the
shares beneficially owned by all of the officers and directors as
a group. Except as otherwise noted in the footnotes to the table,
each person named has sole voting and investment powers related to
his shares.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Robert E. McDonald 484,851 (1) 8.10%
Brian B. Spillane 514,153 (3) 8.59%
James R. Schaff 122,400 (4) 2.04%
Milton O. Childers 431,494 (5) 7.21%
Robert W. Meier 193,178 (6) 3.23%
John R. Parker (7) (2)
All Directors and Officers
as a group (7 persons) 1,746,076 29.17%
(1) See note (1) of the preceding table.
(2) Less than 1%.
(3) See note (2) of the preceding table.
(4) Does not include either 250,000 shares underlying stock
options held by Mr. Schaff, or 20,833 shares which would
be issued if Mr. Schaff elects to convert all of his
$3,125 principal amount of convertible subordinated
debentures to Common Stock.
(5) See note (5) of the preceding table.
(6) Does not include 200,000 shares underlying stock options
held by Mr. Meier. Does not include 41,667 shares which
would be issued if Mr. Meier elects to convert all of his
$6,250 principal amount of convertible subordinated
debentures to Common Stock.
(7) Does not include options owned by Mr. Parker to purchase
125,000 shares directly from Mr. McDonald, options to
purchase 125,000 shares directly from Ms. McDonald, or
options to purchase 200,000 shares from the Company.
Does not include 41,667 shares which would be issued if
Mr. Parker elects to convert his $6,250 principal amount
of convertible subordinated debentures to Common Stock.
ELECTION OF DIRECTORS
Unless directed otherwise, the Proxy will be voted in favor of
electing the five (5) persons listed below to serve as Directors of
the Company until the next Annual Meeting and until their
successors are qualified and elected. All of the nominees are now
serving as Directors and were elected by Shareholders. Thomas F.
Kane, who was elected as a Director in the last election of
Directors, resigned as a Director effective February 17, 1997, as
part of the purchase of all of his shares of Common and Preferred
Stock of the Company. See "Purchase of Kane Stock." The Directors
have determined not to fill the vacancy caused by Mr. Kane's
resignation. If any nominee becomes unavailable for election prior
to the meeting, the holders of the Proxies will vote for the
election of another qualified person (up to a total of five
directors).
Name and Position Served as
Held With the Company Age Director Since
Robert E. McDonald (2) 68 April 22, 1986
Brian B. Spillane, President and 60 April 22, 1986
Chief Executive Officer (3)
Milton O. Childers 68 April 22, 1986
Exploration Manager and Assistant
Secretary
Robert W. Meier (2) 60 April 22, 1986
John R. Parker, Chairman of the 50 April 22, 1986
Board(1)
(1) Chairman of the Board since February 17, 1997.
(2) Member of the Executive Committee.
(3) President and Chief Executive Officer since April 1, 1989.
There is no family relationship between any director of the Company
and any other director or executive officer. The following
paragraphs set forth an account of the business experience of each
of the Company's directors and executive officers, including his
principal occupation and employment.
Mr. McDonald is currently a consulting geologist and oil and gas
explorationist. He is also engaged in agricultural and real estate
pursuits. He was President of Nova Natural Resources Corporation
from its inception until his resignation on April 1, 1989. He
resigned as Chairman of the Board of the Company effective February
17, 1997. From January 1, 1984 to September, 1986, he was
President and Chairman of the Board of Nova Petroleum Corporation,
a predecessor to the Company. He graduated from the University of
Kansas in 1951 with a B.S. degree in Geology. Mr. McDonald has
published several papers relating to oil and gas geology in the
Rocky Mountain area.
Mr. Spillane became President and Chief Executive Officer of the
Company effective April 1, 1989. Prior to that time he was an
independent consultant to the oil, gas and minerals industry. From
February, 1982 to November, 1987, he was employed as Executive Vice
President of Barrett Resources Corporation, a publicly held oil and
gas exploration company, where his duties primarily involved
mergers, acquisitions, and capital financing in addition to
involvement in other operations. He graduated from the University
of Detroit in 1961 with a B.S. in Mechanical Engineering and holds
an M.S. in Mechanical Engineering from San Diego State University.
He is a Registered Professional Engineer (mechanical) in
California.
Dr. Childers was President, Treasurer, and Director of Power
Resources Corporation until the merger in 1986 of Power Resources
Corporation into Nova Natural Resources Corporation, and holds B.S.
and M.A. degrees in geology from the University of Wyoming and a
Ph.D. degree in geology from Princeton University. Dr. Childers
was an independent consulting geologist in the Denver, Colorado
area from 1986 to 1992 when he became the Company's Exploration
Manager. He became Manager of Exploration of the Company in
January, 1993, and continues in that capacity. He also now serves
as Assistant Secretary.
Mr. Meier served as President and Chairman of the Board of Nova
Petroleum Corporation from May 1979 to January 1, 1984. From 1984
to 1989 he was an independent consulting geologist. From 1989 to
1994 he was Project Geologist for Dames & Moore, specializing in
the disposal of hazardous waste materials. He is currently
retired, but occasionally works as a consulting geologist. He
graduated from Northern Illinois University in 1961 with a B.S.
degree in Geology and in 1964 received an M.S. degree in Geology
from Southern Methodist University. Mr. Meier is a member of the
American Association of Petroleum Geologists and is a certified
member of the Association of Professional Geological Scientists.
Mr. Parker became Chairman of the Board on February 17, 1997. He
is currently a real estate developer in Vermont. Prior to this
activity, he was a registered investment councilor with McRae
Capital Management in Morristown, New Jersey. Prior to joining
McRae, Mr. Parker worked as an independent financial consultant to
various companies and as a general partner in an investment banking
firm. Mr. Parker is also a director of several investment
companies associated with the Capstone Group in Houston, Texas. He
graduated from St. Lawrence University in 1969 with a B.S. in
Psychology and holds a P.M.D. from Harvard Graduate School of
Business Administration.
No directors of the Company receive compensation as directors,
although certain expenses incurred for Company business may be
reimbursed.
Executive Officers
The following table sets forth the executive officers of the
Company:
Name and Officer Age Served as Officer Since
Brian B. Spillane
President and Chief
Executive Officer 60 April 1, 1989
James R. Schaff
Secretary and Treasurer
Manager of Lands 41 May 2, 1996
Milton O. Childers
Exploration Manager and
Assistant Secretary 68 January 22, 1993
Mr. Schaff assumed his position as Nova's Land Manager on April 1,
1994, and was appointed Secretary and Treasurer of the Company on
May 2, 1996. From 1981 until 1990, he was an independent
consultant for various major and independent companies in the oil
and gas industry. From 1990 to 1994, he consulted principally for
Nova and U. S. Borax Inc. in mining-related land affairs. He
graduated from Rocky Mountain College in 1981 with a B.S. degree in
Business Administration-Economics. He is a Certified Professional
Landman (CPL) and an active member of the American Association of
Professional Landmen (AAPL), the Rocky Mountain Association of
Mineral Landmen (RMAML) and the Rocky Mountain Mineral Law
Foundation.
Executive Compensation
The following table sets forth information concerning the
compensation of the Chief Executive Officer, the Exploration
Manager and the Land Manager of the Company for the years ended
September 30, 1996, 1995, and 1994 for services in all capacities
to the Company.
Summary Compensation Table
Long Term Compensation
Annual
Compensation Awards
Name and Salary Restricted Stock Options
Principal Position Year $_____ Award ($)* ________#
Brian B. Spillane
CEO 1996 50,120 -- --
1995 67,939 3,397 --
1994 79,829 7,983 200,000
Milton O. Childers
Exploration Manager 1996 50,240 -- --
and Assistant 1995 66,160 3,308 --
Secretary 1994 76,578 7,658 200,000
James R. Schaff
Secretary/Treasurer 1996 48,930 50,000
Manager of Lands 1995 52,456 2,623 --
1994 24,750 2,475 200,000
*ESOP contribution
Option Grants in Last Fiscal Year
Individual Grants
% of Total
Options Options Granted Exercise or
Granted/ to Employees Base Price Expiration
Name (Expired) in Fiscal Year ($/Sh) Date
Brian B. Spillane -- -- -- --
Milton O. Childers -- -- -- --
James R. Schaff 50,000/ 100 $0.05 2001
(20,000)
Employee Stock Option Plans
Under the terms of the Nova Natural Resources Corporation 1989
Nonqualified Stock Option Plan (the "Nonqualified Plan"), key
personnel are issued options to purchase shares of the Company's
Common Stock at the market price at the time of the award. The
options are exercisable over a five year period in increments as
specified by the Board of Directors. Upon termination of
association with the Company, unexercised options are canceled.
Also available to employees and management is the Nova Natural
Resources Corporation 1989 Incentive Stock Option Plan, a qualified
plan (the "Incentive Plan"). Under the terms of the Incentive
Plan, options to purchase shares of the Company's Common Stock are
issued to key employees at the market price of the stock on the
date of issue. The options are exercisable over a five year period.
Options granted to employees who subsequently terminate employment
with the Company are canceled if not exercised within three months
after termination of employment.
A total of 2,000,000 shares of the Company's Common Stock have been
reserved for issuance under the terms of the two Plans. At
September 30, 1996, options to purchase 600,000 shares of Common
Stock had been issued to the Company's Directors under the
Nonqualified Plan (-0- in 1996); under the Incentive Plan, options
to purchase 650,000 shares had been issued (-0- in 1996). None of
the options issued under the Plan were exercised during 1996 or
1995.
Employee Stock Ownership Plans
The Board of Directors and the stockholders of the Company have
also adopted the Nova Natural Resources Corporation Employee Stock
Ownership Plan ("ESOP") for the benefit of its full-time employees,
including its officers and directors.
Only employees who have reached the age of 21 and have completed
one year of Company service are eligible to participate in this
plan. With respect to each plan year, the Company may contribute
cash or Common Stock of the Company to a trust in such amounts as
the Board of Directors deems advisable. Contributions may not
exceed the lesser of 25% of the participant's total annual
compensation or $30,000. Any cash contributions are to be used
primarily by the trustee to purchase shares of Common Stock of the
Company, which, in addition to shares of Common Stock of the
Company contributed by the Company, are allocated to the accounts
of all participants in the ratio that the total annual compensation
(not in excess of $150,000) of each participant bears to the total
compensation of all participants in such year. The plan does not
allow contributions by participants.
Each participant's right to the stock allocated to his account is
fully vested after three years of service. Nonetheless, a
participant's benefits will be fully vested if his employment
terminates by reason of death or upon his reaching 65. If a
participant incurs a break in service (passage of one plan year in
which the employee works 500 or fewer hours), his benefits are
forfeited to the extent they have not vested. All forfeitures are
allocated among the remaining participants in the same manner as
the annual contribution.
Distributions under the plan are to commence no later than 60 days
after the last day of the year in which the participant reaches age
65 or, if later, the plan year in which the participant terminates
employment with the Company. The distribution will consist of the
Company's Common Stock. Any distributions are payable in a lump
sum or, if the participant elects, in annual or monthly
installments.
Each participant is entitled to direct the trustee as to the manner
in which any stock allocated to his account is voted. The trustee
is empowered to vote any stock which has not been allocated in a
manner which, in the judgement of the Board of Directors,
represents the participants' best interests.
As of September 30, 1996, 398,211, 62,093 and 201,497 shares have
been allocated to accounts of Messrs. Spillane, Schaff, and
Childers, respectively. No other current officers or directors of
Nova are currently eligible to participate in the plan. No ESOP
contribution was made for 1996.
APPROVAL OF SALE OF CEMENT-GRADE KAOLIN MINE
Contract For Sale of Cement-Grade Kaolin Mine
Pursuant to a contract dated January 25, 1997, the Company agreed,
subject to shareholder approval, to sell its cement-grade kaolin
mining operations and property (the "Cement Kaolin Mine") near
Redwood Falls, Minnesota, to Northern Con-Agg, Inc., a Minnesota
corporation whose address is 3131 Fernbrook Lane North, Plymouth,
Minnesota 55447 ("NCA"). The non-permitted portion of the Cement
Kaolin Mine is currently subject to a joint venture between the
Company and U.S Borax Inc. ("Borax"), which was formed in 1993
primarily to explore, develop and produce high quality paper-grade
kaolin. Extensive properties near Redwood Falls are held by the
joint venture. During the period that the joint venture has been
exploring these kaolin properties and considering whether to bring
them into paper-grade production, the Company has been mining and
selling lower quality cement-grade kaolin from a portion of the
properties. Borax has agreed to release the non-permitted portion
of the Cement Kaolin Mine from the joint venture to facilitate the
Company's sale of the mine to NCA. The Company and the joint
venture will retain the majority of its properties near Redwood
Falls to explore the possibility of producing paper-grade kaolin.
In short, the Company will be selling all of its cement-grade
kaolin operations to NCA, while retaining its interest in the
paper-grade joint venture. Under the terms of the purchase and
sale agreement which is appended to this Proxy Statement as
Attachment 2 (the "NCA Agreement"), NCA will acquire approximately
78 fee acres owned by the Company and an additional 236 acres
leased by the Company, as well as the inventory, equipment,
contracts, permits and other personal property held by the Company
in connection with these cement-grade mining operations. NCA
proposes to continue the current cement-grade operations of the
Company, and has agreed to turn over to the Company any profits
which it may earn during a 21 year period after the date of closing
as a result of sales of kaolin produced from the property to paper
manufacturers. For its part, the Company has agreed that, if it or
any joint venture of which it is a member sells kaolin to the
cement-industry in Minnesota, Iowa, North Dakota, South Dakota or
Wisconsin during a five year period following the closing, it will
pay to NCA the sum of $30,000 for each year in which any sale
occurs.
NCA will pay a total of $700,000 to the Company for the cement-
grade kaolin assets, including $125,000 in cash at closing,
$450,000 in semi-annual installments until June 15, 2001, and a
final payment of $125,000 on October 15, 2001. Up to $70,008 of
these proceeds will be paid to Thomas F. Kane, a former director,
as part of the Company's purchase of his Common and Preferred
Stock, over a period of years. See "Purchase of Kane Stock." The
Company will retain both a mortgage and a security interest
covering the property being sold to NCA in order to secure full
payment of the purchase price. NCA will assume liability for all
existing contracts relating to the property, although the Company
will continue to have liability for any conduct before the closing
date and, even after the closing date, as to any undisclosed
contracts. The Company believes that it has disclosed all
pertinent contracts to NCA. The Company proposes to secure
appropriate lessor consents to eliminate any liability to the
lessor following assignment of the lease.
As NCA expands the current cement-grade mining operations, the
lessor will have to be relocated from her present home, which
recently has been appraised at $25,000. When this occurs, NCA will
pay the first $25,000 of relocation costs, Nova will pay 50% of the
costs, if any, between $25,000 and $75,000, and Nova will pay the
entire cost, if any, in excess of $75,000.
Shortly following execution of the NCA Agreement, the Company
incurred approximately $5,800 in additional drilling and analysis
costs to meet requests of NCA for additional exploration data. In
addition, the Company discovered a technical defect in its title to
the 78 fee acres, and is now undertaking curative work which may
require litigation in Minnesota to cure this defect. Management
believes that the Company will be able to correct the title defect
but cannot currently estimate the costs of these actions. In
addition, the Company may be asked to indemnify the title insurance
company for some or all of the face amount of the title insurance
in the event that this particular title defect is not cured and a
claim based upon this defect is made by NCA. If the Company cannot
correct the title defect, or if the amount for which
indemnification is requested, if required to be paid, will cause a
material adverse effect on the Company, the NCA Agreement will not
be effectuated.
Over the past three mining seasons, the Company has averaged
$206,108 in operating income (before the application of
administrative costs and corporate overhead) from its cement-grade
kaolin operations. However, the Company's contract with its only
customer expires at December 31, 1997, and projected operating
income from the mine in 1997 is considerably below the average of
the past three years, due to increased costs of mining, royalties
and transportation. The Company's efforts to expand its customer
base and obtain markets in a broader geographical area have not
succeeded. It cannot be determined at this time whether the
Company's current contract will be renewed, nor can it be
determined whether the pricing under a new contract will provide
margins similar to those achieved in past years. Management is
concerned that its sole customer cannot be replaced if lost. The
Company believes that margins will be reduced in the future, due to
the inability to pass along increased costs in a more competitive
environment.
In addition, the Company is wholly dependent on rail service to
remain competitive. In the opinion of Nova management, the rail
line which serves the mine is in need of considerable
rehabilitation, and while rail service during the 1996 season,
which was a relatively dry year, was quite good, the rail line is
very susceptible to the deleterious effects of weather, in
particular wet spring conditions and seasonal rainfall, on its
ability to operate reliably and efficiently. The operator of the
rail line -- which purchased the line just two years ago -- has put
the line up for sale, creating uncertainty as to the adequacy of
maintenance should the sale not take place in the near future, as
the owner desires, and uncertainty as to the future rate structure
and maintenance program under a new owner. The Company believes
the risks of disruption in rail service will increase in future
years, unless a costly rehabilitation program is initiated. Such
a program, while increasing the reliability of rail service, would
in all likelihood increase rail costs as well.
NCA has no material relationship to the Company, its officers or
directors. The Company has not secured an independent opinion
concerning the fairness of the consideration to be paid by NCA, but
the Company's officers believe such consideration to be appropriate
based upon the Company's prior net income from the property, the
anticipated kaolin reserves, and the demand for cement-grade kaolin
in the area.
Potential Impact of the Proposed Sale on the Company's Convertible
Debentures
The Colorado Business Corporation Act (the "Act") requires approval
of the majority of shares voting at a duly noticed and conducted
meeting for the sale of all or substantially all of a corporation's
assets outside of its normal course of business. The Company has
determined that, while the Cement Kaolin Mine is a principal asset,
because the remaining assets and business are not insubstantial and
proceeds of the sale are intended to be used to continue the
Company's business in the same fashion, a shareholder vote is not
required by law. Nonetheless, since the Cement Kaolin Mine sale is
a material transaction, the Company believes that its shareholders
should be informed about and vote upon the approval of that
transaction.
As part of its organization and capitalization of NovaChek Limited
Liability Company, an Idaho limited liability company formed to
develop part of the Company's gold prospect in Nome, Alaska, the
Company sold an aggregate of $250,000 of convertible subordinated
debentures (the "Debentures"). The Debentures require semi-annual
payments of interest and payment of principal and accrued interest
on April 1, 2001. At the option of its holder, each Debenture
matures and is fully payable upon the Company's "sale, exchange,
base or other disposition of all or substantially all of [its]
assets." Notwithstanding the Company's belief that the sale of the
Cement Kaolin Mine is not such an event, upon litigation brought by
a Debenture holder, a court may disagree and order early payment of
the Debentures. Such a payment would have a materially adverse
impact on the Company, require the use of proceeds from the Mine
sale and threaten the ongoing viability of the Company.
Vote Upon Sale
The affirmative vote by a majority of all of the shares of Common
and Preferred Stock entitled to vote as of February 28, 1997 is
required for approval of the agreement to sell the Cement Kaolin
Mine. Unless directed otherwise, the Proxy will be voted in favor
of approving the Agreement and effectuating its terms.
OTHER PERTINENT TRANSACTIONS
Although approval of the Company's shareholders was not required or
sought for two other transactions which have been approved by the
Company's directors and taken by the Company, the Company feels
that information concerning those transactions is appropriate to
the matters to be voted on at the Annual Meeting.
Sale of Oil and Gas Royalty Interests
On November 14, 1996, the Company sold at an auction conducted by
The Oil & Gas Asset Clearinghouse in Houston, Texas several oil &
gas producing assets and leasehold interests, primarily overriding
royalty interests in producing oil & gas wells in the Wyoming
Overthrust Belt. Proceeds from this sale, net of commissions and
direct selling costs paid to the Clearinghouse were $230,257. The
sale was effective as of November 1, 1996. The bulk of the
interests were sold to a Denver, Colorado based firm not affiliated
with the Company, which was the successful bidder among a group of
bidders at the auction for the greater portion of the oil & gas
assets and interests referred to above.
The majority of the value of the properties sold was related to a
single producing well. If a production problem occurred at some
point in the future with that well, the value of the Registrant's
oil and gas reserves could have declined substantially (although
there was no current indication of any problem). The sale was made
to eliminate the aforementioned risk, to generate cash to improve
the Company's liquidity, and for re-investment of cash in the
Company's business. The Company retains other oil and gas
interests, and presently has no intention of withdrawing from this
business. The Company and Robert McDonald, a Board member, are
currently actively seeking industry participation in exploratory
drilling on two prospects in Wyoming, in both of which the Company
holds an undivided interest, with the REM Family Trust, of which
Mr. McDonald is Trustee, holding the balance of the interest.
Purchase of Kane Stock
During 1996, disputes arose between Thomas F. Kane, then a
director, and the other directors of the Company concerning
decisions by the other directors and the business operations of the
"Company." Mr. Kane asserted, inter alia, that the continued
operation of the Company was not in the best interests of the
owners of the Company's Preferred Stock who, if the Company were
liquidated, would receive all of the proceeds in the liquidation
after payment to the Company's creditors. Mr. Kane also asserted
that continuation of the Company's business would cause the
dissipation of assets which otherwise would be distributable to
owners of the Company's Preferred Stock upon liquidation. Mr. Kane
recommended and proposed that the Company be liquidated and
threatened to commence litigation to force the liquidation and
dissolution of the Company. The Company's other directors
disagreed with Mr. Kane, determined to continue the Company as a
going concern and determined to oppose any attempt to liquidate and
dissolve the Company.
In resolution of these disputes, the Company, Mr. Kane and Brian
Spillane, the Company's President and a director, entered into an
Agreement (the "Kane Agreement"), dated February 5, 1997, for the
purchase of all of Mr. Kane's Common and Preferred Stock. A copy
of that Agreement is appended as Attachment 3. By terms of the
Kane Agreement, the Company purchased from Mr. Kane 895,415 shares
of his Preferred Stock and 510,342 shares of his Common Stock. All
of the stock purchased by the Company was retired upon completion
of the purchase. Mr. Spillane purchased from Mr. Kane 203,426
shares of Mr. Kane's Preferred Stock and 115,942 shares of his
Common Stock. Mr. Spillane paid $50,000 for the stock he purchased
from Mr. Kane. The Company paid $150,000 and agreed to pay an
amount equal to 12% of the net proceeds from the sale of the Cement
Kaolin Mine less $13,992, as and when received by the Company.
Alternatively, if the Cement Kaolin Mine is not sold on or before
June 1, 1997, the Company agreed to pay to Mr. Kane a $.10 per ton
royalty, as and when received by Nova, on sales of kaolin from the
Mine up to an aggregate of $70,008. The Agreement among the
Company, Mr. Spillane and Mr. Kane, also contained certain releases
of claims between and among the parties, and certain other
representations.
Rights of Dissenting Shareholders
The Act also affords a shareholder of a Colorado corporation the
right to dissent from certain actions requiring shareholder
approval and to require that the corporation purchase the
shareholder's stock at a "fair value" (the "right of appraisal").
If a vote were required to approve the sale of the Cement Kaolin
Mine (which the Company does not believe), rights of appraisal
generally would not be available to dissenting shareholders because
the Company's Common Stock is owned by more than 2,000
shareholders.
Notwithstanding the absence of a required vote and presence of an
exemption from rights of appraisal provided by the Act, the Company
has decided to offer to purchase all of the shares of Common Stock
of any shareholder who votes against the Cement Kaolin Mine sale
and properly asserts his right of appraisal. Management believes
that the conjunction of its Cement Kaolin Mine sale, sale of oil
and gas overriding royalty interests and purchase of the stock of
Thomas F. Kane, represent material events which might prompt a
shareholder to sell his Common Stock if an adequate market for that
Stock existed. The Company also recognizes that the absence of an
active trading market impedes such a sale. As such, management
wishes to afford shareholders who disagree with these decisions or
with the directors' decision to continue operation of the Company
the ability to sell their Common Stock at a price which management
believes is the appropriate market price.
Any shareholder of the Company who wishes to assert his or her
right as a dissenter must strictly comply with the procedures set
forth in the Act and detailed in Attachment 4. Any shareholder who
wishes to dissent from the vote approving the sale of the Cement
Kaolin Mine must file a notice of his or her intention to dissent
with the Company prior to the Annual Meeting and not vote his or
her shares in favor of the resolution approving the sale. If the
sale is approved by the Company's shareholders, no later than ten
(10) days after the effective date of the corporation action
creating the rights of appraisal, the Company will send a notice to
each shareholder who has timely sent his or her election to assert
rights of appraisal a notice which will state that the corporation
action was authorized; the effective date of the corporation
action; an address at which the Company will receive payment
demands; the place where certificates for shares being sold must be
deposited; supply a form for demanding payment; set the date by
which the Company must receive the payment demand and certificates
for the pertinent shares (which shall not be less than 30 days
after the date of the notice); and provide other pertinent
information.
Any shareholder who fails to timely and properly demand payment and
deposit his or her stock certificates will lose these rights of
appraisal. Upon effective date of the sale of the Mine or receipt
of a payment demand, whichever is later, the Company will pay each
dissenter who complied with all prerequisites for payment the fair
value of the dissenter's shares, plus interest from the date of the
Shareholders' vote at a rate determined by statutes. The
remittance will be accompanied by the Company's balance sheet at
the end of its most recent fiscal year and statement of income for
its last fiscal year, together with the latest available interim
financial statements, a statement of the Company's estimate of the
fair value of the dissenter's shares and a notice of the
dissenter's right to demand supplemental payment.
Any dissenting shareholder who disagrees with the fair value
determined by the Company, or the Company's calculation of
interest, will have 30 days after the date of mailing of the
Company's remittance to mail to the Company his or her own estimate
of the value of the shares and demand payment of any deficiency.
Any dissenter who fails to timely make such a demand will be
entitled to not more than the fair value remitted by the Company.
If the dissenting shareholder and the Company cannot agree upon the
fair value of the dissenter's shares, the dispute must be settled
by a court in an action commenced within sixty (60) days after the
Company receives the dissenter's demand for payment of a claimed
deficiency. That action will be filed in the District Court for
the City and County of Denver, Colorado.
If the Company fails to initiate such an action to determine fair
value, each dissenting shareholder must bring his or her own
lawsuit to determine that value. Cost and expenses of the
litigation, which may include expenses of counsel and experts, may
be assessed against any of the parties to such a litigation upon a
finding that a party acted arbitrarily, vexatiously or not in good
faith or, with respect to the Company, upon a finding that the
Company did not comply with the requirements of the Act for rights
of appraisal.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder who wishes to submit a proposal for inclusion in
the Company's proxy statement and proxy form for its next annual
meeting must assure that any such proposal is received by the
Company on or before December 30, 1997.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-KSB MAY BE OBTAINED WITHOUT CHARGE
BY ANY BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK UPON A
WRITTEN REQUEST ADDRESSED TO JAMES SCHAFF, SECRETARY, NOVA NATURAL
RESOURCES CORPORATION, 789 SHERMAN STREET, SUITE 550, DENVER,
COLORADO 80203.
NOVA NATURAL RESOURCES CORPORATION
789 Sherman Street, Suite 550, Denver, Colorado 80203
PROXY This Proxy is Solicited on Behalf of the Board
of Directors.
The undersigned hereby appoints Brian B. Spillane and
Robert McDonald as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent
and to vote, as designated below, all the shares of Common
Stock of Nova Natural Resources Corporation held on record
by the undersigned on February 28, 1997, at the annual
meeting of shareholders to be held on ____________ of any
adjournment thereof.
=================================================================
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all
nominees listed
below
INSTRUCTION: To withhold authority to vote for any
individual nominee strike a line through the
nominees's name in the list below.)
Robert E. McDonald, Brian B. Spillane, Milton O. Childers,
Robert W. Meier, John R. Parker
2. PROPOSAL TO APPROVE THE AGREEMENT BETWEEN THE COMPANY AND
NORTHERN CON-AGG, INC.
FOR AGAINST ABSTAIN
=================================================================
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is
made, this proxy will be voted for Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED:__________________________, 1997. _________________________
Signature
_________________________
Signature if held jointly
[Please mark, sign, date and return the Proxy card promptly using
the enclosed envelope.]
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made and entered into this ____ day of January,
1997, by and between NOVA NATURAL RESOURCES CORPORATION, a Colorado
corporation ("NOVA"), as seller, and NORTHERN CON-AGG, INC, a
Minnesota corporation ("NCA"), as buyer.
RECITALS
WHEREAS, NOVA is the owner of land and certain assets
consisting of equipment, inventory, and leased land used in its
current clay mining operation at Redwood Falls, Minnesota; and
WHEREAS, NCA desires to acquire all of NOVA's right, title and
interest in such assets and NOVA desires to transfer these assets
to NCA on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this
Agreement, the parties hereto agree as follows:
1. PURCHASE AND SALE.
1.1 Purchase and Sale. Subject to the terms and conditions
set forth in this Agreement, NOVA agrees to sell to NCA and NCA
agrees to purchase, for the consideration hereinafter described,
all of NOVA's right, title, and interest in the following assets
(collectively, the "Assets"):
(a) All of the items of NOVA's equipment listed on the Bill
of Sale attached as Exhibit A (the "Equipment");
(b) The Mining Lease (the "Dahlberg Lease") described in the
Assignment attached as Exhibit B, covering approximately
236 acres (the "Leased Real Estate");
(c) NOVA's land and buildings located at Redwood Falls,
Minnesota, consisting of approximately 78 acres, and
described on the Warranty Deed attached as Exhibit C (the
"Owned Real Estate"). The "Owned Real Estate" and "Leased
Real Estate" are collectively referred to as the "Real
Estate";
(d) To the extent legally transferrable, all permits and
approvals NOVA has from governmental authorities for
operating NOVA's clay mining and processing business, but
not including any bonds or other security in connection
with such permits and approvals and not including any
permits or approvals which may be necessary or convenient
for Nova's continuing activities in Minnesota at
locations other than the "Real Estate";
(e) NOVA's inventory of severed clay produced from the Real
Estate, referred to herein as the "Inventory"; and
(f) The contracts identified in Exhibit D (the "Contracts").
1.2 Records. NOVA agrees to deliver to NCA at Closing, as
defined in Article 4 hereto, copies of all of NOVA's Redwood Falls
business and operational records, including but not limited to
customer lists, equipment manuals, employee records, and office and
sales records. Computer disks of the records shall be provided
where available.
1.3 Purchase Price. The purchase price for the assets shall
be the sum of $700,000, together with a term accelerating
overriding royalty interest, as follows:
(a) $125,000 paid in cash at Closing;
(b) $575,000 by execution and delivery of a promissory note,
substantially in the form attached as Exhibit E and
secured by a mortgage and security agreement
substantially in the form attached as Exhibit F.
(i) $50,000 in cash on each of the following dates: June
15, 1997, October 15, 1997, June 15, 1998, October
15,1998, June 15, 1999, October 15, 1999, June
15,2000, October 15, 2000 and June 15,2001.
(ii) $125,000 in cash on October 15, 2001.
(c) execution and delivery of an assignment of overriding
royalty interest substantially in the form attached as
Exhibit G, providing for a royalty of $.25 per short ton
for all tons in excess of 100,000 short tons sold and
shipped during each calendar year until December 31, 2001
or until the promissory note is paid in full, whichever
first occurs. The royalty payments shall be credited in
inverse order on the installments due under the
promissory note.
1.4 Allocation of Purchase Price. NOVA and NCA agree that the
purchase price shall be allocated in the following manner:
(a) Equipment $ 50,000.00
(b) Mineral Interests $650,000.00
including Real Estate
2. LIABILITIES AND CONTRACTS.
2.1 Permits and Contracts. NCA shall assume, perform, and
fulfill after the Closing Date all obligations under the
transferred permits and approvals and the Contracts. After the
Closing, NCA shall be entitled to all rights and benefits under the
Contracts, except for amounts receivable arising prior to the
Closing Date.
2.2 No Assumption of Liabilities. NCA shall neither assume
nor become liable for any NOVA contracts other than the Contracts,
and NCA shall not be liable with respect to any actions or
transactions under the Contracts occurring prior to the Closing
Date. Without limiting the generality of the foregoing, the parties
specifically agree that NCA shall have no obligation with respect
to NOVA's warranty obligations for products sold and shipped by
NOVA before the Closing Date. NOVA shall satisfy all such warranty
obligations at its expense.
2.3 Lease and Restoration.. NCA shall assume and perform all
obligations under the Dahlberg Lease and shall assume and perform
all environmental protection, restoration, reclamation and other
obligations with respect to the Leased Real Estate required by the
lease, the applicable conditional use permit, NCA's restoration
bond and the Jaw.
2.4 Indemnification against Non-Assumed Liabilities.
Excepting solely the transferred permits and approvals, the
Contracts, and the liabilities assumed under Section 2.3, NOVA
shall indemnify, defend and hold NCA harmless from and against all
claims, demands, loses, expenses and liabilities, including but not
limited to reasonable attorneys' fees, arising in any fashion out
of any non-assumed liabilities or obligations of NOVA.
2.5 Accounts Receivable. NOVA is retaining its accounts
receivable.
2.6 Real Estate Matters. Not later than February 24, 1997,
NOVA will deliver to NCA:
(a) An ALTA 1987 Form B, 1990 Revision, Commitment for an
owner's policy and a lessor's policy of title insurance
for the Owned Real Estate and the Leased Real Estate
issued by a title insurer designated by NCA naming NCA as
the proposed insured, each in the amount of $350,000
(collectively, the "Commitment"). The Commitment shall
show all exceptions to title including, but not limited
to, all covenants, conditions, restrictions,
reservations, easements, rights and rights-of-way, liens
and other matters of record, and shall include proper
searches for bankruptcies, judgments and state and
federal tax liens affecting the Real Estate. The
Commitment shall also include a commitment to (i) endorse
the title policy so as to delete any general or standard
exceptions (including exceptions for parties in
possession, unrecorded instruments, survey matters, and
mechanics liens, except for matters which NCA has
created, suffered or permitted to accrue after the date
hereof); (ii) issue a zoning endorsement (ALTA Form 3.1);
and (iii) issue an endorsement to ensure that the Real
Estate complies with all existing covenants, conditions
and restrictions of record and that the instruments
creating any such restrictions do not contain any
forfeiture of title or right of re-entry provisions. All
such endorsements and agreements shall be in form and
substance satisfactory to NCA. NOVA shall pay the fees
and costs of obtaining the title commitments, although
NCA shall pay the premiums for the policies.
(b) A survey of the Real Estate shall be prepared by a land
surveyor registered in Minnesota. The survey shall show
and certify (i) the legal description of the Real Estate,
(ii) the area of the Real Estate to the nearest 1/10th of
an acre; (iii) all easements affecting the Real Estate,
whether visible or of record, including easements over
property other than the Real Estate for the benefit of
the Real Estate which are shown in the Commitment; (iv)
the location of all visible encroachments; (v) the
boundary lines of the Real Estate; and (vi) the location
of all wells on the Real Estate. The cost of the Survey
shall be paid by NOVA, if the Closing occurs hereunder.
If the closing does not occur, the cost shall be paid by
NCA.
NCA shall be allowed ten days after receipt of both the
Commitment and the Survey to make written objections to the
marketability of title, and any objections not made in writing
within this ten day period shall be deemed to have been waived. If
NCA does make written objections within this ten day period, NOVA
shall be allowed 30 days to attempt to cure the title defects. Not
later than five days after the end of this 30 day curative period,
NOVA shall notify NCA of any curative work it has performed, and
NCA shall be allowed ten days after receipt of such notice to
confirm its satisfaction with the curative work. If NCA does not
confirm its satisfaction with the curative work or otherwise waive
its objections to the title defects within this ten day period,
this Agreement shall terminate.
2.7 Prorations, Allocations, and Adjustments. NOVA and NCA
agree to the following prorations, allocations of costs, and
adjustments in connection with this Agreement and the transactions
contemplated hereby:
(a) Nova will pay in full all assessments, levied or pending,
for improvements presently in and servicing the Owned
Real Estate, as well as all real estate taxes due and
payable for years prior to 1997. Real estate taxes
payable 1997, based upon the best information available
at the Closing Date, shall be prorated between Nova and
NCA based upon the Closing Date, and shall be a final
settlement between them.
(b) All operating costs, including but not limited to
utilities and all prepaid license or permit fees relating
to licenses and permits being assigned to NCA, shall be
prorated between the parties based upon the Closing
Date, except that the mining contractor payment of $2.40
per short ton (2,000 lbs.) shipped after the Closing Date
shall be paid by NCA. It is understood that clearing and
grubbing costs for work performed by the mining
contractor prior to the date of closing will be paid by
NOVA.
(c) Real estate transfer taxes, and any other transfer taxes
customarily paid by a seller of property, shall be paid
by NOVA. Recording fees, mortgage registration tax, and
sales taxes shall be paid by NCA.
(d) Royalties due through the Closing Date under the terms of
the Dahlberg Lease shall be paid to the lessor by Nova.
(e) It is understood that the Dahlberg home and its
outbuildings, including a shed and a barn, will have to
be moved or acquired to accommodate future mining
operations on the Leased Property. The first $25,000 of
such moving or acquisition costs will be borne by NCA.
The next $50,000 of such moving or acquisition costs will
be shared equally by NOVA and NCA. Any such moving or
acquisition costs in excess of $75,000 will be borne
entirely by NOVA NCA shall be reimbursed for any moving
and acquisition costs it advances that are due from NOVA
by deduction from the next due payment under the Note.
NCA will furnish NOVA with moving and acquisition cost
details and verification within 30 days after the costs
have been incurred.
(f) NOVA and NCA have arranged for the drilling of four (4)
additional test holes to be contracted for by NOVA. The
drilling logs and testing results shall be furnished to
each party. NCA shall pay NOVA the first $10,000 of the
cost of the drilling and sample analysis. The balance of
the cost of the drilling and the sample analysis shall be
borne by NOVA. NCA's payment shall be due on February 24,
1997. NCA's obligation to make this payment is absolute
and is not subject to any contingency.
3. CLOSING DELIVERIES.
3.1 NOVA's Deliveries. At the Closing, subject to the terms
and conditions set forth in this Agreement, NOVA shall make the
following deliveries:
(a) Bills of sale, assignments, and other instruments of
conveyance reasonably requested by NCA relating to the
Equipment, the Inventory, the Leased Real Estate, the
permits and licenses that are being assigned, and the
Contracts; provided, however, that all such instruments
relating to buildings, personal property, and water wells
shall disclaim all warranties relating to habitability,
merchantability, or fitness for a particular use.
(b) A search certified to a date reasonably near the Closing
Date showing all financing statements on file against the
Assets, together with appropriate releases or termination
statements for any security interests in the Assets;
(c) A warranty deed conveying the Owned Real Estate, free and
clear of all liens, charges and encumbrances, except
those set forth in the final Commitment;
(d) A seller's affidavit in the form reasonably required by
the title insurance company, certifying that there are no
judgments, bankruptcies, tax liens, mechanic's liens,
parties in possession, unrecorded interest, encroachment
and boundary line questions or related matters affecting
the Real Estate, properly executed by NOVA.
(e) A "non-foreign person affidavit" sufficient in form and
substance to NCA and its counsel establishing that this
transaction is exempt from the withholding requirements
of the Foreign Investment Real Property Tax Act;
(f) A written consent by the lessors to the assignment of the
Dahlberg Lease and a certification by the lessors that
NOVA is not currently in breach under the terms of such
lease; and (g) Such corporate resolutions or other items
or documents as NCA's counsel shall reasonably require.
3.2 NCA's Deliveries. On the Closing Date, subject to the
terms and conditions set forth in this Agreement, NCA shall make
the following deliveries:
(a) The initial payment of the purchase price in accordance
with Section 1.3 herein;
(b) The promissory note, mortgage, and assignment of
overriding royalty interest in accordance with Section
1.3; and
(c) Such corporate resolutions or other items or documents as
NOVA's counsel shall reasonably require.
4. CLOSING.
The closing hereunder shall take place at the offices of NCA
at 3131 Fernbrook Lane North, Plymouth, Minnesota, at 2:00 o'clock
p.m. on March 26, 1997, or at such other place as may be mutually
agreed upon in writing by NCA and NOVA (the "Closing" or "Closing
Date").
5. INVESTIGATION.
From and after the date hereof and through the Closing Date,
NOVA shall afford NCA, its representatives and consultants, free
access to the Real Estate so that NCA may make such investigation
as it shall desire of the Assets, and NOVA shall provide NCA
reasonable assistance in the conduct of said investigation.
Without limiting the generality of the foregoing, NCA, its
representatives and consultants, shall be permitted access to the
Real Estate in order to inspect the same, conduct soil borings,
perform environmental inspections and tests, install monitoring
wells, prepare surveys, and take measurements, all at its sole risk
and expense. During such access, such personnel shall not cause any
unreasonable interference with NOVA's operations or damage the
Assets, except as may be necessary to conduct an environmental
inspection, provided NCA shall promptly repair any such damage and
restore the Assets to their condition immediately prior to such
damage. NCA shall indemnify and hold NOVA harmless against all
claims for injury to third persons or damage to property which may
be caused by the actions of NCA, its representatives and
consultants. As part of such investigations NCA, its
representatives or consultants, shall be permitted access to the
buildings and other improvements located on the Real Estate.
NOVA shall also provide NCA originals or reproductions of
plans and specifications for the building located on the Real
Estate (to the extent the same exist and are in NOVA's possession),
including any available "as built" drawings, maintenance records,
licenses, permits, reports and certificates and such other items
relating to the construction, operation or environmental assessment
of the Real Estate as may be in the possession of NOVA.
No investigation by NCA or its representatives or agents shall
offset or limit the scope of NO VA's representations and warranties
in this Agreement, or limit Nova's liability for any breach
thereof, unless NCA thereby obtains or otherwise has actual
knowledge of the inaccuracy of the representation or warranty at
the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF NOVA.
NOVA represents and warrants to NCA that the following
statements are true and correct and will be true and correct as of
the Closing Date.
6.1 NOVA. NOVA is a corporation duly organized and existing
and in good standing under the laws of the State of Colorado and is
entitled to own or lease its properties and to carry on its
business as and in the places where such properties are now owned,
leased or operated, or such business is now conducted. NOVA has
full power and authority to sell, convey, assign, transfer and
deliver the Assets as herein provided; all corporate and other
proceedings necessary to be taken by NOVA in connection with the
transactions provided for by this Agreement and necessary to make
the same effective have been duly and validly taken by NOVA; this
Agreement has been duly and validly executed and delivered by NOVA;
and this Agreement constitutes a valid and binding obligation of NO
VA enforceable in accordance with its terms.
6.2 Title: NOVA has good and marketable title to the Assets,
free and clear of any mortgages, liens, security interests, pledges
or encumbrances. At the Closing NOVA will convey good and
marketable title to the Assets to be sold hereunder, free and clear
of any and all mortgages, liens, security interests, pledges, or
encumbrances of any kind or nature whatsoever.
6.3 Non-Breach etc. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby by NOVA will not:
(a) result in a breach of any of the terms or conditions of,
or constitute a default under, any mortgage, note, bond,
indenture, agreement, contract, license, lease or other
instrument or obligation to which NO VA is now a party or
by which it or any of its properties or assets may be
bound or affected; or
(b) violate any order, writ, injunction or decree of any
court, administrative agency or governmental body.
6.4 Real Estate.
(a) To the best of NOVA's knowledge, its present use of the.
Real Estate and the other Assets located thereon complies
in all material respects with all applicable federal and
state laws, and regulations, and private restrictions.
(b) NOVA is not a party to, nor currently threatened with,
any legal action or other proceeding before any court or
administrative agency relating to or affecting the Real
Estate or any portion thereof. NOVA has not been charged
with, and has no knowledge that it is under investigation
regarding any violation of any law or administrative
regulation, federal, state or local, concerning the Real
Estate.
(c) To the best of NOVA's knowledge, no activity has ever
been conducted at the Owned Real Estate or the Leased
Real Estate which may give rise to any liability under
any applicable federal, state, or local environmental
protection, health, safety or similar law, whether
statutory or under common law. No condition has been
created and no activity has ever been conducted by NOVA
at the Owned Real Estate or the Leased Real Estate which
has given rise to, or may give rise to, any liability
under any applicable federal, state or local
environmental protection, health, safety or similar law,
statutory or common.
(d) There are no public improvements (water, sewer, sidewalk,
street, alley, curbing, etc.), or condemnation actions
affecting the Real Estate or other Assets located thereon
which have been completed or are in progress and for
which assessments may be levied after Closing. NOVA has
no knowledge of any planned improvements which may result
in assessments or condemnation actions. If NOVA becomes
aware of any planned improvements or condemnation actions
before Closing, NOVA will immediately notify NCA of such
planned improvements or condemnation actions.
(e) Telephone, electricity, and well water sufficient for NO
VA's past operation of the Assets, has been available,
connected and operational.
(f) No portion of the Owned Real Estate is the subject of any
lease or other agreement allowing use of the Owned Real
Estate.
(g) The Real Estate currently has access to a publicly
dedicated and maintained road. This road provides a valid
means of ingress and egress to the Real Estate sufficient
for the present operation of the Real Estate and the
Assets located thereon.
(h) Any existing easements, including, but not limited to,
those upon, above or below the Real Estate, have not
interfered with NOVA's past use of the Real Estate and
the Assets located thereon.
(i) To the best of NOVA's knowledge, there are:
(1) No underground tanks on the Real Estate, nor
are there any transformers, capacitors or other
appliances in use or stored upon the Real
Estate which contain PCB's;
(2) No urea-formaldehyde insulation or asbestos on
the Real Estate;
(3) No "hazardous substances," "pollutants,"
"contaminants," "hazardous wastes,"
"petroleum," or "asbestos" (as such terms are
defined in the Comprehensive Environmental
Response, Compensation or Liability Act of
1980, as amended, or the Resource Conservation,
and Recovery Act, as amended, or their state or
local counterparts (collectively, "Hazardous
Substances'), on, beneath or about the Real
Estate; and
(4) No existing conditions or past activities on
the Real Estate which may give rise to any
liability or obligation under any currently
applicable federal, state or local
environmental protection, health, safety, or
similar law, whether statutory or common law.
(j) During the period of NOVA's ownership and activities
on the Owned Real Estate and on the Leased Real
Estate:
(1) No underground tanks were installed on the
Owned Real Estate or Leased Real Estate, nor
were any transformers, capacitors or other
appliances in use or stored upon the Owned Real
Estate or Leased Real Estate which contain
PCB's.
(2) No urea-formaldehyde insulation nor asbestos
was installed on the Owned Real Estate or
Leased Real Estate.
(3) No Hazardous Substances were placed or located
anywhere in on or under the Owned Real Estate
or the Leased Real Estate by NOVA or any of its
employees or agents.
(4) No activity has ever been conducted at the
Owned Real Estate or Leased Real Estate by NOVA
or any of its agents or employees which has
given rise to, or may give rise to, any
liability or obligation under any applicable
federal, state, or local environmental
protection, health, safety, or similar law,
whether statutory or common law.
Except in the ordinary case of its own business where NOVA has
complied with the legal requirements applicable thereto, NOVA has
not generated, transported, stored, treated or disposed of
Hazardous Substances in or on the Owned Real Estate or the Leased
Real Estate; neither the Owned Real Estate nor the Leased Real
Estate has been used for the storing or disposal of waste or for
storing or disposal of Hazardous Substances during the period that
NOVA has been an owner of the Owned Real Estate and the period that
NOVA has been the mine operator of the Leased Real Estate; NOVA
hereby agrees to indemnify NCA from and against any and all
liability which is the result of a release or threatened release of
Hazardous Substances deposited, stored, disposed of, placed on or
which otherwise came to be located on or under the Real Estate, or
which is the result of the existence of emission of any hazardous,
toxic or contaminated chemicals, substances, materials or
pollutants or other Hazardous Substances in, on or from the Real
Estate during to the period of NOVA's ownership or possession of
the Owned Real Estate and Leased Real Estate.
6.5 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or threatened against or
affecting either NOVA or the Assets, at law or in equity or
admiralty or before or by any federal, state, municipal or other
governmental department, commission, board, agency or
instrumentality, domestic or foreign, nor has any such action,
suit, proceeding or $
investigation been pending during the 12-month period preceding the
date hereof, and NOVA is not operating under or subject to, or in
default with respect to, any order, writ, injunction or decree of
any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic
or foreign.
6.6 Compliance with Laws. NOVA and the Assets are in
substantial compliance with, all applicable laws, regulations and
orders, including without limitations CERCLA, RCRA, MERLA, OSHA,
MSHA, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Safe Drinking Water Act, and the Refuse Act, and
the present uses by NOVA of the Assets do not violate any such
laws, regulations and orders.
6.7 Labor Controversies. There are no controversies pending
or, to Nova's knowledge, threatened between NOVA and any union or
any of NOVA's and NOVA's employees. NOVA is not currently subject
to any threats of strikes or work stoppages, or any organizational
efforts or demands for collective bargaining or any union
organization. NOVA is in compliance in all material respects with
applicable labor laws. NOVA is not a party to any collective
bargaining agreements.
6.8 Changes in Customers. NOVA is not aware of any facts
which indicate that any customer of NOVA intends to cease being a
customer of NOVA (or intends to not continue as customer with NCA
after the Closing hereunder), whether as a result of the
transactions contemplated hereby or other~se.
6.9 Conduct of Business. From the date of this Agreement
until the Closing Date NOVA has not and will not have:
(c) sold or transferred any assets included in the Assets,
other than sales of inventory in the ordinary course of
business;
(d) suffered any material damage, destruction or loss to any
Assets, whether or not covered by insurance;
(e) entered into any transaction involving or relating to the
Assets other than in the ordinary course of business;
(f) made or suffered any amendment or termination of any
Contracts;
(g) suffered a termination of any license or permit; or
(h) taken any action outside of the ordinary course of
business.
6.10 Licenses and Permits. All licenses, permits, franchises,
approvals and governmental authorizations held by NOVA in
connection with the Assets and its Redwood Falls clay operations
are listed on Exhibit H. To NOVA's knowledge, no other licenses,
permits, franchises, approvals or other governmental authorizations
are required for NOVA, the Assets, or its Redwood Falls clay
operations. True, current, correct and complete copies of such
licenses, permits, franchises, approvals, and governmental
authorizations will promptly be delivered by NOVA to NCA. NOVA has
performed in all material respects all obligations required to be
performed by it to date under, and is not in default under, any
such licenses, permits, franchises, approvals, or governmental
authorizations or the laws, regulations and requirements of the
licensing and permit authorities. All such licenses, permits,
franchises, approvals, and governmental authorizations are in full
force and effect.
6.11 Taxes. Within the times and in the manner prescribed by
law, NOVA has filed all federal, state and local tax returns
required by law, and has paid, or made adequate provisions for the
due and timely payment of, all taxes, assessments, and penalties
due and payable. There are no facts or circumstances pertaining to
NOVA which could result in any liability to NCA in connection with
or relating to taxes or tax matters.
6.12 Aggregate Reserves. NOVA has no specific knowledge or
information that would indicate that NOVA's geological reports with
respect to the remaining aggregate reserves contained on the Real
Estate are inaccurate or otherwise do not reflect the true amount
of available aggregate reserves.
7. REPRESENTATIONS AND WARRANTIES BY NCA.
NCA represents and warrants to NOVA that the following
statements are true and correct as of the date of this Agreement
and will be true and correct on the Closing Date as if made on said
date:
7.1 Organization and Standing. NCA is a corporation duly
organized, existing and in good standing under the laws of the
State of Minnesota.
7.2 No Conflict. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will
not (a) result in a breach of any of the terms or conditions of, or
constitute a default under, any mortgage, note, bond, indenture,
agreement, license or other instrument or obligation to which NCA
is a party or by which it or any of its properties or assets may be
bound or affected, or (b) violate any order, writ, injunction or
decree of any court, administrative agency or governmental body, or
(c) conflict with or result in the breach of the terms, conditions
or provisions of the articles of incorporation or by-laws of NCA.
7.3 Authority. NCA has full power and authority to enter into
this Agreement and to carry out the transactions contemplated
hereby, and all corporate and other proceedings required to be
taken by NCA in connection with this Agreement and the transactions
contemplated hereby and necessary to make the same effective have
been duly and validly taken. This Agreement constitutes a valid and
binding obligation of NCA which is enforceable in accordance with
its terms.
7.4 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or threatened against or
affecting NCA, at law or in equity or admiralty or before or by any
federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign,
nor has any such action, suit, proceeding or investigation been
pending during the 12-month period preceding the date hereof, and
NCA is not operating under or subject to, or in default with
respect to, any order, writ, injunction or decree of any court or
federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign.
8. COVENANTS
8.1 Action. Neither NCA nor NOVA will take or permit to be
taken any action or do or permit to be done anything in the conduct
of their business or otherwise, which would be contrary to or in
breach of any of the terms, conditions and provisions of this
Agreement, or which would cause any of the representations and
warranties of NCA or NOVA to be untrue as of the Closing Date or
any time thereafter.
8.2 Further Assurances. On the Closing Date, and from time to
time thereafter, at the request of NCA, NOVA will execute and
deliver to NCA all such assignments, endorsements and other
documents, and take such other action as NCA may reasonably request
in order more effectively to transfer and assign to NCA the Assets
transferred to NCA pursuant to this Agreement, to confirm the title
of NCA thereto and to assist NCA in exercising its rights with
respect thereto and under this Agreement.
8.3 No Solicitation of Alternate Transaction. NOVA shall not,
and shall ensure that its directors, officers, employees,
independent contractors, consultants, counsel, accountants,
shareholders and other representatives and agents do not, directly
or indirectly, solicit, initiate or encourage discussions or
negotiations with, provide any non-public information to, or enter
into any agreement with, any third party concerning the sale,
transfer or other disposition of the Assets or any part thereof.
NOVA shall immediately inform NCA of any unsolicited offer,
including the terms thereof and the identity of the person or
entity making such offer to purchase the Assets or any part
thereof.
8.4 Confidentiality. Each of the parties agrees that all
information obtained by them in the course of negotiating the
transactions contemplated hereby and conducting the due diligence
investigation regarding the transactions contemplated hereby will
be held in strictest confidence by each of the parties hereto and
will be divulged only to those employees and agents of the parties
hereto, including legal counsel, accountants and financial advisors
who have a need to know such information. NCA specifically
covenants that, unless the sale contemplated hereby actually
closes, all such information shall be used exclusively for deciding
whether to proceed with this transaction and for no other purpose.
9. PROPERTY USE.
9.1 Background. Nova currently uses the Assets to produce and
sell kaolin to the cement industry, and NCA is acquiring the Assets
in order to continue such sales to the cement industry. Nova,
however, is retaining and may acquire additional interests in other
lands in Brown, Nicollet, Redwood, and Renville Counties, Minnesota
(the "Nova Area"), which contain higher quality kaolin reserves and
which Nova hopes to develop for production and sale to the more
demanding paper industry. While there is substantial competition
from other kaolin producers in both markets, and while other
producers could enter either market at any time, it is clear that
NCA's investment in the Assets would be jeopardized if Nova were to
begin kaolin sales to the cement industry in Minnesota, Iowa, North
Dakota, South Dakota or Wisconsin, just as Nova's effort to develop
the Nova Area would be jeopardized if NCA were to use the Assets to
begin sales to the paper industry at any location.
9.2 NOVA's Sales to Cement Industry. Nova's interest in the
Nova Area is committed to a joint venture with U.S. Borax Inc.,
under an unrecorded joint venture and operating agreement dated
July 1, 1993. The primary purpose of the joint venture is the
development of the Nova Area for the production of kaolin for the
paper industry, and the joint venture currently has no plans to
produce kaolin for sale to the cement industry. Nova does not have
the power to bind either the joint venture or U.S. Borax Inc. to
any promise concerning the production or sale of kaolin from the
Nova Area, and both the joint venture and U.S. Borax Inc. will
retain the unrestricted right to sell kaolin to the cement industry
at any time and from any location. NOVA agrees, however, that if
kaolin is produced either (i) by NOVA (including a joint venture of
which NOVA is a member) at any location in the United States or
Canada or (ii) by U.S. Borax, Inc. (including a joint venture of
which U.S. Borax, Inc. is a member) at any location within the NOVA
Area, and if such kaolin is sold to the cement industry in
Minnesota, Iowa, North Dakota, South Dakota or Wisconsin during the
five year period following the Closing, then the amounts due NOVA
under the promissory note shall be reduced by $30,000 for each year
in which any such sale occurs.
9.3 NCA's Sales to Paper Industry. NCA is acquiring the
Assets in order to produce kaolin for sale to the cement industry,
and currently has no plans to use the Assets to produce kaolin for
sale to the paper industry. For the benefit of Nova, the joint
venture and U.S Borax, Inc., NCA hereby promises that any profit
which it may earn which is attributable to sales of kaolin produced
from the Real Estate to paper manufacturers at any location at any
time during the period ending twenty one years after the date of
Closing will promptly be delivered by NCA to Nova. The geographical
scope and time period of NCA's promise is greater than that of Nova
in the preceding subsection because of the very high entry costs
into the paper industry market.
9.4 General. All of the foregoing covenants shall run with
the land for the specified periods and shall both benefit and
burden all successors and assigns of NCA and Nova. It shall be the
responsibility of NCA or Nova, as applicable, to ensure that its
successors and assigns understand these promises and promise to
perform them for the requisite period. Based on foreseeable
technical and business conditions, the parties believe it highly
unlikely that NCA will wish to engage in sales to the paper
industry, and they therefore do not expressly define the term
profit, as used in the preceding subsection. The parties do,
however, state their express intention that NCA, if paying profit
to Nova shall be placed in all respects in a position where NCA
(including its affiliates), neither gains nor loses from the
concerned sales, by looking to NCA's actual proceeds of sale,
reduced by all expenditures which NCA paid (whether exploration,
development, mining, transportation, or marketing) to secure such
distributions or proceeds. Finally, whether a sale is made to a
cement manufacturer or a paper manufacturer shall be determined by
the ultimate end use of the concerned material, so that a sale of
material to a purchaser who is acquiring such material for resale
or for further processing will be classified based upon the final
use of that material in either the cement industry or the paper
industry.
10. NO BROKERS OR Finders.
NOVA and NCA represent and warrant to each other that each did
not directly or indirectly engage any person, corporation or
partnership to bring about the consummation of the transactions
contemplated herein, and, that no person, corporation or
partnership is entitled to a broker's commission, finder's fee, or
any similar compensation upon the consummation of the transactions
contemplated herein. If this representation and warranty is
breached by either NOVA or NCA, the breaching party shall indemnify
and hold harmless the other party from any and all claims, demands,
liabilities and obligations (and any and all expenses and costs
incurred in connection with or in defending against the same),
which may arise due to any third part~s claim as a broker or
finder.
11. CONDITIONS PRECEDENT OF NCA.
The obligations of NCA hereunder are subject to the conditions
that, on or before the Closing Date:
11.1 Representations and Warranties True at Closing. The
representations and warranties of NOVA contained in this Agreement
or in any certificate or document delivered pursuant to the
provisions hereof or in connection with the transactions
contemplated hereby shall be true on and as of the Closing Date as
though such representations and warranties were made at and as of
such date, except to the extent that such representations and
warranties may have been expressly waived by NCA at an earlier
date.
11.2 Compliance with the Agreement. NOVA shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with it by the Closing Date.
11.3 Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of them
not be consummated as herein provided.
11.4 Casualty. Between February 24, 1997 and the Closing Date,
the Assets shall not have been materially adversely affected as a
result of any fire, accident, flood or other casualty or act of God
or the public enemy.
11.5 Adverse Developments. There shall have been no adverse
developments between February 24, 1997 and the Closing Date which
have a material adverse effect upon the business currently being
conducted by Nova with the Assets.
12. CONDITIONS PRECEDENT OF NOVA.
The obligations of NOVA hereunder are subject to the
conditions that, on or before the Closing Date:
12.1 Representations and Warranties True at Closing. The
representations and warranties of NOVA contained in this Agreement
or in any certificate or document delivered pursuant to the
provisions hereof or in connection with the transactions
contemplated hereby shall be true on and as of the Closing Date as
though such representations and warranties were made at and as of
such date.
12.2 Compliance with the Agreement. NCA shall have performed
and complied with all agreements and conditions required by this
Agreement to be performed or complied with it by the Closing Date.
12.3 Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein or any of them
not be consummated as herein provided.
13. INDEMNIFICATION.
13.1 Indemnification. NOVA hereby agrees that, notwithstanding
the Closing, the delivery of instruments of conveyance, and
regardless of any investigation at any time made by or on behalf of
any party hereto, NOVA will (unless NCA had actual knowledge at the
Closing Date of the concerned breach, inaccuracy, failure or act)
indemnify, save and hold NCA harmless from and against any and all
liabilities, losses, damages, claims, deficiencies, costs and
expenses, (including, without limitation, reasonable attorney fees
and other costs and expenses incident to any suit, action or
proceeding) arising out of or resulting from and will pay to NCA
the amount of damages suffered thereby together with any amount
which it may pay or become obligated to pay on account of:
(a) the breach or inaccuracy of any warranty or
representation made by NOVA herein or any misstatement of
a fact or facts herein made by NOVA;
(b) the failure by NOVA to state or disclose a material fact
herein necessary in order to make the facts herein stated
or disclosed not misleading;
(c) any failure of NOVA to perform or observe any term,
provision, covenant or condition hereunder on the part of
NOVA to be performed or observed;
(d) any act performed, transaction entered into, or state of
facts suffered to exist by NOVA in violation of the terms
of this Agreement.
In the event of any claim by NCA under Section 13.1, or any other
indemnification claim made by NCA under any other provision of this
Agreement, NCA shall be entitled to exercise all remedies provided
by law and/or equity with respect thereto.
13.2 Limitations. Any suits for indemnification or for any
other relief or damages in connection with the matters set for in
Section 13.1 or elsewhere in this Agreement shall be barred if not
commenced within three years after the Closing Date or if NCA had
actual knowledge at the Closing Date of the concerned breach,
inaccuracy, failure or act.
14. TERMINATION.
14.1 Termination. This Agreement may be terminated prior to
the Closing:
(a) in accordance with Section 2.6;
(b) by the written mutual consent of NCA and NOVA;
(c) by either NCA or NOVA (provided the terminating party is
not otherwise in default or in breach of this Agreement)
if the Closing has not occurred on or before April 26,
1997.
(d) by NCA if it notifies NOVA in writing prior to February
24, 1997 that, in NCA's sole and absolute discretion,
that its legal, accounting, business, environmental or
other inspections of the Assets discloses an unacceptable
risk;
14.2 Procedure Upon Termination. In the event of termination
pursuant to Section 14.1, written notice shall forthwith be given
to the other party, this Agreement shall terminate, and the
transactions contemplated hereby shall be abandoned, without
further action by any party hereto. The provisions of Section
2.6(b), Section 2.7(f), Section 8.4, and Article 16 shall, however,
survive any termination of this Agreement.
15. MODIFICATION.
This Agreement and its Exhibits contain the entire agreement
between the parties with respect to the transactions contemplated
herein and shall not be modified or amended except by an instrument
in writing signed by or on behalf of the parties hereto.
16. EXPENSES.
Whether or not the transactions contemplated hereby are
consummated, each of the parties hereto shall pay its own expenses
in connection with the preparation, authorization, execution and
performance of this Agreement and all transactions contemplated
hereby, including without limitation all fees and expenses of
agents, representatives, counsel and accountants. Surveying costs
shall be paid as provided in Section 2.6 (b).
17. NOTICES.
All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered or mailed by certified mail:
(a) To NCA:
Edward A. Egan
Northern Con-Agg, Inc.
3131 Fernbrook Lane North
Plymouth, Minnesota 55447
with a copy thereof to:
Thomas J. Rooney
Rooney & Neilson, Ltd.
8 Pine Tree Drive, # 120
Arden Hills, Minnesota 55112
(b) To NOVA:
Nova Natural Resources Corporation
Attention: Brian Spillane
1900 Wazee Street, # 305
Denver, Colorado 80202
with a copy thereof to:
Lohf, Shaiman & Jacobs, P.C.
Attention: Neil E. Ayervais
950 South Cherry Street, # 900
Denver, Colorado 80222
or to such other address or to such other person as NCA or NOVA
shall have last designated by written notice to the other.
18. ASSIGNMENT
This Agreement shall not be assignable by any party hereto
without the prior written consent of the other; provided, however,
that NOVA may assign this Agreement to a successor by merger or to
a wholly owned subsidiary without the need for any consent.
19. MINNESOTA LAW TO GOVERN.
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Minnesota.
20. COUNTERPARTS
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21. HEADINGS AND EXHIBITS.
The headings in this Agreement are for convenience only and
shall not be deemed to alter or affect any provision hereof.
Reference to numbered "articles," "sections," "paragraphs," and
"subparagraphs" of this Agreement and to lettered "Exhibits" refer
to articles, sections, paragraphs, a nd subparagraphs of this
Agreement and the Exhibits attached hereto. All Exhibits are
incorporated into, and shall be deemed a part of, this Agreement.
22. ACCESS TO BOOKS AND RECORDS.
Under the terms of this Agreement, NCA is receiving copies of
the records which relate to business relating to the Assets, while
NOVA is retaining the originals. Each party agrees a period of
three years after the Closing Date said party shall preserve any
books or records to the Assets and the related business activities,
and that during such period it will afford to party access to all
such books and records at reasonable business hours and upon
notice. After the termination of said three-year period each party
shall be free to dispose records in such manner as it pleases,
unless the other party has requested said records. party has made
such a request, the party receiving the request either shall give
to the party the originals or copies of such records, or may retain
such records subject to the party's continuing right to inspect the
same.
IN WITNESS WHEREOF. the parties have duly executed this
Agreement as of the date set above.
NOVA NATURAL RESOURCES CORPORATION NORTHERN CON-AGG, INC.
By:/s/Brian B. Spillane By:/s/Edward A. Egan
Brain Spillane, President Edward A. Egan, President
STATE OF COLORADO)
ss
COUNTY OF DENVER
This instrument was acknowledged before me on January 27, 1997 by
Brian B. Spillane, the President of NOVA NATURAL RESOURCES
CORPORATION, a Colorado Corporation, on behalf of the corporation.
/s/ James R. Schaff
Notary Public
[SEAL]
STATE OF MINNESOTA
SS
COUNTY OF RAMSEY
This instrument was acknowledged before me on 1-25, 1997 by
Edward A. Egan, the President of Northern Con-Agg, Inc., A
Minnesota Corporation, on behalf of the corporation.
/s/ Thomas J. Rooney
Notary Public
EXHIBIT A-1
BILL OF SALE
Nova Natural Resources Corporation ("Nova") a Colorado
corporation, in consideration of $10 and other good and valuable
consideration paid to it by Northern Con-Agg, Inc. ("NCA"), a
Minnesota corporation whose address is 3131 Fernbrook Lane North,
Plymouth, Minnesota 55447, hereby bargains, sells, grants, conveys,
and transfers unto NCA the inventory, equipment and other personal
property described on the attached Schedule 1, all of which relate
to a kaolin mining operation in Redwood County, Minnesota.
TO HAVE AND TO HOLD the same unto NCA, its successors and
assigns forever.
Nova warrants and agrees to defend title to the said
inventory, equipment and other personal property described in
Schedule 1, against all persons whomsoever. Except for the
foregoing warranty, Nova makes NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR OTHERWISE. All such property is being sold "as is."
IN WITNESS WHEREOF, this Bill of Sale is executed this _____
day of March, 1997.
NOVA NATURAL RESOURCES CORPORATION
By:_____________________________
Brian Spillane, President
EXHIBIT A-2
PERSONAL PROPERTY
1 Agglomerator - Allis Chalmers 20 x 30
1 Producer Supply Conveyor Belt 30" x 50'
1 25 Ton Silo
1 Foundation
EXHIBIT B-1
ASSIGNMENT
THIS ASSIGNMENT is made this ____ day of March, 1997, from
Nova Natural Resources Corporation, a Colorado corporation whose
address is 1900 Wazee Street, Suite 305, Denver, Colorado 80202
("Nova"), to Northern Con-Agg, Inc., a Minnesota corporation whose
address is 3131 Fernbrook Lane North, Plymouth, Minnesota ("NCA").
IN CONSIDERATION of $10 and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged. hereby
assigns NCA all of the right, title, and interest of Nova in and to
the following mining lease:
LESSORS: William E. Dahlberg and Vera Evelyn Dahlberg
LESSEE: Western Minerals Exploration Company
DATED: October 9, 1981
DESCRIPTION: Township 113 North, Range 35 West
Section 33: E/2 NW/4, E/2 SW/4, and W/2 NE/4
Redwood County, Minnesota
RECORDED: Book 97 (Misc) at page 147 (Redwood County)
NCA assumes the obligations of Nova under the lease and agrees
to indemnify and hold harmless Nova from any costs, loss, or damage
resulting from any default under the lease after the date of this
assignment or from any operations or activities of NCA after the
date of this assignment.
Additional representations, warranties, covenants,
indemnifications and limitations are set forth in an unrecorded
asset purchase agreement dated January _____, 1997 between Nova and
NCA. All such provisions shall survive the execution and delivery
of this assignment.
All provisions contained in this assignment and in the asset
purchase agreement shall be binding upon and inure to benefit of
the parties to this assignment, their successors and assigns.
IN WITNESS WHEREOF, the parties have executed this assignment
as of the date first above written.
NOVA NATURAL RESOURCES CORPORATION
By:_______________________________
Brian Spillane, President
EXHIBIT B-2
NORTHERN CON-AGG, INC.
By:_______________________________
Edward A. Egan, President
STATE OF MINNESOTA
) ss
COUNTY OF ) ss.
The foregoing instrument was acknowledged before me this _____
day of _________ 1997, by Brian Spillane as President of Nova
Natural Resources Corporation, a Colorado corporation.
Witness my hand and official seal.
___________________________
Notary Public
My commission expires:
______________________
STATE OF MINNESOTA )
) SS
COUNTY OF )
The foregoing instrument was acknowledged before me this _____
day of __________ 1997, by Edward A. Egan as President of Northern
Con-Agg, Inc., a Minnesota corporation.
Witness my hand and official seal.
_________________________
Notary Public
My commission expires:
_____________________
EXHIBIT C-1
WARRANTY DEED
STATE DEED TAX DUE HEREON: $______________
Date:_______________, 1997.
FOR VALUABLE CONSIDERATION, Nova Natural Resources
Corporation, a Colorado corporation, Grantor, hereby conveys and
warrants to Northern Con-Agg, Inc., a Minnesota corporation,
Grantee, real property located in Section 35, Township 113 North,
Range 35 West, Redwood County, Minnesota, described as follows:
(1) The NW/4 of the SW/4 and
(2) The W/2 of the NW/4 excepting:
(a) That part of the W/2 NW/4 described as follows:
Beginning at the NW Corner of said Section 33;
thence S.S9.36'14"E., an assumed bearing, along the
north line of said NW/4 1338.15 feet to the NE Comer
of the NW/4 of the NW/4 of said Section 33; then
S.00 40'24"W., along the east line of said W/2 of
the NW/4 1618.03 feet to the northerly right of way
line of the Minnesota Valley Transportation Company;
then N.6047'38"W., along said right of way line
1517.85 feet to the west line of said NW/4; then
N.0022'24"E., along said west line 886.55 feet to
the point of beginning, containing 38.38 acres, more
or less, subject to easements of record in said
county and state.
(b) The railroad right of way.
together with all hereditaments and appurtenances belonging
thereto, subject to the following exceptions: [insert from final
title insurance commitment when obtained]
The Grantor certifies that it does not know of any wells on
the above-described real property.
NOVA NATURAL RESOURCES CORPORATION
A Colorado corporation
Affix Deed Stamp Here
By:__________________________
EXHIBIT C-2
STATE OF MINNESOTA )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me on the
__________ day of 1997, by _____________________, the
_____________________ of Nova Natural Resources Corporation, a
corporation under the laws of the State of Colorado, Grantor, on
behalf of the corporation.
______________________
Notary Public
My commission expires:
___________________
[SEAL]
Send Tax Statements to:
Northern Con-Agg, Inc.
3131 Ferbroon Lane No.
Plymouth, MN 55447
THIS INSTRUMENT DRAFTED BY:
Thomas J. Rooney
Rooney & Neilson, Ltd.
Attorneys at Law
8 Pine Tree Drive, Suite 120
Arden Hills, Minnesota 55112
(612) 481-9222
EXHIBIT D
CONTRACTS
September 1, 1991 royalty assignment from Nova Natural Resources
Corporation to Robert E. McDonald Trust, with two further
assignments by the Trust, one dated September 17, 1992 to the REM
Family Trust and another dated October l, 1992 to the Karen
McDonald Trust;
Kaolin royalty agreement dated July 20, 1990 from Nova Natural
Resources Corporation to Honner Township;
Kaolin supply contract dated January 1, 1990 between Nova Natural
Resources Corporation and Lehigh Portland Cement Company, together
with amendments 1-4; and
Railroad transportation contract (Contract No. ICC-UP-C-30471)
between Nova Natural Resources and Union Pacific Railroad Company.
In addition, there is an oral mining contract with Bill Schmidt
governing mining of the Real Property through the 1997 season. Nova
Natural Resources Corporation is currently seeking Mr. Schmidt's
written confirmation of the payment amounts applicable to the 1997
season by the form of the letter previously furnished Northern Con-
Agg, Inc.
In past years, Nova Natural Resources Corporation has had an oral
agreement allowing Jerome J. Liebl to farm the tillable portion of
the Owned Real Property which was not necessary for mining
operations in exchange for a share of the crop. There have been no
discussions to date concerning renewal of this agreement for the
1997 farming season.
EXHIBIT E-1
PROMISSORY NOTE
$575,000.00 ______________, 1997
Plymouth, Minnesota
FOR VALUE RECEIVED, Northern Con-Agg, Inc., a Minnesota
corporation whose address is 3131 Fernbrook Lane North, Plymouth,
Minnesota ("NCA"), hereby promises to pay to the order of Nova
Natural Resources Corporation, a Colorado corporation whose address
is 1900 Wazee Street, Suite 305, Denver, Colorado 80202 (the
"Lender"), the principal sum of $575,000.00, without interest, in
eight installments of $50,000.00 each on the 15th day of June and
the 15th day of October in 1997, 1998, 1999, 2000, together with a
$50,000.00 installment on June 15, 2001 and a final installment of
$125,000.00 on October 15, 2001.
This Note may be prepaid in whole or in part by NCA without
penalty at any time, and any partial prepayment shall be credited
in inverse order to the installments due. Any amount paid by NCA to
Nova under the terms of the Assignment of Overriding Royalty of
even date herewith, covering a mining lease and certain fee
property in Redwood County, Minnesota, shall be deemed a partial
prepayment of this Note and shall be credited in inverse order to
the installments due hereunder; provided, however, that such credit
shall not exceed the unpaid principal amount of this Note at the
date such credit is made, Similarly, any amounts advanced by NCA on
behalf of Nova in accordance with Section 2.7(e) of the Asset
Purchase Agreement dated January 25, 1997 between NCA and Nova
(relating to the allocation of Dahlberg moving or acquisition
costs) shall be deemed a partial prepayment of this Note and shall
be credited to the next installment due hereunder; provided,
however, that such credit shall not exceed the unpaid principal
amount of this Note at the date such credit is made:
This Note is secured by a Mortgage, Security Agreement,
Financing Statement and Assignment of Production Proceeds of even
date herewith (the "Mortgage") encumbering a mining lease and other
property owned by NCA in Redwood County, Minnesota.
If any one or more of the following events of default shall
occur hereunder and shall not have been remedied:
(a) default by NCA in the payment of principal or interest on
this note when due; or
(b) default by NCA in the performance or observance of any
covenant contained in the Mortgage, which default shall
not have been cured as therein provided; or
EXHIBIT E-2
(c) commencement of any insolvency, bankruptcy, or similar
proceedings by or against NCA, including any assignment
by NCA for the benefit of creditors;
then the Lender may, upon 15 days' advance written notice to NCA,
declare the entire unpaid principal balance of this Note to be
immediately due and payable, together with all interest provided
herein. In addition, the entire amount due and payable shall,
without the need for any notice or other action by Lender, bear
interest at the rate of 18% per annum, calculated on the basis of
a 360 day year for the actual number of days elapsed between the
due date and the date of payment.
NCA hereby waives presentment, demand for payment, notice of
dishonor and any or all other notices or demands in connection with
the delivery, acceptance, performance, default or enforcement of
this Note and hereby consents to any extensions of time, renewals,
waivers or modifcations that may be granted or consented to by the
holder hereof in respect to the time of payment or any other
provisions contained herein.
If any provision of this Note shall be invalid, illegal or
unenforceable in any respect, then it is the intention of the
parties that the remainder of this Note shall not be affected, and
that in lieu of any such clause or provision there may be added as
a part hereof a substantive clause or provision as similar in terms
to such illegal, invalid or unenforceable clause or provision as
may be possible.
NORTHERN CON-AGG, INC.
By:_________________________
Edward A. Egan, President
Attest:
____________________
Secretary
EXHIBIT F-1
MORTGAGE
By Corporation or Partnership
reserved for mortgage registry
tax payment data)
MORTGAGE REGISTRY TAX DUE HEREON:
$________________
THIS INDENTURE, made this _____ day of ______________, 1997,
between Northern Con-Agg, Inc., a corporation under the laws of the
State of Minnesota, Mortgagor, and Nova Natural Resources
Corporation, a corporation under the laws of the State of Colorado,
Mortgagee,
WITNESSETH, that Mortgagor, in consideration of the sum of
Five Hundred Seventy-five Thousand and no/100 ($575,000.00) Dollars
to Mortgagor in hand paid by Mortgagee, the receipt whereof is
hereby acknowledged, does hereby convey unto Mortgagee, forever,
A. The real property situated in Section 35, Township 113 North,
Range 35 West in Redwood County, Minnesota, described as
follows:
(1) The NW/4 of the SW/4 and
(2) The W/2 of the NW/4 excepting:
(a) That part of the W/2 NW/4 described as follows:
Beginning at the NW Corner of said Section 33;
thence 5.89 36'14"E., an assumed bearing, along the
north line of said NW/4 1338.15 feet to the NE
Corner of the NW/4 of the NW/4 of said Section 33;
then 5 00040'24"W., along the east line of said W/2
of the NW/4 1618.03 feet to the northerly right of
way line of the Minnesota Valley Transportation
Company; then N.60 47'38"W., along said right of way
line 1517.85 feet to the west line of said NW/4;
then N.00 22'24"E., along said west line 886.55 feet
to the point of beginning, containing 38.38 acres,
more or less, subject to easements of record in said
county and state.
(b) The railroad right of way.
B. That certain Mining Lease, dated october 9, 1981 and recorded
in Book 97 (Misc) at page 147, from William E. Dahlberg and Vera
Evelyn Dahlberg, as lessors, to Western Minerals Exploration
Company, as lessee, covering the E/2 NW/4, E/2 SW/4 and W/2 NE/4 of
Section 33, Township 113 North, Range 35 West, in Redwood County,
Minnesota, together with all hereditaments and appurtenances
belonging thereto.
TO HAVE AND TO HOLD THE SAME, to Mortgagee forever. Mortgagor
covenants with Mortgagee as follows: That Mortgagor is lawfully
seized of the Property and has good right to convey the same; that
the property is free from all encumbrances, except easements,
restrictions and reservations of record; that Mortgagee shall
quietly enjoy and possess the same; and that Mortgagor will warrant
and defend the title to the same against all lawful claims not
hereinbefore specifically excepted.
PROVIDED, NEVERTHELESS, that if Mortgagor shall pay to
Mortgagee the sum of Five Hundred Seventy-five Thousand and no/100
($575,000.00) Dollars according to the terms of the promissory note
of even date herewith (the "Note"), the final payment being due and
payable on October 15, 2001, with interest after default at the
rate provided in the Note, and shall repay to Mortgagee, at the
times and with interest as specified, all sums advanced in
protecting the lien of this Mortgage, in payment of taxes on the
Property and assessments payable therewith, principal or interest
on any prior liens, expenses and attorney's fees herein provided
for and sums advanced for any other purpose authorized herein, and
shall keep and perform all the covenants and agreements herein
contained, then this Mortgage shall be null and void, and shall be
released at Mortgagor's expense.
AND MORTGAGOR covenants with Mortgagee as follows:
1. to pay the principal sum of money and interest as
specified in the Note;
2. to pay all taxes and assessments now due or that may
hereafter become liens against the Property before
penalty attaches thereto;
3. to keep the Property free and clear of all liens or
encumbrances, unless such liens and encumbrances are
either timely bonded in accordance with Minnesota law or
the consent of Mortgagee is first obtained;
4. to commit or permit no waste on the Property and to keep
it in good repair;
5. to complete forthwith any improvements when may hereafter
be under course of construction on the Property;
6. to timely pay all amounts and faithfully perform all
covenants under the Mining Lease and otherwise maintain
the Mining Lease in full force and effect; and
7. to pay any other expenses and attorney's fees incurred by
Mortgagee by reason of litigation with any third party
for the protection of the lien of this Mortgage.
In case of failure to pay said taxes and assessments, prior
liens or encumbrances, expenses and attorney's fees as above
specified, or to pay any amount or perform any act necessary to
maintain or revive the Mining Lease in full force and effect, then
Mortgagee may pay such taxes, assessments, prior liens, expenses,
amounts under the Mining Lease, and attorney's fees and interest
thereon, or obtain such insurance or perform such acts as may be
required under the Mining Lease, and the sums so paid shall bear
interest from the date of such payment at the 18% per annum default
rate set forth in the Note, and shall be impressed as an additional
lien upon the Property and be immediately due and payable from
Mortgagor to Mortgagee and this Mortgage shall from date thereof
secure the repayment of such advances with interest.
In case of default in any of the foregoing covenants,
Mortgagee may, upon 15 days' advance written notice to Mortgagor,
declare the unpaid balance of the Note and the interest accrued
thereon, together with all sums advanced hereunder, immediately due
and payable, and Mortgagor hereby authorizes and empowers Mortgagee
to foreclose this Mortgage by judicial proceedings or to sell the
Property at public auction and convey the same to the purchaser in
fee simple in accordance with the statute, and out of the moneys
arising from such sale to retain all sums secured hereby, with
interest and all legal costs and charges of such foreclosure and
the maximum attorney's fee permitted by law, which costs, charges
and fees Mortgagor agrees to pay.
The terms of this Mortgage shall run with the Property and bind the
parties hereto and their successors in interest.
IN TESTIMONY WHEREOF, Mortgagor has hereunto set its hand the
day and year first above written.
MORTGAGOR:
NORTHERN CON-AGG, INC.,
A Minnesota corporation,
By:_____________________________
Edward Egan, its President
STATE OF MINNESOTA )
) ss
COUNTY OF ___________)
The foregoing instrument was acknowledged before me on the day
of _____________, 1997, by Edward Egan, the President of Northern
Con-Agg, Inc., a corporation under the laws of the State of
Minnesota, on behalf of the corporation.
_________________________
Notary Public
My commission expires:
_______________________
[SEAL]
THIS INSTRUMENT DRAFTED BY:
Thomas J. Rooney
Rooney & Neilson, Ltd.
Attorneys at Law
8 Pine Tree Drive, Suite 120
Arden Hills, Minnesota 55112
(612) 481-9222
EXHIBIT G-1
ASSIGNMENT OF OVERRIDING ROYALTY INTEREST
THIS ASSIGNMENT is made and entered into this ____ day of
_______, 1997, by and between Northern Con-Agg, Inc., a Minnesota
corporation whose address is 3131 Fernbrook Lane North, Plymouth,
Minnesota (',NCA"), as grantor and assignor, and Nova Natural
Resources Corporation, a Colorado corporation whose address is 1
Wazee Street, Suite 305, Denver, Colorado 80202 ("Nova"), as
grantee and assignee.
1. Background. Nova has today conveyed to NCA the fee
property and the mining lease described in Exhibit A
(collectively, the "Lands"). As partial consideration for
this conveyance, NCA has executed its promissory note of
even date in favor of Nova in the original principal
amount of $575,000 (the "Note").
2. Assignment. As additional consideration for this
conveyance, NCA does hereby grant, assign, transfer, and
convey unto Nova an overriding royalty of 25 cents for
each short ton of clay or other alumina bearing material
in excess of 100,000 tons per calendar year which may be
produced and sold from the Lands. This overriding royalty
shall expire and terminate on December 31, 2001, or upon
full satisfaction of the Note, whichever shall first
occur.
3. Payment. Any amount which may be due under this
assignment shall be paid by NCA to Nova not later than
January 10 of the following year. On or before each
payment date, NCA shall provide Nova a statement
identifying the number of tons of clay and other alumina
bearing material mined from the Lands and the number of
tons sold. Nova and its representatives shall, until
December 31, 2001, have access during normal business
hours to the Lands and to such books and records of NCA
as may be necessary to verify the tonnage mined and sold.
4. Renewals. Extensions. and Replacements. The overriding
royalty interest shall apply to any renewal, extension or
replacement of the Lease which NCA may acquire, directly
or indirectly, prior to December 31, 2000.
4. No Warranty. This assignment is made without any warranty
of title, express or implied.
5. Binding Effect. The interest herein assigned and all
obligations herein contained shall be binding upon and
accrue to the benefit of the parties hereto, their
successors and assigns.
IN WITNESS WHEREOF, this instrument is executed as of
the date set forth above.
NORTHERN CON-AGG, INC.
By:_______________________________
Edward A. Egan, President
EXHIBIT G-2
STATE OF MINNESOTA )
) ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this day
of __________ 1997, by Edward A. Egan as President of Northern Con-
Agg, Inc., a Minnesota corporation.
Witness my hand and official seal.
_____________________________
Notary Public
My commission expires:
____________________
EXHIBIT H
PERMITS
Three separate Redwood County conditional use permits (Permit Nos.
9, 15 and 20), each dated January 28, 1991 and each approved March
21, 1991; and
Minnesota Pollution Control Agency NPDES/SDS Permit No. MN 0059331,
now lapsed but subject to a pending request for reissuance.
AGREEMENT
THIS AGREEMENT is made this 5th day of February, 1997 between
NOVA NATURAL RESOURCES CORPORATION, a Colorado corporation
("Nova"), and BRIAN SPILLANE ("Spillane") (Nova and Spillane shall
be referred to collectively as the "Purchasers"), and THOMAS F.
KANE ("Kane").
RECITALS
A. Kane is the record and beneficial owner of 626,284 shares
of common stock of Nova and 1,098,841 shares of convertible
preferred stock of Nova. Kane's shares of Nova common and
convertible preferred shall be collectively referred to in this
Agreement as the "Shares." Kane is also a director of Nova.
B. Spillane is a director, the president and a shareholder
of Nova. Kane and Robert McDonald, Chairman of the Nova Board of
Directors, own all of the issued and outstanding shares of Nova
convertible preferred stock.
C. Disputes have arisen between Kane and Nova with respect
to decisions by the other directors of Nova and to the business
operations of Nova. Kane has asserted, inter alia, that the
continued operation of Nova are not in the best interests of the
owners of Nova convertible preferred stock who, if Nova were
liquidated, would receive all of the proceeds in liquidation after
payment to Nova's creditors. Kane also has asserted that
continuing Nova's business will cause the dissipation of assets
which would otherwise be distributable to owners of Nova's
convertible preferred stock upon liquidation. As such, Kane has
recommended and proposed that Nova be liquidated. Kane has
threatened to commence litigation to force the liquidation and
dissolution of Nova.
D. Nova's other directors have disagreed with Kane and
determined to continue Nova as a going concern. Nova's other
directors have indicated to Kane that they would oppose any attempt
to liquidate and dissolve Nova and would contest any litigation
commenced by Kane.
E. Each party acknowledges that the other party has asserted
colorable claims, positions and defenses. Nonetheless, the parties
agree that any such litigation would be materially detrimental to
all parties' interests and to the viability of Nova and to the
ability of Nova's management to achieve profitable operations.
Nova and the other directors believe that the continued involvement
of Kane in the management of Nova's affairs and the continuation of
the parties disputes also would be materially detrimental to Nova's
operations, business and shareholders.
F. The parties acknowledge and believe that a resolution of
such claims through the purchase by the Purchasers of the Shares is
in the best interests of the parties and Nova's shareholders.
G. The parties' ability to assess the value of the Shares
and an appropriate amount to be paid to Kane for the purchase of
the Shares and for settlement of all disputes between and among all
the parties is impacted by the value and disposition of a certain
cement-grade kaolin mine owned by Nova in Minnesota. Nova is
currently in negotiation and has reached a tentative agreement for
the sale of the cement-grade kaolin property (the "Cement-Kaolin
Property") with Northern Con-Agg, Inc., a Minnesota corporation
("Con-Agg"), for an aggregate purchase price of approximately
$700,000, subject to certain adjustments and offsets (the "Kaolin
Mine Purchase"). The parties wish to provide for certain
adjustments in the purchase price of the Shares and in the payment
of that price depending upon the ultimate disposition of the Kaolin
Mine Purchase.
NOW, THEREFORE, the parties agree as follows:
1. Incorporation of Recitals. The parties acknowledge that
the Recitals are a substantive part of, incorporated in and a
portion of the consideration for this Agreement,
2. Representations and Warranties Concerning the Shares.
Kane warrants and represents that:
a. The Shares being sold to the Purchasers are composed
of 1,098,841 shares of Nova convertible preferred stock and 575,523
shares of Nova common stock owned of record and beneficially by
Kane and 50,761 shares of Nova common stock owned of record by Kane
Holding, Inc. and beneficially by Kane.
b. Except for 535,430 shares of Nova common stock owned
of record by PKLC II, L.L.C., Kane does not have a beneficial
interest or right to control the voting or disposition of any other
security issued by Nova and currently outstanding.
c. Upon execution of this Agreement and at Closing (as
hereinafter defined), the Shares shall be free and clear of all
liens, security interests, encumbrances, and claims and interests
of any person other than Kane.
d. To the best of Kane's knowledge, the execution,
delivery and performance of this Agreement by Kane and his
participation in the consummation of the transactions contemplated
hereby are within Kane's full legal right, power and authority and
do not contravene, permit the termination of or constitute a
default (or an event which, with or without the giving of notice or
the passage of time, or both, will constitute a default) under any
agreement or other instrument binding upon Kane; does not require
the approval or consent of any third party; and will not result in
the creation or imposition of any lien, charge or encumbrance in
favor of any third party upon the Shares. The execution, delivery
and performance by Kane of this Agreement do not violate any
provision of applicable law or regulations or any judgment,
injunction, award, decree or order to which Kane is subject.
e. Except as otherwise provided in this Agreement, at
the date of Closing, Kane will not have incurred for Nova any
contractual or other obligation not disclosed and approved by Nova.
f. The execution and consummation of this Agreement and
the sale of the Shares will not violate Section 16 of the
Securities Exchange Act of 1934, as amended, any rules or
regulations thereunder or any similar state law or regulation.
3. Purchase and Sale of the Shares. At Closing, Kane shall
sell, and Purchasers shall purchase for the price set forth in
paragraph 4 and to be paid as set forth in paragraph 5, the Shares
in the following amounts:
Purchaser Shares Purchased
Convertible
Preferred Common
Nova 895,415 510,342
Spillane 203,426 115,942
4. Purchase Price.
a. The aggregate purchase price for the Shares shall be
$200,000 plus EITHER:
(1) If, on or before June 1, 1997, the Cement-Kaolin
Property is sold, whether by Nova to Con-Agg under the Kaolin Mine
Purchase or otherwise, Kane shall be paid an amount equal to 12% of
the net proceeds less $13,992 (to be deducted from the last
payments received by Nova) from such Purchase as and when received
by Nova. Payment to Kane shall be made by check or wire transfer
within ten (10) days after each and any such receipt of proceeds by
Nova. As used in this Paragraph 4, "net proceeds" shall mean the
gross proceeds of the sale of the Kaolin Mine Purchase or after
sale of the Cement-Kaolin Property less legal fees, direct sales
costs, core test expenses and costs incurred in removing certain
personal property from the mine property (not to exceed $35,000 in
the aggregate); OR
(2) If the Cement-Kaolin Property is not sold or if the
Kaolin Mine Purchase is not so consummated on or before June 1,
1997, a $.10 per short ton royalty, as an when received by Nova, on
sales of kaolin from the Cement-Kaolin Property, up to an aggregate
of $70,008.
b. The parties acknowledge that the purchase price for the
Shares was reached and determined by them after consideration,
among other matters, of the irreconcilable disputes and conflicts
between Kane and Purchasers; the use of a sale of the Shares as a
settlement of such disputes and conflicts and related avoidance of
litigation; differing valuations of Nova as a going concern and in
liquidation; the fact that the preferred stock is not registered
and is not freely tradeable; and the lack of a significant market
for Nova securities and difficulty of disposing of a large block of
Nova stock.
5. Closing. Closing of the purchase and sale of the Shares
shall take place no later than three (3) business days after the
execution of this Agreement at a time and place mutually agreed by
the parties. At Closing:
a. Kane shall (a) endorse appropriately and deliver to
the pertinent Purchasers certificates representing the Shares, or
if necessary, provide appropriately endorsed certificates for
delivery to Nova's transfer agent and reissuance to the pertinent
Purchasers, or, if such certificates cannot be produced, provide a
lost certificate bond in form satisfactory to Nova's transfer
agent, and (b) deliver a letter of resignation as a director of
Nova.
b. The Purchasers shall deliver to Kane cashier's checks
or cash in the aggregate of $200,000 in the following increments:
Nova (as part of its purchase price) -- $150,000; Spillane (for his
entire purchase price) -- $50,000. The balance of the purchase
price by Nova shall be paid as provided in Paragraph 4(a).
6. Cancellation of Kane Options. Effective upon Closing, and
without any other action by any party, all options to purchase Nova
securities owned of record by Kane shall be canceled and of no
further effect.
7. Nova Representations and Warranties. Nova represents and
warrants to Kane that:
a. Nova has the power and authority to execute,
acknowledge and deliver this Agreement, to consummate the
transactions contemplated hereby, and to take all other actions
required to be taken by it under this Agreement.
b. Nova has taken, or by Closing will have taken, all
actions required by law, its Articles of Incorporation, its Bylaws
and otherwise to authorize the execution, acknowledgment and
delivery of this Agreement.
c. This Agreement is valid and binding upon Nova in
accordance with its terms.
d. The execution and performance of this Agreement and
the purchase of Kane's stock by Nova will not violate the
provisions of the Colorado Business Corporation Act relating to
redemption or repurchase of stock.
8. Due Diligence. The parties acknowledge and represent that
each has been, or has had the opportunity to be, represented by
counsel in all transactions contemplated by this Agreement and has
had the opportunity to conduct all due diligence activities
necessary in connection with the negotiation, execution and
compliance with this Agreement.
9. Release by Kane. Except as provided in this Agreement,
upon Closing, Kane, his representatives, agents, affiliates and
predecessors (collectively, "Kane") release and forever discharge
Nova and its officers, directors, employees, agents, attorneys,
representatives, predecessors and successors (collectively,
"Nova") of and from all manner of actions, causes of action, suits,
debts, covenants, accounts, damages, liabilities, losses, costs,
expenses and claims of any nature, in law or equity, known or
unknown, accrued or unaccrued, suspected or claimed, which
Kane ever had, now has or hereafter may have or allege against Nova
and which arise out of any transaction predating Closing.
10. Release by Nova. Except as provided in this Agreement,
upon Closing, Nova, its officers, directors, employees, agents,
attorneys, representatives, predecessors and successors
(collectively, "Nova") releases and forever discharges Kane and his
agents, attorneys, representatives, affiliates, predecessors and
successors (collectively, "Kane") of and from all manner of
actions, causes of action, suits, debts, covenants, accounts,
damages, liabilities, losses, costs, expenses and claims of any
nature, in law or equity, known or unknown, accrued or unaccrued,
suspected or claimed, which Nova ever had, now has or hereafter may
have or allege against Kane and which arise out of any transaction
predating Closing.
11. Mutual Non-disparagement. From and after the execution
of this Agreement, neither Kane nor Purchasers shall, directly or
indirectly, make any derogatory verbal or written statements about
the other.
12. Non-assistance by Kane. From and after the execution of
this Agreement, Kane shall neither assist in any manner nor provide
any information to any person who is asserting a claim or
initiating any proceeding against Nova, its officers, directors,
employees, attorneys, accountants, affiliates or representatives.
Nothing in this Paragraph 12 shall prohibit or prevent Kane from
complying with any order of a court, government agency, self-
regulatory organization or similar entity or with a subpoena issued
under the authority of any such tribunal.
13. Mutual Indemnification. Kane and the Purchasers each
agree to indemnify and hold the other and all pertinent affiliates,
officers, directors, representatives, attorneys and successors
harmless from any and all claims, liabilities, losses, damages,
costs and expenses, including reasonable fees and disbursements of
counsel, related to or arising, directly or indirectly, out of any
failure or breach by any of them of any representation or warranty,
covenant, obligation or undertaking made by any such party in this
Agreement, or any other statement, certificate or other instrument
delivered pursuant to this Agreement.
14. Special Indemnification of Kane. Nova shall indemnify
and hold Kane harmless from any and all claims, liabilities,
losses, damages, costs and expenses, including reasonable fees and
disbursements of counsel, related to or arising, directly or
indirectly, out of Kane's sale of the Shares under this Agreement.
The indemnification contained in this Paragraph shall apply only to
those matters threatened in writing, asserted in writing or
litigation commenced on or within two years after Closing.
15. Arbitration. Any dispute arising out of this Agreement
and the transactions contemplated hereby shall be resolved by
binding arbitration, in the following manner:
a. Any such party shall serve upon the other party(ies)
a written notice of a demand to arbitrate. The notice shall
specify with particularity the nature of the dispute, the
provisions of this Agreement and law at issue and the proposed
relief sought by such party(ies).
b. Within fifteen (15) days of receipt of such notice,
the opposing party(ies) may submit a response with equivalent
specificity.
c. Within thirty (30) days after service of such
notice, the party seeking arbitration shall submit the dispute for
binding arbitration to the American Arbitration Association
pursuant to its commercial arbitration rules (except as otherwise
provided in this Paragraph 15). The provisions of the Colorado
Arbitration Act shall govern such proceedings.
d. The arbitration shall be conducted by a single
arbitrator in Denver, Colorado, unless the parties to the dispute
agree to a different location. Within 10 days of the filing of the
response to demand for arbitration, the parties shall make the
Initial Disclosures required under Rule 26(a)(1) of the Federal
Rules of Civil Procedure (1996). The parties shall further comply
with the requirements for disclosure of expert testimony and
pretrial (pre-arbitration) disclosures of Rules 26(a)(2) and (3) of
the Federal Rules of Civil Procedure (1996). The arbitrator(s) may
award appropriate sanctions for failure to comply with these
requirements.
e. The decision of the arbitrator with respect to any
matter submitted to arbitration shall be final, enforceable,
binding and unappealable to any court or tribunal with respect to
all parties to this Agreement. Such decision shall be enforceable
with the same force and effect as if issued by any court of
competent jurisdiction.
f. Fees and costs of the arbitration, including
reasonable attorneys' fees, shall be awarded to the prevailing
party. If there be no prevailing party, such fees and costs may be
awarded in the discretion of the arbitrator who, in making such
award, shall assess the relative good or bad faith of the parties
throughout the dispute. All arbitration proceedings shall be
conducted to expedite resolution and minimize cost.
g. In the event that any party, acting through any
officer, agent or recognized official, evidences an intention to
commit an intentional act in violation of this Agreement for which
injunctive or other equitable relief would be the only reasonable
remedy, the other party may disregard the provisions of this
Paragraph 15 and may file action in any court with jurisdiction in
Colorado for purposes of enjoining such activity and to obtain
specific performance of the terms of this Agreement. The parties
agree that any final judgment by a court of competent jurisdiction,
as permitted hereby, in any action or proceeding, may be enforced
in any other state or federal court by suit on the judgment or in
any other manner provided by law.
16. Further Actions. Each of the parties to this Agreement
shall execute and deliver such other agreements and documents and
take all other actions as may be reasonably necessary to effectuate
the intent of and the transactions contemplated by this Agreement.
17. Materiality of Representations, Warranties and Covenants.
The representations and warranties of the parties contained in
Paragraphs 2 and 7 of this Agreement or otherwise made in writing
shall be deemed material and, notwithstanding any investigation by
any party, shall be deemed to have been relied on by the party in
whose favor the representation or warranty was made.
18. Survival of Representations, Warranties and Covenants.
All of the covenants, agreements, promises, representations and
warranties contained in this Agreement shall survive the execution,
acknowledgment and delivery of this Agreement, the sale of the
Shares by Kane to Purchasers and the other transactions
contemplated by this Agreement.
19. Notices. Any notices or other communication required to
be permitted under this Agreement shall be sufficiently given if
delivered in person, sent by overnight courier or by registered or
certified mail, postage pre-paid, addressed as follows or by
facsimile transmission to the numbers set forth below:
If to Purchasers:
Nova Natural Resources Corporation
789 Sherman Street, Suite 550
Denver, Colorado 80203
Facsimile: 303-863-1969
with a copy to:
Neil E. Ayervais
Lohf, Shaiman & Jacobs, P.C.
950 South Cherry, Suite 900
Denver, Colorado 80222
Facsimile: 303-753-9997
If to Kane:
Thomas F. Kane
13845 Rivoli Drive
Palm Beach Gardens, Florida 33410
or such other address as shall be furnished in writing by
any such party. Such notice or communication shall have been
deemed to have been given as of the date so transmitted.
20. "Affiliate." As used in this Agreement, "affiliate"
shall mean a person who controls, is controlled by or is in common
control with another person. Direct or indirect ownership of more
than a 30% voting interest shall constitute control for these
purposes.
21. Expenses. Each party shall pay its own expenses and
costs incidental to the preparation of this Agreement and to the
consummation of the transactions contemplated by this Agreement.
22. Assigns. This Agreement and any rights and obligations
hereunder may not be assigned in whole or part by any party, shall
give no third party beneficiary rights to any person and shall be
binding upon and inure to the benefit of the parties and their
respective heirs and successors.
23. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter of this Agreement and
shall not be amended except by a written instrument signed by all
of the parties to this Agreement.
24. Construction. The language used in this Agreement will
be deemed to be language chosen by all parties to express their
intent, and no rule or strict construction will be applied to any
party.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive and procedural laws of
the State of Colorado, including those governing arbitration.
26. Severability. If any provision of this Agreement is
challenged as invalid, illegal or unenforceable, the tribunal
adjudicating such challenge shall
(a) interpret such provision, in a manner consistent
with the intent of the parties, so as to preserve the
enforceability of such provision; or
(b) if necessary and if such tribunal cannot preserve
the enforceability of the challenged provision, interpret other
provisions of this Agreement, in a manner consistent with the
intent of the parties, so as to preserve the enforceability of the
Agreement; and
(c) in any case, hold valid, legal and enforceable the
unchallenged provisions of this Agreement.
27. Waiver. No waiver by any party of the right to enforce
any obligation under this Agreement shall be effective unless
contained in a writing signed by such party, and any waiver of
rights shall not impair the future enforceability of the obligation
then waived.
IN WITNESS WHEREOF, the parties have executed this Agreement
this 5th day of February, 1997.
PURCHASERS:
NOVA NATURAL RESOURCES CORPORATION
By: /s/ Brian B. Spillane
Brian B. Spillane, President
/s/ Brian B. Spillane
Brian B. Spillane
SELLER:
/s/ Thomas F. Kane
Thomas F. Kane
7-113-101. Definitions
For purposes of this article:
(1) "Beneficial shareholder', means the beneficial owner of
shares held in a voting trust or by a nominee as the
record shareholder.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving
or acquiring domestic or foreign corporation, by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under section 7-113-102
and who exercises that right at the time and in the
manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means
the value of the shares immediately before the effective
date of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent
that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the
average rate currently paid by the corporation on its
principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or
the beneficial owner of shares that are registered in the
name of a nominee to the extent such owner is recognized
by the corporation as the shareholder as provided in
section 7-107-204.
(7) "Shareholder" means either a record shareholder or a
beneficial shareholder.
7-113-102. Right to dissent
(1) A shareholder, whether or not entitled to vote, is
entitled to dissent and obtain payment of the fair value
of the shareholder's shares in the event of any of the
following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party if:
(I) Approval by the shareholders of that
corporation is required for the merger by
section 7-111-103 or 7-111-104 or by the
articles of incorporation, or
(II) The corporation is a subsidiary that is merged
with its parent corporation under section 7-
111-104;
(b) Consummation of a plan of share exchange to which
the corporation is a party as the corporation whose
shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the
property of the corporation for which a
shareholders' vote is required under section 7-112-
102(1); and
(d) Consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the
property of an entity controlled by the corporation
if the shareholders of the corporation were entitled
to vote upon the consent of the corporation to the
disposition pursuant to section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain
payment, under subsection (1) of this section, of the
fair value of the shares of any class or series of shares
which either were listed on a national securities
exchange registered under the federal "Securities
Exchange Act of 1934", as amended, or on the national
market system of the national association of securities
dealers automated quotation system, or were held of
record by more than two thousand shareholders, at the
time of:
(a) The record date fixed under Section 7-107-107 to
determine the shareholders entitled to receive
notice of the shareholders' meeting at which the
corporate action is submitted to a vote;
(b) The record date fixed under Section 7-107-104 to
determine shareholders entitled to sign writings
consenting to the corporate action; or
(c) The effective date of the corporate action if the
corporate action is authorized other than by a vote
of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this
section shall not apply if the shareholder will receive
for the shareholder's shares, pursuant to the corporate
action, any-thing except:
(a) Shares of the corporation surviving the consummation
of the plan of merger or share exchange;
(b) Shares of any other corporation which at the
effective date of the plan of merger or share
exchange either will be listed on a national
securities exchange registered under the federal
"Securities Exchange Act of 1934", as amended, or on
the national market system of the National
Association of Securities Dealers Automated
Quotation System, or will be held of record by more
than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or
cash in lieu of fractional shares.
(2.5) A shareholder, whether or not entitled to vote, is
entitled to dissent and obtain payment of the fair value
of the shareholder's shares in the event of a reverse
split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the
fractional share or scrip so created is to be acquired
for cash or the scrip is to be voided under section 7-
106-104.
(3) A shareholder is entitled to dissent and obtain payment
of the fair value of the shareholder's shares in the
event of any corporate action to the extent provided by
the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for
the shareholder's shares under this article may not
challenge the corporate action creating such entitlement
unless the action is unlawful or fraudulent with respect
to the shareholder or the corporation.
7-113-103. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in the record
shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by
any one person and causes the corporation to receive
written notice which states such dissent and the name,
address, and federal taxpayer identification number, if
any, of each person on whose behalf the record
shareholder asserts dissenters' rights. The rights of a
record shareholder under this subsection (1) are
determined as if the shares as to which the record
shareholder dissents and the other shares of the record
shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as
to the shares held on the beneficial shareholder's behalf
only if:
(a) The beneficial shareholder causes the corporation to
receive the record shareholder's written consent to
the dissent not later than the time the beneficial
share-holder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to
all shares beneficially owned by the beneficial
shareholder.
(3) The corporation may require that, when a record share-
holder dissents with respect to the shares held by any
one or more beneficial shareholders, each such beneficial
shareholder must certify to the corporation that the
beneficial shareholder and the record shareholder or
record shareholders of all shares owned beneficially by
the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to
which there is no limitation on the ability to exercise
dissenters' rights. Any such requirement shall be stated
in the dissenters' notice given pursuant to section 7-11
3-203.
7-113-201. Notice of dissenters' rights
(1) If a proposed corporate action creating dissenters'
rights under section 7-113-102 is submitted to a vote at
a shareholders' meeting, the notice of the meeting shall
be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may
be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles
101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at
the meeting. Failure to give notice as provided by this
subsection (1) shall not affect any action taken at the
shareholders' meeting for which the notice was to have
been given, but any shareholder who was entitled to
dissent but who was not given such notice shall not be
precluded from demanding payment for the shareholder's
shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-
202(1).
(2) If a proposed corporate action creating dissenters'
rights under section 7-113-102 is authorized without a
meeting of shareholders pursuant to section 7-107-104,
any written or oral solicitation of a shareholder to
execute a writing consenting to such action contemplated
in section 7-107-104 shall be accompanied or preceded by
a written notice stating that shareholders are or may be
entitled to assert dissenters' rights under this article,
by a copy of this article, and by the materials, if any,
that, under articles 101 to 117 of this title, would have
been required to be given to shareholders entitled to
vote on the proposed action if the proposed action were
submitted to a vote at a shareholders' meeting. Failure
to give notice as provided by this subsection (2) shall
not affect any action taken pursuant to section 7-107-104
for which the notice was to have been given, but any
shareholder who was entitled to dissent but who was not
given such notice shall not be precluded from demanding
payment for the shareholder's shares under this article
by reason of the shareholder's failure to comply with the
provisions of section 7-113-202(2).
7-113-202. Notice of intent to demand payment
(1) If a proposed corporate action creating dissenters'
rights under section 7-113-102 is submitted to a vote at
a shareholders' meeting and if notice of dissenters'
rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201(1), a
shareholder who wishes to assert dissenters' rights
shall:
(a) Cause the corporation to receive, before the vote is
taken, written notice of the shareholder's intention
to demand payment for the shareholder's shares if
the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed
corporate action.
(2) If a proposed corporate action creating dissenters'
rights under section 7-113-102 is authorized without a
meeting of shareholders pursuant to section 7-107-104 and
if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to
section 7-113-201(2), a shareholder who wishes to assert
dissenters' rights shall not execute a writing consenting
to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to
demand payment for the shareholder's shares under this
article.
7-113-203. Dissenters' notice
(1) If a proposed corporate action creating dissenters'
rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to
all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this
section shall be given no later than ten days after the
effective date of the corporate action creating
dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and
state the effective date or proposed effective date
of the corporate action;
(b) State an address at which the corporation will
receive payment demands and the address of a place
where certificates for certificated shares must be
deposited;
(c) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted
after the payment demand is received;
(d) Supply a form for demanding payment, which form
shall request a dissenter to state an address to
which payment is to be made;
(e) Set the date by which the corporation must receive
the payment demand and certificates for certificated
shares, which date shall not be less than thirty
days after the date the notice required by
subsection (1) of this section is given;
(f) State the requirement contemplated in section 7-113-
103(3), if such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. Procedure to demand payment
(1) A shareholder who is given a dissenters' notice pursuant
to section 7-113-203 and who wishes to assert dissenters'
rights shall, in accordance with the terms of the
dissenters' notice:
(a) Cause the corporation to receive a payment demand,
which may be the payment demand form contemplated in
section 7-1 13-203(2)(d), duly completed, or may be
stated in another writing; and
(b) Deposit the shareholder's certificates for
certificated shares.
(2) A shareholder who demands payment in accordance with
subsection (1) of this section retains all rights of a
share holder, except the right to transfer the shares,
until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters'
rights and has only the right to receive payment for the
shares after the effective date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-
209(1)(b), the demand for payment and deposit of
certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date
or dates set in the dissenters' notice is not entitled to
payment for the shares under this article.
7-113-205. Uncertificated shares
(1) Upon receipt of a demand for payment under section 7-113-
204 from a shareholder holding uncertificated shares, and
in lieu of the deposit of certificates representing the
shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-
204 shall be applicable to shareholders who own
uncertificated shares.
7-113-206. Payment
(1) Except as provided in section 7-113-208, upon the
effective date of the corporate action creating
dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-
204, whichever is later, the corporation shall pay each
dissenter who complied with section 7-113-204, at the
address stated in the payment demand, or if no such
address is stated in the payment demand, at the address
shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's
shares, the amount the corporation estimates to be the
fair value of the dissenter's shares, plus accrued
interest.
(2) The payment made pursuant to subsection (1) of this
section shall be accompanied by:
(a) The corporation's balance sheet as of the end of its
most recent fiscal year or, if that is not
available, the corporation's balance sheet as of the
end of a fiscal year ending not more than sixteen
months before the date of payment, an income
statement for that year, and, if the corporation
customarily provides such statements to
shareholders, a statement of changes in
shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and
statements shall have been audited if the
corporation customarily provides audited financial
statements to shareholders, as well as the latest
available financial statements, if any, for the
interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the
fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand
payment under section 7-113-209; and
(e) A copy of this article.
7-113-207. Failure to take action
(1) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 does not occur
within sixty days after the date set by the corporation
by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall
return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more
than sixty days after the date set by the corporation by
which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall
send a new dissenters' notice, as provided in section 7-
113-203, and the provisions of sections 7-113-204 to 7-
113-209 shall again be applicable.
7-118-208. Special provisions relating to shares acquired after
announcement of proposed corporate action
(1) The corporation may, in or with the dissenters' notice
given pursuant to section 7-113-203, state the date of
the first announcement to news media or to shareholders
of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that
the dissenter shall certify in writing, in or with the
dissenter's payment demand under section 7-113-204,
whether or not the dissenter (or the person on whose
behalf dissenters' rights are asserted) acquired
beneficial ownership of the shares before that date. With
respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the
dissenter or the person on whose behalf the dissenter
asserts dissenters' rights acquired beneficial ownership
of the shares before such date, the corporation may, in
lieu of making the payment provided in section 7-113-206,
offer to make such payment if the dissenter agrees to
accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this
section shall include or be accompanied by the
information required by section 7-113-206(2).
7-113-209. Procedure if dissenter is dissatisfied with payment or
offer
(1) A dissenter may give notice to the corporation in writing
of the dissenter's estimate of the fair value of the
dissenter's shares and of the amount of interest due and
may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's
offer under section 7-113-208 and demand payment of the
fair value of the shares and interest due, if:
(a) The dissenter believes that the amount paid under
section 7-113-206 or offered under section 7-113-208
is less than the fair value of the shares or that
the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section
7-113-206 within sixty days after the date set by
the corporation by which the corporation must
receive the payment demand; or
(c) The corporation does not return the deposited
certificates or release the transfer restrictions
imposed on uncertificated shares as required by
section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this
section unless the dissenter causes the corporation to
receive the notice required by subsection (1) of this
section within thirty days after the corporation made or
offered payment for the dissenter's shares.
7-113-301. Court action
(1) If a demand for payment under section 7-113-209 remains
unresolved, the corporation may, within sixty days after
receiving the payment demand, commence a proceeding and
petition the court to determine the fair value of 'the
shares and accrued interest. If the corporation does not
commence the proceeding within the sixty-day period, it
shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described
in subsection (1) of this section in the district court
of the county in this state where the corporation's
principal office is located or, if the corporation has no
principal office in this state, in the district court of
the county in which its registered office is located. If
the corporation is a foreign corporation without a
registered office, it shall commence the proceeding in
the county where the registered office of the domestic
corporation merged into, or whose shares were acquired
by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unresolved
parties to the proceeding commenced under subsection (2)
of this section as in an action against their shares, and
all parties shall be served with a copy of the petition.
Service on each dissenter shall be by registered or
certified mail, to the address stated in such dissenter's
payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's
current record of shareholders for the record shareholder
holding the dissenter's shares, or as provided. by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary
and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers
have the powers described in the order appointing them,
or in any amendment to such order. The parties to the
proceeding are entitled to the same discovery rights as
parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced
under subsection (2) of this section is entitled to
judgment for the amount, if any, by which the court finds
the fair value of the dissenter's shares, plus interest,
exceeds the amount paid by the corporation, or for the
fair value, plus interest, of the dissenter's shares for
which the corporation elected to withhold payment under
section 7-113-208.
7-113-302. Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under
section 7-113-301 shall determine all costs of the
proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation; except
that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in
demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in
amounts the court finds equitable:
(a) Against the corporation and in favor of any
dissenters if the court finds the corporation did
not substantially comply with the requirements of
part 2 of this article; or
(b) Against either the corporation or one or more
dissenters, in favor of any other party, if the
court finds that the party against whom the fees and
expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to
the rights provided by this article.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services
should not be assessed against the corporation, the court
may award to said counsel reasonable fees to be paid out
of the amounts awarded to the dissenters who were
benefitted.