0000844788-95-000009.txt : 19950918 0000844788-95-000009.hdr.sgml : 19950918 ACCESSION NUMBER: 0000844788-95-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950915 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISCHER WATT GOLD CO INC CENTRAL INDEX KEY: 0000844788 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 880227654 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17386 FILM NUMBER: 95574017 BUSINESS ADDRESS: STREET 1: 1410 CHERRYWOOD DRIVE CITY: COEUR DALENE STATE: ID ZIP: 83814 BUSINESS PHONE: 2086646757 MAIL ADDRESS: STREET 2: 1410 CHERRYWOOD DRIVE CITY: COEUR DALENE STATE: ID ZIP: 83814 10QSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JULY 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-17386 FISCHER-WATT GOLD COMPANY, INC. (Exact name of small business issuer as specified in its charter) NEVADA 88-0227654 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 1410 Cherrywood Drive, Coeur d'Alene, ID 83814 (Address of principal executive offices) (208) 664-6757 (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of Common Stock, $0.001 par value, outstanding as of September 1, 1995 was 12,344,000 Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] Part 1 - Financial Information Item 1. Financial Statements FISCHER-WATT GOLD COMPANY, INC. BALANCE SHEETS July 31, January 31, ASSETS 1995 1995 (Unaudited) CURRENT ASSETS: Cash $124,000 $ 6,000 Trading securities 346,000 358,000 Accounts receivable 2,000 2,000 Other current assets 5,000 6,000 ------- ------- Total current assets 477,000 372,000 MINERAL INTERESTS 192,000 387,000 MINING AND OTHER EQUIPMENT 51,000 50,000 LESS DEPRECIATION, DEPLETION AND AMORTIZATION ( 36,000) ( 36,000) ------- ------- 207,000 401,000 INVESTMENT IN HONDURAN CORPORATION 100,000 91,000 INVESTMENT IN MEXICAN CORPORATION 16,000 - OTHER ASSETS 27,000 27,000 ------- ------- Total assets $ 827,000 $ 891,000 ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 85,000 $ 89,000 Notes payable - 500,000 Accrued payroll and benefits 32,000 59,000 Accrued interest expense 3,000 51,000 Other accrued liabilities 42,000 31,000 ------- ------- Total current liabilities 162,000 730,000 LONG TERM LIABILITIES: Nonrecourse debt (Note 5) 100,000 87,000 Total liabilities 262,000 817,000 COMMITMENTS AND CONTINGENCIES, Notes 1,3, 6 SHAREHOLDERS' EQUITY (DEFICIT): Common stock, $0.001 par value, 50,000,000 shares authorized; 12,344,000 shares outstanding at July and January 1995 12,000 12,000 Additional paid-in capital 5,773,000 5,773,000 Deficit (5,220,000) (5,711,000) --------- --------- Total shareholders' equity 565,000 74,000 --------- -------- Total liabilities and shareholders' equity $ 827,000 $ 891,000 -------- -------- The accompanying notes are an integral part of these balance sheets. FISCHER-WATT GOLD COMPANY, INC. STATEMENTS OF OPERATIONS (UNAUDITED) [CAPTION] Three Months Ended Six Months Ended July 31, July 31, 1995 1994 1995 1994 _______ _______ _______ _______ REVENUES: Gain on sale of mineral interest $641,000 $ - $641,000 $109,000 COSTS AND EXPENSES: Abandoned properties and prospects 157,000 197,000 179,000 197,000 Generative exploration expense - - 3,000 - Operating and administrative 71,000 54,000 119,000 127,000 Public company costs 23,000 2,000 44,000 23,000 _______ _______ _______ _______ 251,000 253,000 345,000 347,000 OTHER INCOME (EXPENSE): Interest expense ( 2,000) (20,000) (24,000) (39,000) Unrealized gain on trading securities 156,000 - 206,000 - Other income 35,000 - 24,000 21,000 _______ _______ _______ _______ 189,000 (20,000) 206,000 (18,000) Net income (loss) before tax provision 579,000 (273,000) 502,000 (256,000) TAX PROVISION (10,000) - (11,000) (1,000) _______ _______ _______ _______ NET INCOME (LOSS) $569,000 $(273,000) $491,000 $(257,000) INCOME (LOSS) PER SHARE AND COMMON EQUIVALENT $ .05 $ (.02) $ .04 $ (.02) WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 12,588,000 12,344,000 12,588,000 12,344,000 The accompanying notes are an integral part of these statements. FISCHER-WATT GOLD COMPANY, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended July 31, 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 491,000 $(257,000) Adjustments to reconcile net income (loss) to net cash used in operating activities- Unrealized gain on trading securities (206,000) - Gain on sale of mineral interest (641,000) (109,000) Abandoned properties and prospects 180,000 197,000 Generative exploration expensed 3,000 - Depreciation and amortization 1,000 2,000 Accrued interest added to principal balance - 40,000 (Increase) decrease in receivables and other current assets - (3,000) Gain on sale of equipment - ( 20,000) Proceeds from sale of trading securities 238,000 - Gain on sale of trading securities (20,000) - Increase (decrease) in accounts payable and accrued liabilities 2,000 ( 89,000) -------- -------- Net cash provided by (used in) operating activities 48,000 (239,000) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of mineral interest 150,000 105,000 Property acquisition and development costs(63,000) 4,000 Bonuses applied to reduce cost basis - 33,000 Investment in Honduran Corporation ( 9,000) - Investment in Mexican Corporation (15,000) ( 4,000) Equipment acquired ( 2,000) ( 3,000) -------- -------- Net cash provided by investing activities 61,000 135,000 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 9,000 - -------- -------- Net cash provided by financing activities 9,000 - -------- -------- NET INCREASE (DECREASE) IN CASH 118,000 (104,000) CASH, at beginning of period 6,000 106,000 CASH, at end of period $124,000 $ 2,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $2,000 $ 2,000 SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NONCASH ACTIVITIES: Application of bonus on unproven property to offset accrued interest expense $ 25,000 $ 25,000 Cost basis of trading securities sold in connection with loss on trading securities $218,000 - Application of reclamation bond to offset cost basis of mineral property $ - $ 40,000 Short-term debt eliminated in connection with sale of mineral interest $500,000 $ 90,000 Accrued interest eliminated in connection with sale of mineral interest $ 42,000 $ - Cost basis in mineral interest sold in connection with short- term debt eliminated $ 51,000 $ 86,000 Purchase of stock in Honduran corporation paid for in August 1994 $ - $ 81,000 Fair market value of vehicles and office equipment offset against wages and expenses due to former employees $ - $ 33,000 The accompanying notes are an integral part of these statements. FISCHER-WATT GOLD COMPANY, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) FINANCIAL STATEMENT ADJUSTMENTS AND FOOTNOTES DISCLOSURES The accompanying financial statements are unaudited; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been made. These financial statements and notes thereto should be read in conjunction with the financial statements and related notes included in Fischer-Watt Gold Company, Inc.'s ("Fischer-Watt" or the "Company") Annual Report on Form 10-K for the year ended January 31, 1995 ("Form 10-K"). Future Financing and Realization While Fischer-Watt was profitable in the latest fiscal year, it had negative cash flow from operations in the latest fiscal year and suffered losses from operations and negative cash flow from operations in each of its prior years. The entire profit was attributable to a sale of a mineral interest. Since the Company has no sustaining income or cash flow from operations, it is currently funding its operations from proceeds of property sales and the sale of stock received as part of the sale price of a mineral interest. The ability of the Company to continue as a going concern is dependent upon establishing successful future operations or additional financing, or disposition of some of the Company's assets. While the Company has been successful in raising cash from these sources in the past, there can be no assurance that its cash raising efforts will succeed. (See Item 2 Management's Discussion and Analysis or Plan of Operation - "Subsequent Events".) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Gain on Sale of Mineral Interest--Gain on sale of mineral interests represents the excess of the proceeds realized from the sale of a mineral interest over the Company's cost basis in that property. On February 28, 1995, Tombstone Explorations Co. Ltd. ("Tombstone"),a Vancouver-based mining and exploration company entered into a letter agreement with Fischer-Watt to purchase Fischer-Watt's interest in the Minas de Oro property in Honduras. Minas de Oro was joint ventured with Kennecott Exploration Company ("Kennecott") who had an 80 percent working interest. Tombstone agreed to buy the Kennecott interest and to acquire Fischer-Watt's $500,000 promissory note to Kennecott, as well as Fischer-Watt's interest in the property. Tombstone paid Fischer-Watt $150,000 in cash and delivered for cancellation, Fischer-Watt's $500,000 promissory note to Kennecott plus all accrued interest. The transaction closed on May 16, 1995 with the sale of the Minas de Oro interests to Cerenex Financial A. V. V., a subsidiary of Tombstone. The sale resulted in a gain of $641,000. (See Note 4.) In March 1994, Fischer-Watt optioned its interest in the San Andres mineral property in Honduras to Greenstone Resources Ltd. ("Greenstone"). Fischer-Watt's gross proceeds from the sale of this option were $195,000 ($105,000 in cash plus elimination of $90,000 of its $94,000 debt to Greenstone. Fischer-Watt's cost basis in the property optioned was $86,000 resulting in a realized gain of $109,000 from the sale of the option. The balance of the purchase price was recognized as income when the option was exercised on October 31, 1994. (See Note 5.) Bonuses--As an incentive to enter into a joint exploration and development agreement, Fischer-Watt may receive bonus payments. The bonus payments are recognized as revenue if the agreement entered into relates to a proven property. For unproven properties, bonus payments are first applied as a reduction of the cost basis of the property with any excess being recognized as revenue. Trading Securities Shares of Greenstone Resources Ltd.--The Company received 427,300 restricted shares of Greenstone Resources Ltd. ("Greenstone"), common stock upon exercise of the San Andres option (Note 5). These shares were valued at $700,000 which was the average of the daily closing price on the Toronto Stock Exchange for the five trading days preceding the exercise date of the option, adjusted to United States dollars. The Company has adopted Statement of Financial Accounting Standards ("SFAS ") No. 115 which applies to certain investments in equity securities. At July 31, 1995, the Company held 142,300 shares of Greenstone stock. Since the shares are listed on both NASDAQ and the Toronto Stock Exchange, the average closing price (converted to United States dollars) of the two exchanges was used to determine the fair value. The fair value was determined to be $346,000 which resulted in an unrealized gain on trading securities of $206,000. The gain is included in the statements of operations. In the quarter ended July 31, 1995, the Company sold 66,000 shares and received net proceeds of $121,000 which resulted in a gain on the sale of trading securities of $20,000 which is shown on the statement of operations. In the quarter ended April 30, 1995, the Company sold 119,000 shares and received net proceeds of $117,000 which resulted in a loss on the sale of trading securities of $13,000 which is shown on the statement of operations. Abandonment of Mineral Interests Mineral Interests in unproven properties are evaluated on a quarterly basis for possible impairment. Management evaluation considers all the facts and circumstances known about each property including: the results of drilling and other exploration activities to date; the desirability and likelihood that additional future exploration activities will be undertaken by the Company or by others; the land holding costs including work commitments, rental and royalty payments and other lease and claim maintenance commitments; the expiration date of the lease including any earlier dates by which notice of intent to terminate the lease must be given in order to avoid work commitments; the accessibility of the property; the ability and likelihood to joint venture the property with others; and, if producing, the cost and revenue of operation. Unproven properties are considered fully or partially impaired, and are fully or partially abandoned, at the earliest of the time that: geologic mapping, surface sample assays or drilling results fail to confirm the geologic concepts involved at the time the property was acquired; a decision is made not to perform the work commitments or to make the lease payments required to retain the property; the Company discontinues its efforts to find a joint venture partner to fund future exploration activities and has decided not to fund those costs itself; or, the time the property interest terminates by contract or by operation of law. Reclamation Liabilities Reclamation liabilities are recorded as liabilities (and as a cost of the related property) in the period in which the drilling or mining activity which generates the reclamation requirement occurs. Generative Exploration Expense The costs of generative exploration activities that do not result in the acquisition of mineral interests are expensed. Income Taxes Because of the Company's exploration activities and net operating loss carryovers, the Federal tax rate for the year ended January 31, 1995 was zero. Accordingly, no provision for Federal Income taxes was made in the statement of operations for the quarter ended July 31, 1995. Because of the Company's gain on the sale of mineral interest, the provision for State income taxes, primarily for the State of Idaho, was increased from $1,000 to $11,000. Earnings Per Share Net income (loss) per common share has been computed on the basis of the weighted average number of common shares outstanding during each period using the modified treasury stock method. Since the number of shares of common stock obtainable upon exercise of outstanding options exceeds 20% of the number of common shares outstanding, the treasury stock method has been modified to assume exercise of all outstanding options. In these circumstances, the assumed proceeds are first applied to share repurchase, next to reduction of debt and the remaining balance of the proceeds are invested in U.S. Government securities with appropriate recognition of any income tax effect. The net result of this calculation is that the effect of the options in non-dilutive. (3) PROPERTY AND EQUIPMENT A summary of the cost basis of mineral properties and prospects as of July 31 and January 31, 1995, is: July 31 January 31 Oatman (United Western), Arizona $ 10,000 $ 136,000 Modoc, California 72,000 72,000 Minas de Oro, Honduras - 59,000 Tuscarora, Nevada 45,000 77,000 America Mine, California 18,000 16,000 La Victoria, Honduras 5,000 - Other mineral interests (each less than $40,000) 42,000 27,000 ------- ------- $ 192,000 $ 387,000 The Company's property interests require minimum payments to be made, or work commitments to be satisfied, to maintain ownership of the property. However, all of these payments may be avoided by timely forfeiture of the related property interest. If the joint venture partner, or the Company, fails to meet these commitments,the Company could lose its rights to explore, develop or mine the property. The table below lists the various properties and the required financial commitments. PROPERTY COMMITMENTS For the year ending July 31, 1996 Lease Work J.V. Net FWG Property Payments Commit. Total Share Cost -------- -------- -------- -------- -------- -------- America $48,000 $102,000 $152,000 $152,000 $ - La Victoria 10,000 25,000 35,000 - 35,000 Tuscarora - 2,000 2,000 2,000 - Modoc 26,000 - 26,000 26,000 - Oatman - - - - - Other 48,000 193,000 241,000 191,000 50,000 ------ -------- -------- -------- ------- Totals $132,000 $324,000 $456,000 $371,000 $85,000 (4) NOTES PAYABLE Kennecott Loan In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal and interest on this loan were repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bore interest at the higher of 10% or prime plus 5% and was secured by the Company's interest in the America Mine property. The Company was in default as to payment of principal and interest on this loan from August 1,1992 until May 16, 1995 when the note and associated interest were canceled in conjunction with the sale of the Company's mineral interest in the Minas de Oro, Honduras property. (See Item 2 Management's Discussion and Analysis or Plan of Operation -"Liquidity and Financial Position".) (5) GREENSTONE RESOURCES TRANSACTIONS On November 2, 1993, the Company signed a letter of intent to be acquired by Greenstone Resources Ltd. During the due diligence period, Greenstone advanced funds to the Company for current operations. The proposed merger was terminated by Greenstone in February 1994. Greenstone advanced $94,000 during that period. In March 1994, Fischer-Watt accepted an offer from Greenstone to acquire an option to purchase all of Fischer-Watt's interests in the San Andres project in Honduras. As consideration for the option, Greenstone paid Fischer-Watt $105,000 and forgave $90,000 of a $94,000 loan provided to Fischer-Watt pursuant to the terminated merger transaction. At April 30, 1994, the Company recognized a gain of $109,000 on this transaction. Greenstone exercised its option on October 31, 1994 by forgiving the remaining loan balance of $4,000, paying Fischer-Watt a further $56,000 and issuing it $700,000 worth of Greenstone common stock, valued at the time of exercise. Upon exercise of the option, Greenstone was assigned Fischer-Watt's option to acquire 51% of Compania Minerales de Copan, S.A. de C.V. from Milner Consolidated Silver Mines (25.5%) and North American Palladium Resources (25.5%) as well as all of Fischer-Watt's other rights and interest in the San Andres project subject to the shares described below. Minerales de Copan owns the San Andres project and is currently producing gold from a small open pit, heap leach operation within the project boundaries. On August 4, 1994, the Company received the first instalment of a loan from Greenstone Resources Canada Ltd. The loan was negotiated as part of the San Andres option agreement. The loan is to provide all of the funds to purchase up to nine percent of the shares of Compania Minerales de Copan S.A. de C.V. ("Copan"). The Company believes that the total loan amount may eventually exceed $250,000. The loan is nonrecourse as to both principal and interest to the Company and is to be repaid out of dividends, if any, from the Copan shares. The shares are pledged to Greenstone as collateral for the loan which is due on or before December 31, 1999. At July 31, 1995 this loan plus associated accrued interest totaled $100,000. At July 31, 1995, the Company owned, or had options to purchase, seven percent of the outstanding shares of Copan. On August 28, 1995, the Company agreed to convey all of these shares and options to acquire additional shares as part of the purchase price for the for the shares of Greenstone of Colombia. Under the terms of the agreement, the nonrecourse debt and accrued interest associated with this debt will be forgiven. (See Item 2 Management's Discussion and Analysis or Plan of Operation -"Subsequent Events".) (6) COMMITMENTS Property Leases The Company's property interests require minimum payments to be made, or work commitments to be satisfied, to maintain ownership of the property. However, all of these payments may be avoided by timely forfeiture of the related property interest. (See Note 3 and Item 2 "Subsequent Events".) Item 2. Management's Discussion and Analysis or Plan of Operation The following is a discussion of Fischer-Watt Gold Company, Inc.'s ("Fischer-Watt" or the "Company") current financial condition as well as its operations for the three months and six months ended July 31, 1995 (fiscal 1996) and July 31, 1994 (fiscal 1995). This discussion should be read in conjunction with the Financial Statements in Item 1 of this report as well as the Financial Statements in Form 10-K for the fiscal year ended January 31, 1995 on file with the Securities and Exchange Commission, as the discussion set forth below is qualified in its entirety by reference thereto. LIQUIDITY AND FINANCIAL POSITION As of September 1, 1995, the Company had $29,000 in cash and accounts payable of $88,000. The Company also has 122,300 shares of Greenstone common stock that had an approximate market value of $321,000 that could be sold to provide funds for operations. In March 1992, Kennecott loaned Fischer-Watt $500,000. Principal and interest on this loan were repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bore interest at the higher of 10% or prime plus 5% and was secured by the Company's interest in the America Mine property. The Company was in default as to payment of principal and interest on this loan from August 1, 1992 until May 16, 1995 when the note and associated interest were canceled in conjunction with the sale of the Company's mineral interest in the Minas de Oro, Honduras property. (See Note 4 to Financial Statements.) Subsequent Events On August 28, 1995, the Company signed an agreement to purchase 100% of Greenstone Resources Ltd.'s wholly-owned Colombian branch, Greenstone of Colombia ("GOC"). Greenstone of Colombia owns 94.9% of Compania Minera Oronorte S. A. ("Oronorte"). Under the terms of the agreement, Fischer-Watt will convey all rights and interests it holds in Compania Minerales de Copan S.A. de C.V. ("Copan") to Greenstone Resources Ltd.. In return, Fischer-Watt will acquire all ownership rights of GOC which include GOC's interest in Oronorte which owns an operating gold mine and related cash and receivables and saleable gold in inventory of not less than $450,000, subject to certain liabilities not exceeding $1,000,000 and equipment lease obligations not exceeding $375,000. Fischer-Watt has taken operating control of GOC and its subsidiaries and their respective operations. The Oronorte is an underground mine in northern Colombia. It produces gold concentrates that are shipped to Japan for smelting. It has produced an average of 8,800 ounces of gold for the past four years. The mine has recently been losing approximately $75,000 per month. The Company recently assumed operation of the mine and is conducting engineering studies to explore the feasibility of expanding production, improving operating efficiency and reducing costs. The Company is searching for funds to subsidize operations until planned changes in operations can take effect. At September 1, 1995, the Company had only enough cash and trading securities that could be sold to fund the next three months of operations. On August 28, 1995, the Company signed a letter of intent to enter into a business combination with Great Basin Management Company, Inc. ("GBM") GBM is a privately held minerals exploration company based in Reno, Nevada. GBM owns Great Basin Exploration and Mining Company, Inc. ("GBEM") which has several mineral properties in Nevada's Battle Mountain - Eureka Trend, a major gold producing district in central Nevada in addition to mineral interests in Arizona and Canada. Under the terms of the letter of intent, GBM and Fischer-Watt shall combine through the merger of GBM with and into a newly formed, wholly-owned subsidiary of Fischer-Watt Gold Company, Inc. GBM is actively negotiating with prospective joint venture partners on several of its properties and evaluating other mineral prospects. At the closing, as to be defined in a definitive agreement, Fischer-Watt will issue shares of its common stock representing, immediately after such issuance, 25% of the outstanding shares of common stock of Fischer-Watt. The letter of intent is subject to each party's due diligence and obtaining any necessary approvals. Either party may terminate the letter of intent if the definitive agreement has not been executed by October 31. 1995. On August 28, 1995, the Company agreed to loan GBM up to $108,000 for specified purposes in connection with maintaining certain mineral property positions. There are no plans to loan GBM any additional funds. As of September 1, 1995, $97,000 of the loan had been funded. The loan is secured by all of GBM's interest to all of the outstanding shares of GBEM. There is no requirement to repay the loan or any interest thereon unless the proposed merger between the Company and GBM has not occurred by November 1, 1995, in which event the entire amount of the loan and accrued interest shall be due and payable on December 1, 1995. Short-Term Liquidity While Fischer-Watt was profitable in the latest fiscal year, it had negative cash flow from operations in the latest fiscal year and suffered losses from operations and negative cash flow from operations in each of its prior years. The entire profit was attributable to a sale of a mineral interest. Since the Company has no sustaining income or cash flow from operations, it is currently funding its operations from proceeds of the sale of a mineral interest and the sale of stock received as part of the sale price of a mineral interest. The ability of the Company to continue as a going concern is dependent upon establishing successful future operations or additional financing, or disposition of some of the Company's assets. There can be no assurance that its cash raising efforts will succeed. The principal assets of the Company consists of investments in mineral properties and in the common stock of Greenstone Resources Ltd. The ability of the Company to ultimately realize the value of these investments is dependent upon successful future operations and additional financing, or disposition of assets, since the Company's properties are not projected to generate cash from mining operations during fiscal 1996. The Company's net cash provided by operating activities during the first six months of fiscal 1996 was $48,000 compared to $239,000 used during the first six months of the prior year. This increase in cash provided of $287,000 is due primarily to the Company's net income of $491,000 compared to a loss of $257,000 in the first six months of the prior year as adjusted to eliminate noncash items. In the first six months of fiscal 1996, the Company had gain on sale of mineral interest of $641,000 compared to a $109,000 gain in the first six months of fiscal 1995. The Company had an unrealized gain on trading securities of $206,000 in the six months ended July 31, 1995. The Company had proceeds from sales of trading securities of $238,000 during the first six months of fiscal 1996. There was no comparable gain or proceeds in the six months ended July 31, 1994 as the Company had no trading securities. Accrued interest decreased from $40,000 in the prior year to none in the current fiscal period due to the cancellation of the Kennecott loan on May 16, 1995. There was no gain on the sale of equipment in the current period compared to a $20,000 gain in the six months ended July 31, 1994 which was attributable to sales of vehicles and equipment pursuant to settlement agreements with former employees. The change in accounts payable of $91,000 was attributable to the Company's acquiring $81,000 of stock in a Honduran corporation during the six months ended July 31, 1994 but not paying for it until August 1994. (See Note 5 to Financial Statements.) Net cash provided by investing activities was $61,000 in the first six months of fiscal 1996 compared to $135,000 in the first six months of fiscal 1995. This decrease of $74,000 results primarily from the larger proceeds of the sale of mineral property offset by an increase in the Company's expenditures for property acquisition costs. In the six months ended July 31, 1994, the property acquisition and development costs were unusual in that cash was provided by the return of a reclamation bond to offset property costs coupled with a very low level of property acquisition and development activity due to a shortage of available funds. Net cash provided by financing activities was $9,000 in the six months ended July 31, 1995. This was the receipt of a portion of the nonrecourse loan from Greenstone Resources in conjunction with the Copan share purchase. (See Note 5 to Financial Statements.) There was no net cash provided by, or used for, financing activities in the first quarter of fiscal 1995. On July 31, 1995, Fischer-Watt's current ratio was 2.9:1 based on current assets of $477,000 and current liabilities of $162,000. On January 31, 1995, its current ratio was .5:1 based upon current assets of $372,000 and current liabilities of $730,000. The main reason for this improvement was the elimination of the $500,000 Kennecott loan and accrued interest. A current ratio of less than 1:1 indicates that the Company does not have sufficient cash and other current assets to pay its bills and other liabilities incurred at the end of its fiscal period which are due and payable within the next 12 months. Long-Term Liquidity The Company plans to continue its search for long-term debt or equity capital to fund its operating and exploration activities until these activities can be funded from production of mineral resources. At July 31, 1995, the Company's long-term debt consisted entirely of a nonrecourse loan from Greenstone Resources Canada Ltd. The loan was negotiated as part of the San Andres option agreement. The loan was to provide all of the funds to purchase up to nine percent of the shares of Compania Minerales de Copan S.A. de C.V.("Copan"). The loan was nonrecourse as to both principal and interest to the Company and was to be repaid out of dividends, if any, from the Copan shares. At July 31, 1995, this loan plus associated accrued interest totaled $100,000. On August 28, 1995, the Company signed an agreement to convey all of the stock and options to acquire stock to Greenstone. Under the terms of the agreement, the nonrecourse debt and accrued interest associated with this debt will be forgiven. (See "Subsequent Events" and Note 5 to Financial Statements.) RESULTS OF OPERATIONS Three Months Ended July 31, 1995 Compared with Three Months Ended July 31, 1994 Fischer-Watt had net income of $569,000, or $.05 per share in the quarter ended July 31, 1995 compared with a net loss of $273,000, or $.02 per share, in the quarter ended July 31, 1994. This net income is attributable to a $641,000 gain on the sale of a mineral interest and an unrecognized gain of $156,000 on trading securities. In the quarter ended July 31, 1994, there were no sales of mineral interests nor any gain on trading securities. This net income was reduced by higher levels of operating and administrative and public company costs in the quarter from the prior year's abnormally low levels. Abandoned properties and prospects decreased from $197,000 in the three months ended July 31, 1994 to $157,000 in the three months ended July 31, 1995. Copan Share Purchase On August 4, 1994, the Company received the first instalment of a loan from Greenstone Resources Canada Ltd. The loan was negotiated for in the San Andres option agreement. The loan is to provide all of the funds to purchase up to nine percent of the shares of Compania Minerales de Copan S.A. de C.V.(Copan). The loan is non-recourse as to both principal and interest to the Company and is to be repaid out of dividends, if any, from the Copan shares. The shares are pledged to Greenstone as collateral for the loan which is due on or before December 31, 1999. On August 28, 1995, the Company signed an agreement to convey all of the stock and options to acquire stock to Greenstone. Under the terms of the agreement, the nonrecourse debt and accrued interest associated with this debt will be forgiven.(See "Subsequent Events" and Note 5 to Financial Statements.) Other items Abandonments in the quarter ended July 31, 1995 were $157,000 compared with $197,000 in the second quarter of fiscal 1995. The Oatman property in Arizona was partially abandoned after an independent evaluation indicated that it was unlikely that its cost would be fully recovered based on the current mineral lease on the property. The $125,000 writedown reduced its basis to $10,000. Tuscarora was partially abandoned in the amount of $32,000 based on the results of the same independent evaluation leaving the remaining basis at $45,000. In the prior year quarter ended July 31, 1994, Sukut, Costa Rica, having a cost basis of $197,000 was the only property abandoned. Operating and administrative costs increased from $54,000 in the second quarter of fiscal 1995 to $71,000 in the first quarter of fiscal 1996. This increase reflects the Company's ability to resume a more normal level of operations due to its improved cash position compared to the prior year. The prior year costs did not reflect normal operations due to the severe cash position of the Company. Public company costs increased from $2,000 in the second quarter of fiscal 1995 to $23,000 in the second quarter of fiscal 1996. This $18,000 increase is due to the resumption of more normal levels of corporate relations with the investment community and due to reimbursing members of the Board of Directors for their expenses in connection with their services. Interest expense decreased to $2,000 in the second quarter of fiscal 1996 from $20,000 in the second quarter of fiscal 1995. This decrease is due primarily to elimination of accrued interest expense on the $500,000 Kennecott loan which was canceled in conjunction with the sale of the Minas de Oro sale. (See above and Note 4 to Financial Statements.) Other income increased from none in the second quarter of fiscal 1995 to $35,000 in the second quarter of fiscal 1996. This $35,000 increase is due primarily to a $32,000 gain on the sale of trading securities in the current quarter. There were no comparable sales in the prior year quarter. Six Months Ended July 31, 1995 Compared with Six Months ended July 31, 1994 Fischer-Watt had a net income of $491,000, $.04 per share, in the six months ended July 31, 1995 compared to net loss of $257,000, $.02 per share, in the six months ended July 31, 1994. This difference of $748,000 is due primarily to a $641,000 gain from the sale of Fischer-Watt's interest in the Minas de Oro property in Honduras coupled with an unrealized gain of $206,000 on trading securities. Sale of Minas de Oro mineral interest On February 28, 1995, Tombstone Explorations Co. Ltd. ("Tombstone"), a Vancouver-based mining and exploration company entered into a letter agreement with Fischer-Watt to purchase Fischer-Watt's interest in the Minas de Oro property in Honduras. Minas de Oro was joint ventured with Kennecott Exploration Company ("Kennecott") who had an 80 percent working interest. Tombstone agreed to buy the Kennecott interest and to acquire Fischer-Watt's $500,000 promissory note to Kennecott, as well as Fischer-Watt's interest in the property. Tombstone paid Fischer-Watt $150,000 in cash and delivered for cancellation, Fischer-Watt's $500,000 promissory note to Kennecott plus all accrued interest. The transaction closed on May 16, 1995 with the sale of the Minas de Oro interests to Cerenex Financial A. V. V., a subsidiary of Tombstone. The sale resulted in a gain of $641,000. (See Note 4 to Financial Statements) Sale of Option on San Andres In the six months ended July 31, 1994, a gain of $109,000 was realized from the sale of an option to purchase Fischer-Watt's interest in the San Andres property. Other items Abandonments decreased from $197,000 in the first six months of fiscal 1995 to $179,000 in the first six months of fiscal 1996. The Oatman property in Arizona was partially abandoned after an independent evaluation indicated that it was unlikely that its cost would be fully recovered based on the current mineral lease on the property. The $125,000 writedown reduced its net cost basis to $10,000. The Tuscarora mineral interest in Nevada was partially abandoned in the amount of $32,000 based on the results of the same independent evaluation leaving the remaining basis at $45,000. The Rio Tinto property in Honduras was abandoned when an exploration program conducted at the end of fiscal 1995 and the beginning of fiscal 1996 could not confirm mineral values discovered under earlier exploration programs. Rio Tinto had a cost basis of $22,000. An additional $3,000 of generative exploration expense was incurred when a prospect in Nevada was abandoned when the Company decided not to fund the work needed to perfect its mining claims. In the six months ended July 31, 1994, Sukut, Costa Rica, having a cost basis of $197,000 was the only property abandoned. Operating and administrative costs decreased from $127,000 in the first six months of fiscal 1995 to $119,000 in the first six months of fiscal 1996. This $8,000 decrease is primarily due to lower office occupancy costs in fiscal 1996 resulting from the closure of the Company's office in Nevada. Public company costs increased from $23,000 in the first six months of fiscal 1995 to $44,000 in the first six months of fiscal 1996. This increase resulted primarily from the Company's resumption of more normal levels of corporate relations with the investment community and due to reimbursing members of the Board of Directors for their expenses in connection with their services. Interest on recourse debt decreased to $24,000 in the first six months of fiscal 1996 from $39,000 in the first six months of fiscal 1995. This decrease is due primarily to elimination of interest accrued on the $500,000 Kennecott loan which was canceled in conjunction with the May 1995 sale of the Minas de Oro mineral interests. (See above and Note 4 to Financial Statements.) Interest and other income increased from$21,000 in the first six months of fiscal 1995 to $24,000 in the first six months of fiscal 1996. The income in the current six month period is attributable to a gain on the sale of trading securities whereas the gain in the first six months of fiscal 1995 was due to the Company's $20,000 gain on the sale of vehicles and equipment to former employees pursuant to employee settlement agreements. Part II - Other Information Item 3. Defaults Upon Senior Securities In March 1992, Kennecott Exploration Company loaned Fischer-Watt $500,000. Principle and interest on this loan was repayable in monthly installments of $100,000 beginning August 1, 1992. The loan bore interest at the higher of 10% or prime plus 5% and was secured by the Company's interest in the America Mine property. On May 16, 1995 the note and associated interest were canceled in conjunction with the sale of the Company's mineral interest in the Minas de Oro, Honduras property thus curing the default. (See above and Note 4 to Financial Statements.) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit Item 601 No. Category Exhibit 1 2 Letter of Intent dated August 28, 1995 whereby Fischer- Watt Gold Company, Inc., and Great Basin Management Company, Inc., agree to form a business combination. 2 2 August 28, 1995 agreement between Fischer-Watt Gold Company, Inc., and Greenstone Resources Ltd., whereby Fischer-Watt agrees to purchase 100% of Greenstone Resources Ltd.'s wholly-owned Colombian branch, Greenstone of Colombia ("GOC"). 3 3 Articles of Incorporation dated October 20, 1986 filed as Exhibit 3.1 to Form 10 filed December 22, 1988, and incorporated herein by reference. 4 3 By-Laws of the Corporation, filed as Exhibit 3.2 to Form 10 filed December 22, 1988, and incorporated herein by reference. 5 3 Certificate of Amendment of Articles of Incorporation of Fischer-Watt Gold Company, Inc., dated February 8, 1987,filed as Exhibit 3.3 to Form 10 filed December 22, 1988, and incorporated herein by reference. 6 10 Letter Agreement between BMR Gold Corporation and Fischer-Watt Gold Company, Inc., regarding the America Mine Property effective September 20, 1989, and filed as Exhibit 19.1 to Form 10-Q filed November 20, 1989 and incorporated herein by reference. 7 10 Fischer-Watt Gold Company, Inc., non-qualified stock option plan of May 1987 and filed as Exhibit 36.10 to Form 10-K filed April 23, 1991 and incorporated herein by reference. 8 10 Greenstone Letter Agreement dated November 2, 1993 whereby Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc. agree to a merger of Fischer-Watt Gold Company, Inc., with a wholly-owned subsidiary of Greenstone and filed as Exhibit 49.10 to Form 10-Q filed December 10, 1993 and incorporated herein by reference. 9 10 Employment Agreement effective September 1, 1993 between Fischer-Watt Gold Company, Inc., and George Beattie whereby Fischer-Watt agrees to employ Mr. Beattie for a two-year period as Chief Executive Officer and filed as Exhibit 20.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 10 10 Loan Agreement dated November 12, 1993 between Fischer- Watt Gold Company, Inc., and Greenstone Resources Ltd., whereby Greenstone agreed to lend Fischer-Watt working capital during the prospective merger's due diligence period and filed as Exhibit 21.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 11 10 Letter from Greenstone Resources Ltd., dated February 1,1994 to Fischer-Watt Gold Company, Inc., whereby Greenstone advised that the merger agreement dated November 2, 1993 between Greenstone and Fischer-Watt Gold is terminated as of that date and filed as Exhibit 22.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 12 10 Option Agreement between Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc., dated March 24, 1994, whereby Greenstone has the right to purchase all of Fischer-Watt's interest in the San Andres property in Honduras and filed as Exhibit 23.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 13 10 Exploration Agreement between Fischer-Watt Gold Company, Inc.'s 50% owned Mexican company, Minera Montoro S.A. de C.V., and Gatro South America Holdings Limited (GSA) dated March 25, 1994, whereby GSA funds a Generative Exploration program in Baja California, Mexico and filed as Exhibit 24.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 14 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and W. Perry Durning, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 25.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 15 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Joel Heath, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 26.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 16 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Robert Gordon, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 27.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 17 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Frank L. Hillemeyer, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 28.10 to Form 10-K filed May 11, 1994 and incorporated herein by reference. 18 10 Compromise Wage and Expense Settlement Agreement dated March 22, 1994 between Fischer-Watt Gold Company, Inc., and Michael D. Johnson, a former employee, whereby terms for payment of unpaid wages and expenses were accepted by the parties and filed as Exhibit 29.10 to Form 10-Q filed June 14, 1994 and incorporated herein by reference. 19 10 Agreement to Assign Leases dated July 7, 1994 between Fischer-Watt Gold Company, Inc., and Kennecott Exploration Company whereby Fischer-Watt agrees to assign its interests in the Modoc property located in Imperial County, California to Kennecott, reserving a Net Smelter Return royalty. This agreement was filed as Exhibit 22.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 20 10 Letter agreement between Fischer-Watt Gold Company, Inc., and La Cuesta International (LCI) dated August 11, 1994 whereby LCI agrees to lease the Oatman property located in Mohave County, Arizona. This agreement was filed as Exhibit 23.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 21 10 Stock Pledge Agreement between Fischer-Watt Gold Company, Inc., and Greenstone Resources Canada Ltd., dated July 31, 1994 whereby Fischer-Watt grants a security interest in shares of Compania Minerales de Copan S.A. de C.V., acquired under Stock Loans, to Greenstone. This agreement was filed as Exhibit 24.10 to Form 10-Q filed September 13, 1994 and incorporated herein by reference. 22 10 Option Agreement - Lock-up Agreement between Fischer- Watt Gold Company, Inc., and Greenstone Resources Ltd., dated October 17, 1994 whereby the San Andres option agreement was amended to provide for an early advance of $50,000 as partial payment of the option in exchange for restrictions on the disposition of Greenstone shares. This agreement was filed as Exhibit 22.10 to Form 10-Q filed December 14, 1994 and incorporated herein by reference. 23 10 English translation of an Exploration Agreement between Fischer-Watt's Mexican subsidiary, Minera Montoro, S.A. de C.V. and Minera Cuicuilco, S.A. de C.V. dated October 18, 1994 whereby Minera Cuicuilco is granted the rights to explore the Cerrito property in Baja California, Mexico and was filed as Exhibit 23.10 to Form 10-Q filed December 14, 1994 and incorporated herein by reference. 24 10 Acquisition agreement dated November 10, 1994 among Greenstone Resources Canada Ltd., Greenstone Resources Ltd., and Fischer-Watt Gold Company, Inc., whereby the parties finalize the Option Agreement of March 24, 1994 to purchase the San Andres property in Honduras and modify the Lock-Up Agreement dated October 17, 1994. This agreement was filed as Exhibit 29.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 25 10 Letter agreement dated February 28, 1995 between Tombstone Explorations Co. Ltd., and Fischer-Watt Gold Company, Inc., whereby Tombstone agrees to purchase all of Fischer-Watt's rights to the Minas de Oro property in Honduras. This agreement was filed as Exhibit 30.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 26 10 Letter agreement dated April 13, 1995 between Begeyge Minera Limitada and Fischer-Watt Gold Company, Inc., whereby Fischer-Watt will acquire rights to the La Victoria, Honduras property. This agreement was filed as Exhibit 31.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 27 10 Option whereby Fischer-Watt Gold Company, Inc., grants Gerald D. Helgeson an option to purchase 100,000 shares of Fischer-Watt restricted common stock. This option was filed as Exhibit 32.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 28 10 Option whereby Fischer-Watt Gold Company, Inc., grants Larry J. Buchanan an option to purchase 100,000 shares of Fischer-Watt restricted common stock. This option was filed as Exhibit 33.10 to Form 10-K filed May 15, 1995 and incorporated herein by reference. 29 10 Amendment dated April 20, 1995 to Agreement to Assign Leases dated July 7, 1994 between Fischer-Watt Gold Company, Inc., and Kennecott Exploration Company whereby Fischer-Watt agrees to assign its interests in the Modoc property located in Imperial County, California to Kennecott and filed as Exhibit 28.10 to Form 10-QSB filed June 14, 1995 and incorporated herein by reference. 30 10 Asset Purchase Agreement dated May 16, 1995 between Fischer-Watt Gold Company, Inc., and Cerenex Financial A. V. V., whereby the February 28, 1995 sale of Minas de Oro is closed and filed as Exhibit 29.10 to Form 10-QSB filed June 14, 1995 and incorporated herein by reference. 31 10 Option effective June 1, 1995, replacing an option filed as Exhibit 26.10 to Form 10-QSB filed June 14, 1995, whereby Fischer-Watt Gold Company, Inc., grants Gerald D.Helgeson an option to purchase 200,000 shares of Fischer-Watt restricted common stock. 32 10 Option effective June 1, 1995, replacing an option filed as Exhibit 27.10 to Form 10-QSB filed June 14, 1995, whereby Fischer-Watt Gold Company, Inc., grants Larry J. Buchanan an option to purchase 100,000 shares of Fischer-Watt restricted common stock. 33 10 Option effective June 1, 1995 whereby Fischer-Watt Gold Company, Inc., grants Anthony P. Taylor an option to purchase 100,000 shares of Fischer-Watt restricted common stock. 34 10 Option effective June 1, 1995 whereby Fischer-Watt Gold Company, Inc., grants Kelly Boatright an option to purchase 25,000 shares of Fischer-Watt restricted common stock. 35 10 Option effective June 1, 1995 whereby Fischer-Watt Gold Company, Inc., grants Donald N. Lawrence III an option to purchase 100,000 shares of Fischer-Watt restricted common stock. 36 10 Loan agreement dated August 28, 1995, between Fischer- Watt Gold Company, Inc., and Great Basin Management Company, Inc., whereby Fischer-Watt agrees to loan Great Basin Management Company, Inc., up to $108,000. 37 11 Statement regarding per share earnings for the quarterly period ended July 31, 1995. 38 27 Financial Data Schedule for the quarterly period ended April 30, 1995 and filed as Exhibit 30.10 to Form 10-QSB filed June 14, 1995 and incorporated herein by reference. 39 27 Financial Data Schedule for the six month period ended July 31,1995. 40 99 Promissory Note from Fischer-Watt Gold Company, Inc. to Kennecott Exploration Company in the amount of $500,000 dated March 25, 1992 and filed as Exhibit 44.28 to Form 10-K filed April 22, 1993 and incorporated herein by reference. 41 99 Minutes of Special Meeting of Board of Directors of Fischer-Watt Gold Company, Inc., dated October 19, 1994, whereby George Beattie's employment contract dated September 1, 1993 is extended to September 1, 1997. These minutes were filed as Exhibit 28.99 to Form 10-K filed May 15, 1995 and incorporated herein by reference. (b) Reports on Form 8-K - NONE SIGNATURES In accordance with the requirements of the Exchange Act the Registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FISCHER-WATT GOLD COMPANY, INC. September 13, 1995 By /s/ George Beattie George Beattie, President, Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), Chairman of the Board and Director
EX-2 2 FISCHER-WATT GOLD COMPANY, INC. 1410 CHERRYWOOD DRIVE COEUR D'ALENE, IDAHO 83814 August 28, 1995 Great Basin Management Co., Inc. 3400 Kauai Court, Suite 208 Reno, Nevada 89509 Re: Business Combination of Great Basin Management Co., Inc. ("GBM") and Fischer-Watt Gold Company, Inc. ("FWG") Gentlemen: This letter of intent, when countersigned by you, will confirm our tentative agreement to combine, in the transaction described below (the "Transaction"), GBM and FWG. Our agreement is on the terms, and subject to the conditions, described below. Except for Items 3A, 4 and 5 below, this letter of intent represents only our current good-faith intention to negotiate and enter into a definitive agreement, subject to a more complete review of your business and to negotiation of such a definitive agreement in form acceptable to us. It is not, and is not intended to be, a binding agreement between us (except as to those specified items), and neither of us shall have any liability to the other if we fail to execute a definitive agreement for any reason. Statements below as to what we, or you, will do, or agree to do, or the like, are so expressed for convenience only, and are understood in all instances (except for the items enumerated above) to be subject to our mutual continued willingness to proceed with any transaction as our negotiations take place. 1. Fundamental Terms. GBM and FWG shall combine through the merger of GBM with and into a newly formed wholly-owned subsidiary of FWG ("Newco"). FWG will form Newco under the laws of Nevada to consummate the Transaction. At the Closing, as to be defined in the definitive agreement (the "Agreement"), as consideration for such Transaction, FWG shall issue shares of its Common Stock representing, immediately after such issuance, 25% of the outstanding shares of Common Stock of FWG (the "Consid- eration"). 2. Definitive Agreement. We mutually agree to proceed in good faith toward negotiation and execution of the Agreement, which shall provide for the Transaction, and shall contain representa- tions, conditions, covenants and the like typical in such Transac- tions. We also agree that if the Agreement has not been executed by 5:00 P.M. pacific time (standard or daylight savings, as then in effect) on October 31, 1995, this letter of intent shall automatically be terminated and of no further force or effect, except for the items enumerated in the first paragraph, which shall survive any such termination. 3.Conditions. This letter of intent is and, to the extent applicable, the Agreement will (except as specified below) be subject to the following conditions: A. A complete review by each of us of the books, records, business and affairs of the other. Each of us agrees to provide to the other and its agents complete access to all of our respective books, records and personnel for purposes of conducting our investigation. We agree that all information so provided by either of us to the other and identified as "confidential" will be treated by the recipient as such, that the recipient will not make any use of such information unless the same shall become available to it through non-confidential means or shall otherwise come into the public domain, and that if this letter of intent shall be terminated without an Agreement having been executed, each of us will return to the other all such confidential documents (and all copies thereof) in our possession, or will certify to the other that all of such confidential documents not returned have been destroyed. B. Negotiation and execution of the Agreement with terms, provisions and conditions mutually acceptable to each of us. C. Approval of the Transaction by the Boards of Directors of GBM and FWG. D. Approval of the Transaction by shareholders of GBM. E. Approval of the Transaction by banks, lessors or similar creditors of GBM or FWG whose consent is required. F. Approval of the Transaction by regulatory authorities, if any, having jurisdiction over the Transaction. G. Appropriate confirmations as to compliance with representations, warranties and covenants, and opinions of counsel, at the Closing of the Transaction as is customary in similar agreements. 4. Expenses. Each party to this letter of intent shall bear its own expenses, except as specifically provided to the contrary above. 5. Press Releases and Disclosure. Each party agrees that it will not issue any press release or other disclosure of this letter of intent or of the Transaction without the prior approval of the other, which shall not be unreasonably withheld, unless, in the good faith opinion of counsel, such disclosure is required by law and time does not permit the obtaining of such consent, or such consent is withheld. 6.Termination. This letter of intent may be terminated (i) by either party if the Agreement has not been executed by October 31, 1995 or (ii) by mutual consent of GBM and FWG. In the event of such termination, all provisions hereof shall terminate except Items 3A, 4 and 5, which shall survive termination of this letter of intent, and except that if a party is in breach of its obliga- tions hereunder, such termination shall not relieve such party of liability for such breach. Very truly yours, FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie President Confirmed and Agreed: GREAT BASIN MANAGEMENT CO., INC. By /s/ Dr. Anthony Taylor Date: August 28, 1995 President EX-2 3 Greenstone Resources Ltd. August 28, 1995 Mr. George Beattie Chairman and Chief Executive Officer Fischer-Watt Gold Company, Inc. 1410 Cherrywood Drive Coeur d'Alene, Idaho 83814 Dear George: This Agreement sets forth all of the terms and conditions whereby Fischer-Watt Gold Company, Inc. ("FWG") irrevocably agrees to purchase 100% of Greenstone Resources Ltd.'s ("GRE") wholly-owned Colombian branch, Greenstone of Colombia ("GOC"). Commercial Terms (1) FWG or its subsidiaries shall at closing convey to Greenstone all rights and interests FWG holds in Minerales de Copan ("Copan Interests"), including shares and options to acquire shares and GRE shall at closing convey to FWG 100% of GOC and any other shares of GOC or Compania Minera Oronorte S.A. ("Oronorte") owned by GRE on any GRE subsidiary. (2) FWG as of closing shall acquire all ownership rights of GOC. The liabilities of GOC include the bank debt with certain Colombian banks, the equipment lease obligations with Union Leasing and Finevesa ("Lease Obligations"), the existing accounts payable and accrued royalty obligations of GOC's majority owned subsidiary, Oronorte. GRE shall at closing forgive any amounts owed by GOC or Oronorte to GRE or any of it's subsidiaries. (3) GRE shall as of closing forgive FWG of any amounts owed by FWG to GRE or any of its subsidiaries. (4) GRE shall as of closing indemnify FWG and its subsidiaries from any and all financial obligations resulting from any legal actions taken by Norman Bracht, John Miller or their related companies. GRE also agrees to pursue legal action against Bracht and Miller at its expense and any Colombian land or mineral rights obtained from such action shall be offered to Oronorte at GRE's cost, if any. Representations and Warranties of FWG FWG hereby represents and warrants that: (5) Except for the liens in favour of GRE, there are no other existing liens or encumbrances against the Copan shares. Any additional Copan Interests which FWG may acquire after the date of this Agreement shall be offered forthwith to GRE for purchase by GRE at FWG's cost. (6) Upon execution of this Agreement, FWG agrees to take operating control of GOC and its subsidiaries and their respective operations. (7) FWG has obtained all the necessary corporate approvals to enter into this transaction. Representations and Warranties of GRE GRE hereby represents and warrants that: (8) GOC and its subsidiaries are validly existing corporate entities under Colombian law. (9) At the date of closing GOC shall not own not less than 94.9% of the outstanding shares of Oronorte. At the date of closing there will be no existing liens or encumbrances against such shares, and there will be no outstanding rights to acquire equity interests in Oronorte. At the date of closing GRE shall own 100% of the outstanding shares of GOC, there will be no existing liens or encumbrances against such shares, and there will be no outstanding rights to acquire equity interests in GOC. Any additional shares of Oronorte which GRE may acquire after the date of closing shall be offered forthwith to FWG for purchase by FWG at GRE's costs. (10) The total liabilities of GOC and its subsidiaries as of August 24, 1995, excluding the Lease Obligations, including any contingent liabilities, shall not exceed US $1,000,000. The amount of the Lease Obligations at the time of closing shall not exceed US $375,000. (11) The total of cash, accounts receivable and saleable gold in inventory of GOC and it's subsidiaries, as of August 24, 1995 shall not be less than US $450,000. Expenditures after August 24, 1995 will follow the ordinary course of business. (12) GRE has the corporate power and authority and has or will obtain by the date of closing all necessary approvals to enter into this transaction. (13) Prior to Closing, GRE shall cause the officers and directors of GOC and Oronorte to take direction from FWG and to do all things necessary to ensure that FWG is able to exercise control over GOC and Oronorte. (14) GOC and Oronorte have and will have at closing, good and marketable title, or valid leasehold rights in the case of leasehold property, to all assets owned or leased by them or used by them in the conduct of their business, free and clear of liens or encumbrances. (15) To the best of GRE's knowledge, this transaction does not conflict with or result in a breach of any contractual legal or regulatory obligation to which GOC, Oronorte, or any of their assets are subject to and will not result in the acceleration of any debt or other obligation to which GOC or Oronorte are subject. (16) The material terms of the relationship and contractual obligations of GOC or Oronorte with Dual Resources is accurately stated or summarized as follows: Dual resources owns 2.8 million shares of Oronorte, Oronorte owes certain taxes to Dual Resources, GRE will indemnify FWG for the US $300,000 payment to Dual Resources. Closing (17) The parties hereto agree to effect a Closing of this transaction as soon as possible and to execute any and all documents required to give effect to this transaction. Sincerely, Greenstone Resources Ltd. /s/ J. Randy Martin Senior Vice-President Chief Operating Officer /s/ George Beattie Reviewed, Agreed and Accepted on August 28, 1995 Fischer-Watt Gold Company, Inc. EX-10 4 OPTION THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI- TIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDER- ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS. OPTION TO PURCHASE 200,000 SHARES OF COMMON STOCK FISCHER-WATT GOLD COMPANY, INC. (A Nevada Corporation) Not Transferable or Exercisable Except upon Conditions Herein Specified Void after 5:00 O'Clock P.M., Mountain Time, on June 1, 2001 Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company") hereby certifies that Gerald D. Helgeson or his regis- tered successors and permitted assigns thereof, registered on the books of the Company maintained for such purposes as the registered holder hereof (the "Holder"), for value received, is entitled to purchase from the Company the number of fully paid and non-assessable shares of Common Stock of the Company, of the par value of $.001 per share (the "Shares"), stated above at the purchase price of $.0625 per Share (the "Exercise Price") (the number of Shares and Exercise Price being subject to adjustment as hereinafter provided) upon the terms and conditions herein provided. 1. Exercise of Option. (a) Subject to subsection (b) of this Section 1, upon presentation and surrender of this Option Certificate, with the attached Purchase Form duly executed, at the principal office of the Company at 1410 Cherrywood Drive, Couer d'Alene, Idaho 83814, or at such other place as the Company may designate by notice to the Holder hereof, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price times the number of Shares being purchased, the Company shall deliver to the Holder hereof, as promptly as practicable, certificates representing the Shares being purchased. This Option may be exercised in whole or in part; and, in case of exercise hereof in part only, the Company, upon surrender hereof, will deliver to the Holder a new Option Certificate or Option Certificates of like tenor entitling the Holder to purchase the number of Shares as to which this Option has not been exercised. (b) This Option may be exercised in whole or in part at any time after June 1, 1996 and prior to 5:00 o'clock P.M. Mountain Time, on June 1, 2001. In the event that, prior to June 1, 1996, the Holder shall cease for any reason whatsoever to be a director of the Company, except due to removal by the shareholders of the Company, failure to be nominated for election at a meeting of the Company's shareholders at which directors are to be elected, or failure to be elected by the shareholders of the Company if nominated for election at such a meeting, this Option shall immediately and automatically be and become null and void and of no further force or effect. 2. Exchange and Transfer of Option. This Option at any time prior to the exercise hereof, upon presentation and surrender to the Company, may be exchanged, alone or with other Options of like tenor registered in the name of the Holder, for another Option or other Options of like tenor in the name of such Holder exercisable for the same aggregate number of Shares as the Option or Options surrendered. 3. Rights and Obligations of Option Holder. (a) The Holder of this Option Certificate shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, in the event that any certificate representing the Shares is issued to the Holder hereof upon exercise of this Option, such Holder shall, for all purposes, be deemed to have become the holder of record of such Shares on the date on which this Option Certificate, together with a duly executed Purchase Form, was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such Share certificate. The rights of the Holder of this Option are limited to those expressed herein and the Holder of this Option, by its acceptance hereof, consents to and agrees to be bound by and to comply with all the provisions of this Option Certificate, including, without limitation, all the obligations imposed upon the Holder hereof by Section 5 hereof. In addition, the Holder of this Option Certificate, by accepting the same, agrees that the Company may deem and treat the person in whose name this Option Certificate is registered on the books of the Company maintained for such purpose as the absolute, true and lawful owner for all purposes whatsoever, notwithstanding any notation of ownership or other writing thereon, and the Company shall not be affected by any notice to the contrary. (b) No Holder of this Option Certificate, as such, shall be entitled to vote or receive dividends or to be deemed the holder of Shares for any purpose, nor shall anything contained in this Option Certificate be construed to confer upon any Holder of this Option Certificate, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company, whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise, receive notice of meetings or other action affecting stockholders (except for notices provided for herein), receive dividends, subscription rights, or otherwise, until this Option shall have been exercised and the Shares purchasable upon the exercise thereof shall have become deliverable as provided herein; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for those Shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and the Option surrendered shall not be deemed to have been exercised, in whole or in part as the case may be, until the next succeeding day on which stock transfer books are open for the purpose of determining entitlement to dividends on the Company's common stock. 4. Shares Underlying Option. The Company covenants and agrees that all Shares delivered upon exercise of this Option shall, upon delivery and payment therefor, be duly and validly authorized and issued, fully paid and non-assessable, and free from all stamp-taxes, liens, and charges with respect to the purchase thereof. In addition, the Company agrees at all time to reserve and keep available an authorized number of Shares sufficient to permit the exercise in full of this Option. 5. Disposition of Option or Shares. (a) The holder of this Option Certificate and any transferee hereof or of the Shares issuable upon the exercise of the Option Certificate, by their acceptance hereof, hereby understand and agree that the Option, and the Shares issuable upon the exercise hereof, have not been registered under either the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated, or otherwise transferred (whether or not for consider- ation) except upon the issuance to the Company of a favorable opinion of counsel or submission to the Company of such evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. It shall be a condition to the transfer of this Option that any transferee hereof deliver to the Company its written agreement to accept and be bound by all of the terms and conditions of this Option Certificate. (b) The stock certificates of the Company that will evidence the shares of Common Stock with respect to which this Option may be exercisable will be imprinted with a conspicuous legend in substantially the following form: The shares represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise transferred (whether or not for consideration) by the holder except upon the issuance to the Company of a favorable opinion of its counsel or submission to the Company of such other evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. The Company has not agreed to register any of the holder's shares of Common Stock of the Company with respect to which this Option may be exercisable for distribution in accordance with the provisions of the Act or the State Acts and, the Company has not agreed to comply with any exemption from registration under the Act or the State Acts for the resale of the holder's shares of Common Stock of the Company with respect to which this Option may be exercised. Hence, it is the understanding of the holders of this Option that by virtue of the provisions of certain rules respecting "restricted securities" promulgated by the SEC, the shares of Common Stock of the Company with respect to which this Option may be exercisable may be required to be held indefinitely, unless and until registered under the Act and the State Acts, unless an exemption from such registration is avail- able, in which case the holder may still be limited as to the number of shares of Common Stock of the Company with respect to which this Option may be exercised that may be sold. 6. Adjustments. The number of Shares purchasable upon the exercise of this Option is subject to adjustment from time to time upon the occurrence of any of the events enumerated below. (a) In case the Company shall: (i) pay a dividend in Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue, by reclassification of its Shares, any shares of its capital stock, the amount of Shares purchasable upon the exercise of this Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive upon exercise of the Option that number of Shares which such Holder would have owned or would have been entitled to receive after the happening of such event had such Holder exercised the Option immediately prior to the record date, in the case of such dividend, or the effective date, in the case of any such subdivision, combination or reclassification. An adjustment made pursuant to this subsection (a) shall be made whenever any of such events shall occur, but shall become effective retroactively after such record date or such effective date, as the case may be, as to any exercise between such record date or effective date and the date of happening of any such event. (b) Notice to Option Holders of Adjustment. Whenever the number of Shares purchasable hereunder is adjusted as herein provided, the Company shall cause to be mailed to the Holder in accordance with the provisions of this Section 6 a notice (i) stating that the number of Shares purchasable upon exercise of this Option have been adjusted, (ii) setting forth the adjusted number of Shares purchasable upon the exercise of this Option, and (iii) showing in reasonable detail the computations and the facts, including the amount of consideration received or deemed to have been received by the Company, upon which such adjustments are based. 7. Fractional Shares. The Company shall not be required to issue any fraction of a Share upon the exercise of this Option. If more than one Option shall be surrendered for exercise at one time by the same Holder, the number of full Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Shares with respect to which this Option is exercised. If any fractional interest in a Share shall be deliverable upon the exercise of this Option, the Company shall make an adjustment therefor in cash equal to such fraction multiplied by the Exercise Price. 8. Loss or Destruction. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Option Certificate and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or bond satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Option Certificate, the Company at its expense will execute and deliver, in lieu thereof, a new Option Certificate of like tenor. 9. Survival. The various rights and obligations of the Holder hereof as set forth herein shall survive the exercise of the Option represented hereby and the surrender of this Option Certificate. 10. Notices. Whenever any notice, payment of any purchase price, or other communication is required to be given or delivered under the terms of this Option, it shall be in writing and delivered by hand delivery or United States registered or certified mail, return receipt requested, postage prepaid, and will be deemed to have been given or delivered on the date such notice, purchase price or other communication is so delivered or posted, as the case may be; and, if to the Company, it will be addressed to the address specified in Section 1 hereof, and if to the Holder, it will be addressed to the registered Holder at its, his or her address as it appears on the books of the Company. FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie Chief Executive Officer Date: June 1, 1995 ATTEST: By /s/ Gerald D. Helgeson Secretary EX-10 5 OPTION THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI- TIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDER- ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS. OPTION TO PURCHASE 100,000 SHARES OF COMMON STOCK FISCHER-WATT GOLD COMPANY, INC. (A Nevada Corporation) Not Transferable or Exercisable Except upon Conditions Herein Specified Void after 5:00 O'Clock P.M., Mountain Time, on June 1, 2001 Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company") hereby certifies that Lawrence J. Buchanan or his registered successors and permitted assigns thereof, registered on the books of the Company maintained for such purposes as the registered holder hereof (the "Holder"), for value received, is entitled to purchase from the Company the number of fully paid and non-assessable shares of Common Stock of the Company, of the par value of $.001 per share (the "Shares"), stated above at the purchase price of $.0625 per Share (the "Exercise Price") (the number of Shares and Exercise Price being subject to adjustment as hereinafter provided) upon the terms and conditions herein provided. 1. Exercise of Option. (a) Subject to subsection (b) of this Section 1, upon presentation and surrender of this Option Certificate, with the attached Purchase Form duly executed, at the principal office of the Company at 1410 Cherrywood Drive, Couer d'Alene, Idaho 83814, or at such other place as the Company may designate by notice to the Holder hereof, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price times the number of Shares being purchased, the Company shall deliver to the Holder hereof, as promptly as practicable, certificates representing the Shares being purchased. This Option may be exercised in whole or in part; and, in case of exercise hereof in part only, the Company, upon surrender hereof, will deliver to the Holder a new Option Certificate or Option Certificates of like tenor entitling the Holder to purchase the number of Shares as to which this Option has not been exercised. (b) This Option may be exercised in whole or in part at any time after June 1, 1996 and prior to 5:00 o'clock P.M. Mountain Time, on June 1, 2001. In the event that, prior to June 1, 1996, the Holder shall cease for any reason whatsoever to be a director of the Company, except due to removal by the shareholders of the Company, failure to be nominated for election at a meeting of the Company's shareholders at which directors are to be elected, or failure to be elected by the shareholders of the Company if nominated for election at such a meeting, this Option shall immediately and automatically be and become null and void and of no further force or effect. 2. Exchange and Transfer of Option. This Option at any time prior to the exercise hereof, upon presentation and surrender to the Company, may be exchanged, alone or with other Options of like tenor registered in the name of the Holder, for another Option or other Options of like tenor in the name of such Holder exercisable for the same aggregate number of Shares as the Option or Options surrendered. 3. Rights and Obligations of Option Holder. (a) The Holder of this Option Certificate shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, in the event that any certificate representing the Shares is issued to the Holder hereof upon exercise of this Option, such Holder shall, for all purposes, be deemed to have become the holder of record of such Shares on the date on which this Option Certificate, together with a duly executed Purchase Form, was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such Share certificate. The rights of the Holder of this Option are limited to those expressed herein and the Holder of this Option, by its acceptance hereof, consents to and agrees to be bound by and to comply with all the provisions of this Option Certificate, including, without limitation, all the obligations imposed upon the Holder hereof by Section 5 hereof. In addition, the Holder of this Option Certificate, by accepting the same, agrees that the Company may deem and treat the person in whose name this Option Certificate is registered on the books of the Company maintained for such purpose as the absolute, true and lawful owner for all purposes whatsoever, notwithstanding any notation of ownership or other writing thereon, and the Company shall not be affected by any notice to the contrary. (b) No Holder of this Option Certificate, as such, shall be entitled to vote or receive dividends or to be deemed the holder of Shares for any purpose, nor shall anything contained in this Option Certificate be construed to confer upon any Holder of this Option Certificate, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company, whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise, receive notice of meetings or other action affecting stockholders (except for notices provided for herein), receive dividends, subscription rights, or otherwise, until this Option shall have been exercised and the Shares purchasable upon the exercise thereof shall have become deliverable as provided herein; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for those Shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and the Option surrendered shall not be deemed to have been exercised, in whole or in part as the case may be, until the next succeeding day on which stock transfer books are open for the purpose of determining entitlement to dividends on the Company's common stock. 4. Shares Underlying Option. The Company covenants and agrees that all Shares delivered upon exercise of this Option shall, upon delivery and payment therefor, be duly and validly authorized and issued, fully paid and non-assessable, and free from all stamp-taxes, liens, and charges with respect to the purchase thereof. In addition, the Company agrees at all time to reserve and keep available an authorized number of Shares sufficient to permit the exercise in full of this Option. 5. Disposition of Option or Shares. (a) The holder of this Option Certificate and any transferee hereof or of the Shares issuable upon the exercise of the Option Certificate, by their acceptance hereof, hereby understand and agree that the Option, and the Shares issuable upon the exercise hereof, have not been registered under either the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated, or otherwise transferred (whether or not for consider- ation) except upon the issuance to the Company of a favorable opinion of counsel or submission to the Company of such evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. It shall be a condition to the transfer of this Option that any transferee hereof deliver to the Company its written agreement to accept and be bound by all of the terms and conditions of this Option Certificate. (b) The stock certificates of the Company that will evidence the shares of Common Stock with respect to which this Option may be exercisable will be imprinted with a conspicuous legend in substantially the following form: The shares represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise transferred (whether or not for consideration) by the holder except upon the issuance to the Company of a favorable opinion of its counsel or submission to the Company of such other evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. The Company has not agreed to register any of the holder's shares of Common Stock of the Company with respect to which this Option may be exercisable for distribution in accordance with the provisions of the Act or the State Acts and, the Company has not agreed to comply with any exemption from registration under the Act or the State Acts for the resale of the holder's shares of Common Stock of the Company with respect to which this Option may be exercised. Hence, it is the understanding of the holders of this Option that by virtue of the provisions of certain rules respecting "restricted securities" promulgated by the SEC, the shares of Common Stock of the Company with respect to which this Option may be exercisable may be required to be held indefinitely, unless and until registered under the Act and the State Acts, unless an exemption from such registration is avail- able, in which case the holder may still be limited as to the number of shares of Common Stock of the Company with respect to which this Option may be exercised that may be sold. 6. Adjustments. The number of Shares purchasable upon the exercise of this Option is subject to adjustment from time to time upon the occurrence of any of the events enumerated below. (a) In case the Company shall: (i) pay a dividend in Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue, by reclassification of its Shares, any shares of its capital stock, the amount of Shares purchasable upon the exercise of this Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive upon exercise of the Option that number of Shares which such Holder would have owned or would have been entitled to receive after the happening of such event had such Holder exercised the Option immediately prior to the record date, in the case of such dividend, or the effective date, in the case of any such subdivision, combination or reclassification. An adjustment made pursuant to this subsection (a) shall be made whenever any of such events shall occur, but shall become effective retroactively after such record date or such effective date, as the case may be, as to any exercise between such record date or effective date and the date of happening of any such event. (b) Notice to Option Holders of Adjustment. Whenever the number of Shares purchasable hereunder is adjusted as herein provided, the Company shall cause to be mailed to the Holder in accordance with the provisions of this Section 6 a notice (i) stating that the number of Shares purchasable upon exercise of this Option have been adjusted, (ii) setting forth the adjusted number of Shares purchasable upon the exercise of this Option, and (iii) showing in reasonable detail the computations and the facts, including the amount of consideration received or deemed to have been received by the Company, upon which such adjustments are based. 7. Fractional Shares. The Company shall not be required to issue any fraction of a Share upon the exercise of this Option. If more than one Option shall be surrendered for exercise at one time by the same Holder, the number of full Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Shares with respect to which this Option is exercised. If any fractional interest in a Share shall be deliverable upon the exercise of this Option, the Company shall make an adjustment therefor in cash equal to such fraction multiplied by the Exercise Price. 8. Loss or Destruction. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Option Certificate and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or bond satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Option Certificate, the Company at its expense will execute and deliver, in lieu thereof, a new Option Certificate of like tenor. 9. Survival. The various rights and obligations of the Holder hereof as set forth herein shall survive the exercise of the Option represented hereby and the surrender of this Option Certificate. 10. Notices. Whenever any notice, payment of any purchase price, or other communication is required to be given or delivered under the terms of this Option, it shall be in writing and delivered by hand delivery or United States registered or certified mail, return receipt requested, postage prepaid, and will be deemed to have been given or delivered on the date such notice, purchase price or other communication is so delivered or posted, as the case may be; and, if to the Company, it will be addressed to the address specified in Section 1 hereof, and if to the Holder, it will be addressed to the registered Holder at its, his or her address as it appears on the books of the Company. FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie Chief Executive Officer Date: June 1, 1995 ATTEST: By /s/ Gerald D. Helgeson Secretary EX-10 6 OPTION THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI- TIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDER- ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS. OPTION TO PURCHASE 100,000 SHARES OF COMMON STOCK FISCHER-WATT GOLD COMPANY, INC. (A Nevada Corporation) Not Transferable or Exercisable Except upon Conditions Herein Specified Void after 5:00 O'Clock P.M., Mountain Time, on June 1, 2001 Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company") hereby certifies that Anthony P. Taylor or his regis- tered successors and permitted assigns thereof, registered on the books of the Company maintained for such purposes as the registered holder hereof (the "Holder"), for value received, is entitled to purchase from the Company the number of fully paid and non-assessable shares of Common Stock of the Company, of the par value of $.001 per share (the "Shares"), stated above at the purchase price of $.0625 per Share (the "Exercise Price") (the number of Shares and Exercise Price being subject to adjustment as hereinafter provided) upon the terms and conditions herein provided. 1. Exercise of Option. (a) Subject to subsection (b) of this Section 1, upon presentation and surrender of this Option Certificate, with the attached Purchase Form duly executed, at the principal office of the Company at 1410 Cherrywood Drive, Couer d'Alene, Idaho 83814, or at such other place as the Company may designate by notice to the Holder hereof, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price times the number of Shares being purchased, the Company shall deliver to the Holder hereof, as promptly as practicable, certificates representing the Shares being purchased. This Option may be exercised in whole or in part; and, in case of exercise hereof in part only, the Company, upon surrender hereof, will deliver to the Holder a new Option Certificate or Option Certificates of like tenor entitling the Holder to purchase the number of Shares as to which this Option has not been exercised. (b) This Option may be exercised in whole or in part at any time after June 1, 1996 and prior to 5:00 o'clock P.M. Mountain Time, on June 1, 2001. In the event that, prior to June 1, 1996, the Holder shall cease for any reason whatsoever to be a director of the Company, except due to removal by the shareholders of the Company, failure to be nominated for election at a meeting of the Company's shareholders at which directors are to be elected, or failure to be elected by the shareholders of the Company if nominated for election at such a meeting, this Option shall immediately and automatically be and become null and void and of no further force or effect. 2. Exchange and Transfer of Option. This Option at any time prior to the exercise hereof, upon presentation and surrender to the Company, may be exchanged, alone or with other Options of like tenor registered in the name of the Holder, for another Option or other Options of like tenor in the name of such Holder exercisable for the same aggregate number of Shares as the Option or Options surrendered. 3. Rights and Obligations of Option Holder. (a) The Holder of this Option Certificate shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, in the event that any certificate representing the Shares is issued to the Holder hereof upon exercise of this Option, such Holder shall, for all purposes, be deemed to have become the holder of record of such Shares on the date on which this Option Certificate, together with a duly executed Purchase Form, was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such Share certificate. The rights of the Holder of this Option are limited to those expressed herein and the Holder of this Option, by its acceptance hereof, consents to and agrees to be bound by and to comply with all the provisions of this Option Certificate, including, without limitation, all the obligations imposed upon the Holder hereof by Section 5 hereof. In addition, the Holder of this Option Certificate, by accepting the same, agrees that the Company may deem and treat the person in whose name this Option Certificate is registered on the books of the Company maintained for such purpose as the absolute, true and lawful owner for all purposes whatsoever, notwithstanding any notation of ownership or other writing thereon, and the Company shall not be affected by any notice to the contrary. (b) No Holder of this Option Certificate, as such, shall be entitled to vote or receive dividends or to be deemed the holder of Shares for any purpose, nor shall anything contained in this Option Certificate be construed to confer upon any Holder of this Option Certificate, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company, whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise, receive notice of meetings or other action affecting stockholders (except for notices provided for herein), receive dividends, subscription rights, or otherwise, until this Option shall have been exercised and the Shares purchasable upon the exercise thereof shall have become deliverable as provided herein; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for those Shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and the Option surrendered shall not be deemed to have been exercised, in whole or in part as the case may be, until the next succeeding day on which stock transfer books are open for the purpose of determining entitlement to dividends on the Company's common stock. 4. Shares Underlying Option. The Company covenants and agrees that all Shares delivered upon exercise of this Option shall, upon delivery and payment therefor, be duly and validly authorized and issued, fully paid and non-assessable, and free from all stamp-taxes, liens, and charges with respect to the purchase thereof. In addition, the Company agrees at all time to reserve and keep available an authorized number of Shares sufficient to permit the exercise in full of this Option. 5. Disposition of Option or Shares. (a) The holder of this Option Certificate and any transferee hereof or of the Shares issuable upon the exercise of the Option Certificate, by their acceptance hereof, hereby understand and agree that the Option, and the Shares issuable upon the exercise hereof, have not been registered under either the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated, or otherwise transferred (whether or not for consider- ation) except upon the issuance to the Company of a favorable opinion of counsel or submission to the Company of such evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. It shall be a condition to the transfer of this Option that any transferee hereof deliver to the Company its written agreement to accept and be bound by all of the terms and conditions of this Option Certificate. (b) The stock certificates of the Company that will evidence the shares of Common Stock with respect to which this Option may be exercisable will be imprinted with a conspicuous legend in substantially the following form: The shares represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise transferred (whether or not for consideration) by the holder except upon the issuance to the Company of a favorable opinion of its counsel or submission to the Company of such other evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. The Company has not agreed to register any of the holder's shares of Common Stock of the Company with respect to which this Option may be exercisable for distribution in accordance with the provisions of the Act or the State Acts and, the Company has not agreed to comply with any exemption from registration under the Act or the State Acts for the resale of the holder's shares of Common Stock of the Company with respect to which this Option may be exercised. Hence, it is the understanding of the holders of this Option that by virtue of the provisions of certain rules respecting "restricted securities" promulgated by the SEC, the shares of Common Stock of the Company with respect to which this Option may be exercisable may be required to be held indefinitely, unless and until registered under the Act and the State Acts, unless an exemption from such registration is avail- able, in which case the holder may still be limited as to the number of shares of Common Stock of the Company with respect to which this Option may be exercised that may be sold. 6. Adjustments. The number of Shares purchasable upon the exercise of this Option is subject to adjustment from time to time upon the occurrence of any of the events enumerated below. (a) In case the Company shall: (i) pay a dividend in Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue, by reclassification of its Shares, any shares of its capital stock, the amount of Shares purchasable upon the exercise of this Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive upon exercise of the Option that number of Shares which such Holder would have owned or would have been entitled to receive after the happening of such event had such Holder exercised the Option immediately prior to the record date, in the case of such dividend, or the effective date, in the case of any such subdivision, combination or reclassification. An adjustment made pursuant to this subsection (a) shall be made whenever any of such events shall occur, but shall become effective retroactively after such record date or such effective date, as the case may be, as to any exercise between such record date or effective date and the date of happening of any such event. (b) Notice to Option Holders of Adjustment. Whenever the number of Shares purchasable hereunder is adjusted as herein provided, the Company shall cause to be mailed to the Holder in accordance with the provisions of this Section 6 a notice (i) stating that the number of Shares purchasable upon exercise of this Option have been adjusted, (ii) setting forth the adjusted number of Shares purchasable upon the exercise of this Option, and (iii) showing in reasonable detail the computations and the facts, including the amount of consideration received or deemed to have been received by the Company, upon which such adjustments are based. 7. Fractional Shares. The Company shall not be required to issue any fraction of a Share upon the exercise of this Option. If more than one Option shall be surrendered for exercise at one time by the same Holder, the number of full Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Shares with respect to which this Option is exercised. If any fractional interest in a Share shall be deliverable upon the exercise of this Option, the Company shall make an adjustment therefor in cash equal to such fraction multiplied by the Exercise Price. 8. Loss or Destruction. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Option Certificate and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or bond satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Option Certificate, the Company at its expense will execute and deliver, in lieu thereof, a new Option Certificate of like tenor. 9. Survival. The various rights and obligations of the Holder hereof as set forth herein shall survive the exercise of the Option represented hereby and the surrender of this Option Certificate. 10. Notices. Whenever any notice, payment of any purchase price, or other communication is required to be given or delivered under the terms of this Option, it shall be in writing and delivered by hand delivery or United States registered or certified mail, return receipt requested, postage prepaid, and will be deemed to have been given or delivered on the date such notice, purchase price or other communication is so delivered or posted, as the case may be; and, if to the Company, it will be addressed to the address specified in Section 1 hereof, and if to the Holder, it will be addressed to the registered Holder at its, his or her address as it appears on the books of the Company. FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie Chief Executive Officer Date: June 1, 1995 ATTEST: By /s/ Gerald D. Helgeson Secretary EX-10 7 OPTION THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI- TIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDER- ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS. OPTION TO PURCHASE 25,000 SHARES OF COMMON STOCK FISCHER-WATT GOLD COMPANY, INC. (A Nevada Corporation) Not Transferable or Exercisable Except upon Conditions Herein Specified Void after 5:00 O'Clock P.M., Mountain Time, on June 1, 2001 Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company") hereby certifies that Kelly A. Boatright or his regis- tered successors and permitted assigns thereof, registered on the books of the Company maintained for such purposes as the registered holder hereof (the "Holder"), for value received, is entitled to purchase from the Company the number of fully paid and non-assessable shares of Common Stock of the Company, of the par value of $.001 per share (the "Shares"), stated above at the purchase price of $.0625 per Share (the "Exercise Price") (the number of Shares and Exercise Price being subject to adjustment as hereinafter provided) upon the terms and conditions herein provided. 1. Exercise of Option. (a) Subject to subsection (b) of this Section 1, upon presentation and surrender of this Option Certificate, with the attached Purchase Form duly executed, at the principal office of the Company at 1410 Cherrywood Drive, Couer d'Alene, Idaho 83814, or at such other place as the Company may designate by notice to the Holder hereof, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price times the number of Shares being purchased, the Company shall deliver to the Holder hereof, as promptly as practicable, certificates representing the Shares being purchased. This Option may be exercised in whole or in part; and, in case of exercise hereof in part only, the Company, upon surrender hereof, will deliver to the Holder a new Option Certificate or Option Certificates of like tenor entitling the Holder to purchase the number of Shares as to which this Option has not been exercised. (b) This Option may be exercised in whole or in part at any time after June 1, 1996 and prior to 5:00 o'clock P.M. Mountain Time, on June 1, 2001. 2. Exchange and Transfer of Option. This Option at any time prior to the exercise hereof, upon presentation and surrender to the Company, may be exchanged, alone or with other Options of like tenor registered in the name of the Holder, for another Option or other Options of like tenor in the name of such Holder exercisable for the same aggregate number of Shares as the Option or Options surrendered. 3. Rights and Obligations of Option Holder. (a) The Holder of this Option Certificate shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, in the event that any certificate representing the Shares is issued to the Holder hereof upon exercise of this Option, such Holder shall, for all purposes, be deemed to have become the holder of record of such Shares on the date on which this Option Certificate, together with a duly executed Purchase Form, was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such Share certificate. The rights of the Holder of this Option are limited to those expressed herein and the Holder of this Option, by its acceptance hereof, consents to and agrees to be bound by and to comply with all the provisions of this Option Certificate, including, without limitation, all the obligations imposed upon the Holder hereof by Section 5 hereof. In addition, the Holder of this Option Certificate, by accepting the same, agrees that the Company may deem and treat the person in whose name this Option Certificate is registered on the books of the Company maintained for such purpose as the absolute, true and lawful owner for all purposes whatsoever, notwithstanding any notation of ownership or other writing thereon, and the Company shall not be affected by any notice to the contrary. (b) No Holder of this Option Certificate, as such, shall be entitled to vote or receive dividends or to be deemed the holder of Shares for any purpose, nor shall anything contained in this Option Certificate be construed to confer upon any Holder of this Option Certificate, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company, whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise, receive notice of meetings or other action affecting stockholders (except for notices provided for herein), receive dividends, subscription rights, or otherwise, until this Option shall have been exercised and the Shares purchasable upon the exercise thereof shall have become deliverable as provided herein; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for those Shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and the Option surrendered shall not be deemed to have been exercised, in whole or in part as the case may be, until the next succeeding day on which stock transfer books are open for the purpose of determining entitlement to dividends on the Company's common stock. 4. Shares Underlying Option. The Company covenants and agrees that all Shares delivered upon exercise of this Option shall, upon delivery and payment therefor, be duly and validly authorized and issued, fully paid and non-assessable, and free from all stamp-taxes, liens, and charges with respect to the purchase thereof. In addition, the Company agrees at all time to reserve and keep available an authorized number of Shares sufficient to permit the exercise in full of this Option. 5. Disposition of Option or Shares. (a) The holder of this Option Certificate and any transferee hereof or of the Shares issuable upon the exercise of the Option Certificate, by their acceptance hereof, hereby understand and agree that the Option, and the Shares issuable upon the exercise hereof, have not been registered under either the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated, or otherwise transferred (whether or not for consider- ation) except upon the issuance to the Company of a favorable opinion of counsel or submission to the Company of such evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. It shall be a condition to the transfer of this Option that any transferee hereof deliver to the Company its written agreement to accept and be bound by all of the terms and conditions of this Option Certificate. (b) The stock certificates of the Company that will evidence the shares of Common Stock with respect to which this Option may be exercisable will be imprinted with a conspicuous legend in substantially the following form: The shares represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise transferred (whether or not for consideration) by the holder except upon the issuance to the Company of a favorable opinion of its counsel or submission to the Company of such other evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. The Company has not agreed to register any of the holder's shares of Common Stock of the Company with respect to which this Option may be exercisable for distribution in accordance with the provisions of the Act or the State Acts and, the Company has not agreed to comply with any exemption from registration under the Act or the State Acts for the resale of the holder's shares of Common Stock of the Company with respect to which this Option may be exercised. Hence, it is the understanding of the holders of this Option that by virtue of the provisions of certain rules respecting "restricted securities" promulgated by the SEC, the shares of Common Stock of the Company with respect to which this Option may be exercisable may be required to be held indefinitely, unless and until registered under the Act and the State Acts, unless an exemption from such registration is avail- able, in which case the holder may still be limited as to the number of shares of Common Stock of the Company with respect to which this Option may be exercised that may be sold. 6. Adjustments. The number of Shares purchasable upon the exercise of this Option is subject to adjustment from time to time upon the occurrence of any of the events enumerated below. (a) In case the Company shall: (i) pay a dividend in Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue, by reclassification of its Shares, any shares of its capital stock, the amount of Shares purchasable upon the exercise of this Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive upon exercise of the Option that number of Shares which such Holder would have owned or would have been entitled to receive after the happening of such event had such Holder exercised the Option immediately prior to the record date, in the case of such dividend, or the effective date, in the case of any such subdivision, combination or reclassification. An adjustment made pursuant to this subsection (a) shall be made whenever any of such events shall occur, but shall become effective retroactively after such record date or such effective date, as the case may be, as to any exercise between such record date or effective date and the date of happening of any such event. (b) Notice to Option Holders of Adjustment. Whenever the number of Shares purchasable hereunder is adjusted as herein provided, the Company shall cause to be mailed to the Holder in accordance with the provisions of this Section 6 a notice (i) stating that the number of Shares purchasable upon exercise of this Option have been adjusted, (ii) setting forth the adjusted number of Shares purchasable upon the exercise of this Option, and (iii) showing in reasonable detail the computations and the facts, including the amount of consideration received or deemed to have been received by the Company, upon which such adjustments are based. 7. Fractional Shares. The Company shall not be required to issue any fraction of a Share upon the exercise of this Option. If more than one Option shall be surrendered for exercise at one time by the same Holder, the number of full Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Shares with respect to which this Option is exercised. If any fractional interest in a Share shall be deliverable upon the exercise of this Option, the Company shall make an adjustment therefor in cash equal to such fraction multiplied by the Exercise Price. 8. Loss or Destruction. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Option Certificate and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or bond satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Option Certificate, the Company at its expense will execute and deliver, in lieu thereof, a new Option Certificate of like tenor. 9. Survival. The various rights and obligations of the Holder hereof as set forth herein shall survive the exercise of the Option represented hereby and the surrender of this Option Certificate. 10. Notices. Whenever any notice, payment of any purchase price, or other communication is required to be given or delivered under the terms of this Option, it shall be in writing and delivered by hand delivery or United States registered or certified mail, return receipt requested, postage prepaid, and will be deemed to have been given or delivered on the date such notice, purchase price or other communication is so delivered or posted, as the case may be; and, if to the Company, it will be addressed to the address specified in Section 1 hereof, and if to the Holder, it will be addressed to the registered Holder at its, his or her address as it appears on the books of the Company. FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie Chief Executive Officer Date: June 1, 1995 ATTEST: By /s/ Gerald D. Helgeson Secretary EX-10 8 OPTION THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURI- TIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS") AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDER- ATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE COMPANY OF FAVORABLE OPINION OF COUNSEL OR SUBMISSION TO THE COMPANY OF SUCH EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE COMPANY, IN EACH SUCH CASE, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS. OPTION TO PURCHASE 100,000 SHARES OF COMMON STOCK FISCHER-WATT GOLD COMPANY, INC. (A Nevada Corporation) Not Transferable or Exercisable Except upon Conditions Herein Specified Void after 5:00 O'Clock P.M., Mountain Time, on June 1, 2001 Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Company") hereby certifies that Donald N. Lawrence III or his registered successors and permitted assigns thereof, registered on the books of the Company maintained for such purposes as the registered holder hereof (the "Holder"), for value received, is entitled to purchase from the Company the number of fully paid and non-assessable shares of Common Stock of the Company, of the par value of $.001 per share (the "Shares"), stated above at the purchase price of $.0625 per Share (the "Exercise Price") (the number of Shares and Exercise Price being subject to adjustment as hereinafter provided) upon the terms and conditions herein provided. 1. Exercise of Option. (a) Subject to subsection (b) of this Section 1, upon presentation and surrender of this Option Certificate, with the attached Purchase Form duly executed, at the principal office of the Company at 1410 Cherrywood Drive, Couer d'Alene, Idaho 83814, or at such other place as the Company may designate by notice to the Holder hereof, together with a certified or bank cashier's check payable to the order of the Company in the amount of the Exercise Price times the number of Shares being purchased, the Company shall deliver to the Holder hereof, as promptly as practicable, certificates representing the Shares being purchased. This Option may be exercised in whole or in part; and, in case of exercise hereof in part only, the Company, upon surrender hereof, will deliver to the Holder a new Option Certificate or Option Certificates of like tenor entitling the Holder to purchase the number of Shares as to which this Option has not been exercised. (b) This Option may be exercised in whole or in part at any time after June 1, 1996 and prior to 5:00 o'clock P.M. Mountain Time, on June 1, 2001. 2. Exchange and Transfer of Option. This Option at any time prior to the exercise hereof, upon presentation and surrender to the Company, may be exchanged, alone or with other Options of like tenor registered in the name of the Holder, for another Option or other Options of like tenor in the name of such Holder exercisable for the same aggregate number of Shares as the Option or Options surrendered. 3. Rights and Obligations of Option Holder. (a) The Holder of this Option Certificate shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity; provided, however, in the event that any certificate representing the Shares is issued to the Holder hereof upon exercise of this Option, such Holder shall, for all purposes, be deemed to have become the holder of record of such Shares on the date on which this Option Certificate, together with a duly executed Purchase Form, was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such Share certificate. The rights of the Holder of this Option are limited to those expressed herein and the Holder of this Option, by its acceptance hereof, consents to and agrees to be bound by and to comply with all the provisions of this Option Certificate, including, without limitation, all the obligations imposed upon the Holder hereof by Section 5 hereof. In addition, the Holder of this Option Certificate, by accepting the same, agrees that the Company may deem and treat the person in whose name this Option Certificate is registered on the books of the Company maintained for such purpose as the absolute, true and lawful owner for all purposes whatsoever, notwithstanding any notation of ownership or other writing thereon, and the Company shall not be affected by any notice to the contrary. (b) No Holder of this Option Certificate, as such, shall be entitled to vote or receive dividends or to be deemed the holder of Shares for any purpose, nor shall anything contained in this Option Certificate be construed to confer upon any Holder of this Option Certificate, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any action by the Company, whether upon any recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise, receive notice of meetings or other action affecting stockholders (except for notices provided for herein), receive dividends, subscription rights, or otherwise, until this Option shall have been exercised and the Shares purchasable upon the exercise thereof shall have become deliverable as provided herein; provided, however, that any such exercise on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for those Shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and the Option surrendered shall not be deemed to have been exercised, in whole or in part as the case may be, until the next succeeding day on which stock transfer books are open for the purpose of determining entitlement to dividends on the Company's common stock. 4. Shares Underlying Option. The Company covenants and agrees that all Shares delivered upon exercise of this Option shall, upon delivery and payment therefor, be duly and validly authorized and issued, fully paid and non-assessable, and free from all stamp-taxes, liens, and charges with respect to the purchase thereof. In addition, the Company agrees at all time to reserve and keep available an authorized number of Shares sufficient to permit the exercise in full of this Option. 5. Disposition of Option or Shares. (a) The holder of this Option Certificate and any transferee hereof or of the Shares issuable upon the exercise of the Option Certificate, by their acceptance hereof, hereby understand and agree that the Option, and the Shares issuable upon the exercise hereof, have not been registered under either the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated, or otherwise transferred (whether or not for consider- ation) except upon the issuance to the Company of a favorable opinion of counsel or submission to the Company of such evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. It shall be a condition to the transfer of this Option that any transferee hereof deliver to the Company its written agreement to accept and be bound by all of the terms and conditions of this Option Certificate. (b) The stock certificates of the Company that will evidence the shares of Common Stock with respect to which this Option may be exercisable will be imprinted with a conspicuous legend in substantially the following form: The shares represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") or applicable state securities laws (the "State Acts") and shall not be sold, pledged, hypothecated, donated or otherwise transferred (whether or not for consideration) by the holder except upon the issuance to the Company of a favorable opinion of its counsel or submission to the Company of such other evidence as may be satisfactory to counsel to the Company, in each such case, to the effect that any such transfer shall not be in violation of the Act and the State Acts. The Company has not agreed to register any of the holder's shares of Common Stock of the Company with respect to which this Option may be exercisable for distribution in accordance with the provisions of the Act or the State Acts and, the Company has not agreed to comply with any exemption from registration under the Act or the State Acts for the resale of the holder's shares of Common Stock of the Company with respect to which this Option may be exercised. Hence, it is the understanding of the holders of this Option that by virtue of the provisions of certain rules respecting "restricted securities" promulgated by the SEC, the shares of Common Stock of the Company with respect to which this Option may be exercisable may be required to be held indefinitely, unless and until registered under the Act and the State Acts, unless an exemption from such registration is avail- able, in which case the holder may still be limited as to the number of shares of Common Stock of the Company with respect to which this Option may be exercised that may be sold. 6. Adjustments. The number of Shares purchasable upon the exercise of this Option is subject to adjustment from time to time upon the occurrence of any of the events enumerated below. (a) In case the Company shall: (i) pay a dividend in Shares, (ii) subdivide its outstanding Shares into a greater number of Shares, (iii) combine its outstanding Shares into a smaller number of Shares, or (iv) issue, by reclassification of its Shares, any shares of its capital stock, the amount of Shares purchasable upon the exercise of this Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive upon exercise of the Option that number of Shares which such Holder would have owned or would have been entitled to receive after the happening of such event had such Holder exercised the Option immediately prior to the record date, in the case of such dividend, or the effective date, in the case of any such subdivision, combination or reclassification. An adjustment made pursuant to this subsection (a) shall be made whenever any of such events shall occur, but shall become effective retroactively after such record date or such effective date, as the case may be, as to any exercise between such record date or effective date and the date of happening of any such event. (b) Notice to Option Holders of Adjustment. Whenever the number of Shares purchasable hereunder is adjusted as herein provided, the Company shall cause to be mailed to the Holder in accordance with the provisions of this Section 6 a notice (i) stating that the number of Shares purchasable upon exercise of this Option have been adjusted, (ii) setting forth the adjusted number of Shares purchasable upon the exercise of this Option, and (iii) showing in reasonable detail the computations and the facts, including the amount of consideration received or deemed to have been received by the Company, upon which such adjustments are based. 7. Fractional Shares. The Company shall not be required to issue any fraction of a Share upon the exercise of this Option. If more than one Option shall be surrendered for exercise at one time by the same Holder, the number of full Shares which shall be issuable upon exercise thereof shall be computed on the basis of the aggregate number of Shares with respect to which this Option is exercised. If any fractional interest in a Share shall be deliverable upon the exercise of this Option, the Company shall make an adjustment therefor in cash equal to such fraction multiplied by the Exercise Price. 8. Loss or Destruction. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Option Certificate and, in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement or bond satisfactory in form, substance and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Option Certificate, the Company at its expense will execute and deliver, in lieu thereof, a new Option Certificate of like tenor. 9. Survival. The various rights and obligations of the Holder hereof as set forth herein shall survive the exercise of the Option represented hereby and the surrender of this Option Certificate. 10. Notices. Whenever any notice, payment of any purchase price, or other communication is required to be given or delivered under the terms of this Option, it shall be in writing and delivered by hand delivery or United States registered or certified mail, return receipt requested, postage prepaid, and will be deemed to have been given or delivered on the date such notice, purchase price or other communication is so delivered or posted, as the case may be; and, if to the Company, it will be addressed to the address specified in Section 1 hereof, and if to the Holder, it will be addressed to the registered Holder at its, his or her address as it appears on the books of the Company. FISCHER-WATT GOLD COMPANY, INC. By /s/ George Beattie Chief Executive Officer Date: June 1, 1995 ATTEST: By /s/ Gerald D. Helgeson Secretary EX-10 9 LOAN AGREEMENT This Loan Agreement is entered into this 28th day of August, 1995, by and between Fischer-Watt Gold Company, Inc., a Nevada corporation (the "Lender"), and Great Basin Management Co., Inc., a Nevada corporation (the "Borrower"). WHEREAS the Borrower and the Lender have expressed to each other their tentative agreement to merge the Borrower with and into a subsidiary of the Lender (the "Proposed Merger"), and; WHEREAS the Lender has determined that the Borrower has an immediate need for funds to retain property positions held by its subsidiary, Great Basin Exploration and Mining Co., Inc. ("GBEM"), during the period required to perform due diligence, prepare definitive documentation and obtain the necessary approvals in connection with the Proposed Merger, and; WHEREAS the Borrower has determined that it is most feasible and in the best interests of its shareholders to borrow funds from the Lender on the terms of this loan agreement pending completion of the Proposed Merger; WHEREAS the Borrower wishes to borrow from the Lender and the Lender has agreed to lend to the Borrower up to the sum of One Hundred Eight Thousand Four Hundred Forty Seven Dollars ($108,447) for the purposes and in accordance with the timetable set forth in Exhibit A (the "Purposes"); NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants, terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby expressly acknowledged, the parties hereto agree as follows: 1. The Loan 1.1 The Lender shall, on the terms and conditions of this agreement, lend to the Borrower up to the amount of One Hundred Eight Thousand Four Hundred Forty Seven Dollars ($108,447) (the "Loan") in installments as set forth in Exhibit A. 1.2 The Loan is made available by the Lender to the Borrower to enable the Borrower to carry out the Purposes and the Borrower shall use all proceeds advanced under the Loan for the Purposes and for no other purpose. 2. Repayment of the Loan The Borrower shall repay the Loan together with interest as provided in this agreement to the Lender as follows: 2.1 There is no requirement to repay the Loan or any interest thereon unless the Proposed Merger has not occurred by November 1, 1995, in which event the entire amount of the Loan and accrued interest shall be due and payable on December 1, 1995 (the "Due Date"). 2.2 The Borrower shall pay interest on the aggregate amount of outstanding principal advanced from time to time under the Loan at the rate of 11.75% per annum. 2.3 The Borrower shall have the privilege without premium or penalty, of prepaying all or any part of the moneys advanced pursuant to the Loan. Any prepayment of a part only of the advances then outstanding and unpaid shall be applied first to outstanding interest and second to outstanding principal. 3. Conditions Precedent The Borrower acknowledges that the Lender shall not be called on to make any advance under the Loan until the following conditions precedent have been fulfilled: 3.1 No Event of Default (hereinafter defined) shall have occurred and be continuing. 3.2 The Borrower shall have furnished to the Lender copies of resolutions of the Board of Directors of the Borrower in a form satisfactory to the Lender authorizing the borrowing contemplated by this agreement, the execution and delivery of this agreement and the security interest granted in Section 4 of this agreement, all certified by the Secretary of the Borrower or another authorized officer of the Borrower. 4. Security 4.1 As continuing collateral security for the payment of all advances made under the Loan and interest and all other moneys payable pursuant to this agreement, the Borrower shall execute and deliver to the Lender the promissory note attached hereto as Exhibit B (the "Note") and hereby delivers, sets over, transfers, pledges, grants a security interest in and assigns to the Lender all of its right, title and interest in and to all of the issued and outstanding shares of stock of any class of GBEM (the "Stock") owned by the Borrower on the date hereof (certificates therefor, accompanied by stock powers duly executed in blank by the Borrower, having been delivered to the Lender), and any proceeds thereof, to be held by the Lender upon the terms and conditions set forth in this agreement. If the Borrower shall acquire (by purchase, stock dividend or otherwise) any other or additional Stock at any time or from time to time after the date hereof, the Borrower will forthwith pledge and deposit the same with the Lender hereunder and deliver to the Lender certificates therefor, accompanied by stock powers duly executed in blank by the Borrower. All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock", and the Pledged Stock, together with all other securities and moneys received and at the time held by the Lender hereunder, is hereinafter called the "Collateral". 4.2 Unless an Event of Default shall have occurred and be continuing, the Borrower shall be entitled to vote its shares of the Pledged Stock and to give consents, waivers, and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would violate or not comply with any of the terms and provisions of this agreement. All such rights of the Borrower to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing. If there shall have occurred an Event of Default, the Borrower hereby grants to the Lender an irrevocable proxy coupled with an interest for the Pledged Stock pursuant to which proxy the Lender shall be entitled to vote or consent in its discretion and in such event the Borrower agrees to deliver to the Lender such further evidence of such proxy as the Lender may request. 4.3 All cash dividends payable in respect of the Pledged Stock shall be paid to the Lender and retained by it as part of the Collateral. The Lender shall also be entitled to receive directly, and to retain as part of the Collateral: (a) other or additional stock or securities or property paid or distributed by way of dividend in respect of the Pledged Stock; (b) all other or additional stock or any other securities or property (including cash) paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement; and (c) all other or additional stock or other securities or property (including cash) which may be paid or distributed in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. The Borrower will not permit or approve of the issuance of any additional shares of stock of any class of GBEM, or the declaration, order or setting apart of any sum or any property or assets by GBEM for any dividend on account of any shares of stock of any class of GBEM, now or hereafter outstanding. 4.4 In case an Event of Default shall have occurred and be continuing, the Lender shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this agreement or by law or otherwise including, without limitation, those of a secured party under the Uniform Commercial Code) for the protection and enforcement of its rights in respect of the Collateral, and the Lender shall be entitled, without limitation: (a) to receive all amounts payable in respect of the Collateral otherwise payable under Section 4.3 to the Borrower; (b) to transfer and register all or any part of the Pledged Stock into the Lender's name or the name of its nominee or nominees; (c) to vote all or any part the Pledged Stock (whether or not transferred or registered into the name of the Lender) and give all consents, waivers and ratifications in respect thereof and otherwise act with respect to the Collateral as through it were the outright owner thereof pursuant to the proxy granted heretofore in Section 4.2 hereof; and (d) to sell, upon no less than ten (10) days' prior notice to the Borrower of the time and place of any public sale, or up to ten (10) days prior notice to the Borrower of the date after which a private sale may be consummated (which notice the Borrower agrees is reasonable) and without liability for any diminution in price which may have occurred, all of the Pledged Stock in such manner, whether at any broker's board, public or private sale, and whether in one lot as an entirety, or in separate portions, and for such price and other terms and conditions as the Lender may determine in its absolute discretion. At any sale, the Lender shall be free to purchase all or any part of the Pledged Stock unless prohibited by applicable law. Upon any sale or other disposition, the Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Pledged Stock so sold or disposed of. Each purchaser at any such sale or other disposition (including the Lender) shall hold the Pledged Stock free from any claim or right of whatever kind, including any equity or right of redemption of the Borrower. The Borrower specifically waives all rights of redemption, stay or appraisal which it had or may have under any rule of law or statute now existing or hereafter adopted. The Lender shall not be obligated to make any sale or other disposition, unless the terms thereof shall be satisfactory to it. The Lender may, without notice or publication, adjourn any private or public sale, and upon ten (10) days' prior notice to the Borrower, may hold such sale at any time or place to which the same may be so adjourned. In case of any sale of all the Pledged Stock, on credit for future delivery, the pledged stock so sold may be retained by the Lender until the selling price is paid by the purchaser thereof, but the Lender shall incur no liability in case of the failure of such purchaser to take up and pay for the Pledged Stock so sold and, in case of any such failure, such Pledged Stock may again be sold as hereinabove provided. The Borrower recognizes that the Lender may be unable to effect a public sale of all or a part of the Pledged Stock by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities law, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Pledged Stock for their own account, for investment and not with a view to the distribution or resale thereof. The Borrower agrees that private sales so made may be at prices and on other terms less favorable to the seller than if the Pledged Stock were sold at public sale, and that the Lender has no obligation to delay the sale of any Pledged Stock for the period of time necessary to permit the registration of the Pledged Stock for public sale under any securities law. The Borrower agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. If any consent, approval or authorization of any state, municipal or other governmental department, agency or authority should be necessary to effectuate any sale or other disposition of the Pledged Stock, or any partial sale or other disposition of the Pledged Stock, the Borrower will execute all such applications and other instruments as may be required in connection with securing any such consent, approval or authorization, and will otherwise use its best efforts to secure the same. 4.5 Each right, power and remedy of the Lender provided for in this agreement or in the Note now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Lender of any one or more of the rights, powers or remedies provided for in this agreement or in the Note or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Lender of all such other rights, powers or remedies, and no failure or delay on the part of the Lender to exercise any such right, power or remedy shall operate as a waiver thereof. 4.6 All moneys collected upon any sale or sales of the Collateral hereunder, together with all other moneys received by the Lender hereunder, shall be applied to the payment of all costs and expenses incurred or paid by the Lender in connection with any sale, transfer or delivery of the Collateral or the collection of any such moneys (including without limitation, reasonable attorney's fees and expenses), and the balance of such moneys shall be held by the Lender and applied by it at any time or from time to time to the payment of the Loan and interest and all other moneys payable pursuant to the agreement in such order and manner as the Lender in its sole discretion may determine. 4.7 The obligations of the Borrower under this agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated, lessened or otherwise affected by any circumstance or occurrence whatsoever, including, without limitation: (a) any renewal, extension, substitution, amendment or modification of or addition or supplement to or deletion from the Note or this agreement or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of the Note or this agreement, or any exercise or nonexercise of any right, remedy, power or privilege under or in respect of the Note or this agreement; (c) any furnishing of any additional collateral or security to the Lender or its assignee or any acceptance thereof or any release of any collateral or security in whole or in part by the Lender or its assignee under this agreement or otherwise; (d) any limitation on any party's liability or obligations under the Note or under this agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or any term thereof; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Borrower, or any action taken with respect to this agreement or the Note by any trustee or receiver, or by any court, in any such proceeding; or (f) any other circumstances; whether or nor the Borrower shall have notice or knowledge or any of the foregoing. 4.8 The Lender shall have no duty or any obligation to take any steps to protect, preserve or enforce any rights under the Collateral. The Lender shall exercise reasonable care in the custody and preservation of the Collateral in its possession to the extent required by applicable statute, and shall be deemed to have exercised reasonable care if it takes such action for that purpose as the Borrower shall reasonably request in writing; but no omission to do any act so requested by the Borrower shall be deemed a failure to exercise reasonable care. 4.9 Upon the payment in full of the Loan and interest and all other moneys payable pursuant to this agreement in accordance with the terms of the Note and of this agreement, and the payment of all other sums payable thereunder and hereunder, this agreement shall terminate and the Lender, at the request and expense of the Borrower, will execute and deliver to the Borrower a proper instrument or instruments acknowledging the satisfaction and termination of this agreement, and will duly assign, transfer and deliver to the Borrower such of the Collateral as has not theretofore been sold or otherwise applied or released pursuant to this agreement, together with any moneys at the time held by the Lender hereunder. 5. Representations and Warranties of the Borrower The Borrower represents and warrants to the Lender that: 5.1 The Borrower is a corporation legally incorporated, duly organized and validly existing, in good standing under the laws of the jurisdiction of its incorporation and is qualified to carry on its business in all jurisdictions where the nature of its business or the character of its properties make such qualification necessary. 5.2 The borrowing of money by the Borrower and the execution, delivery and performance of this agreement and the grant of the security interest set forth in Section 4 of this agreement are within the corporate powers and capacities of the Borrower and have been duly authorized by proper corporate proceedings. 5.3 There are no actions, suits or proceedings pending or to the knowledge of the Borrower threatened against or adversely affecting the Borrower or GBEM in any court or before or by any federal, state, municipal or other governmental department, commission, board, bureau or agency, United States or foreign, which might materially affect the financial condition of the Borrower or GBEM or the title to their property or assets. 5.4 The execution and delivery of this agreement, the consummation of the transactions contemplated by this agreement, the grant to the Lender of the security interest set forth in Section 4 of this agreement, and the compliance with the covenants, terms, provisions and conditions of this agreement will not conflict with or result in a breach of any of the terms or provisions of the Articles of Incorporation or by-laws of the Borrower or GBEM, any resolution of the directors or shareholders of the Borrower or GBEM, any laws of the United States or the State of Nevada governing the Borrower, or any agreement or instrument to which the Borrower or GBEM is now a party or which purports to be binding on the borrower or GBEM or their property or assets. 5.5 This agreement and all other documents or instruments to be delivered pursuant to this agreement will, when executed and delivered, constitute valid and binding obligations of the Borrower enforceable against it in accordance with their respective terms, except as may be limited by other deeds, documents or instruments delivered pursuant to this agreement, or by applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting the enforcement of creditor's rights. 5.6 The borrowing of money under this agreement and the execution and delivery of this agreement do not require the consent or approval of any other party, including shareholders of the Borrower. 5.7 All balance sheets, earnings statements and other financial data, which have been or shall be furnished to the Lender to induce the Lender to enter into this agreement or otherwise in connection with this agreement have been or will be prepared in accordance with generally accepted accounting principles (which means, with respect to the Borrower and GBEM, generally accepted accounting principles consistently followed through prior fiscal periods as given effect to in previous financial statements of the Borrower and GBEM) and do or will fairly present the financial condition and the results of the operations of the Borrower and GBEM, and all other information, certificates, schedules, reports and other papers and data furnished by the Borrower are or will be at the time they are so furnished, accurate and complete in all material respects. 5.8 As to each share of the Stock at any time pledged or required to be pledged hereunder: (a) the Borrower is the sole legal, record and beneficial owner thereof, and the Borrower has good and marketable title thereto; (b) the Stock is validly issued, fully paid and non-assessable and the holder or holders thereof are not and will not be subject to any personal liability as such holder; (c) on the date hereof the Stock consists of 100% of the shares of common stock of GBEM; (d) the Stock is and will remain free and clear of all security interests, pledges, liens or other encumbrances, and restrictions on the transfer and assignment thereof, except pursuant to this agreement and those permitted in writing by Lender; (e) any consent, approval or authorization of or designation or filing with any governmental authority on the part of the Borrower which is required in connection with the pledge and security interest granted under this agreement has been obtained or effected; and (f) there are no outstanding options, warrants or other requirements with respect to the Stock. 6. Affirmative Covenants The Borrower covenants with the Lender that so long as any amounts advanced under the Loan remain outstanding: 6.1 It will deliver to the Lender: (a) Copies of all financial statements, reports and returns that the Borrower shall send to its shareholders; and (b) With reasonable promptness, other financial data as the Lender may reasonably request. 6.2 It will permit any person designated by the Lender in writing to visit and inspect any of the properties, corporate books and financial records of the Borrower and GBEM and to discuss the affairs, finances and accounts of the Borrower and GBEM with the principal officers of the Borrower at all reasonable times and as often as the Lender may reasonably request. 6.3 All current insurance policies and those which may have lapsed in the prior six months covering the assets and property of the Borrower and GBEM, if any, shall be kept/reinstituted into good standing. The Borrower shall pay or cause to be paid all premiums in connection with the insurance and will deposit certified copies of insurance policies with the Lender or otherwise deal with them as the Lender may require. 6.4 It will give the Lender prompt written notice of any material adverse change in the condition or business of the Borrower or GBEM, financial or other, or of any material loss, destruction or damage of or to any property of the Borrower or GBEM. 6.5 It will carry on and conduct the business of GBEM in a proper and efficient manner so as to preserve and protect the property and assets and the business and its earnings, incomes, rents, issues and profits. 6.6 It will duly and punctually pay to the Lender, the principal, accrued interest and all other moneys payable on the dates, at the place, in the moneys and in the manner provided in this agreement. 6.7 It will pay or reimburse the Lender for all costs, charges and expenses (including legal fees) of or incurred by the Lender in connection with the recovery or enforcement of payment of moneys advanced under the Loan, together with interest at the rate set out in Section 2.2 of this agreement. 6.8 It will maintain at all times proper records and books of account and make true and correct entries in the records of all dealings and transactions relating to its business. 6.9 It will do, observe and perform all of its obligations and all matters and things necessary or expedient to be done, observed or performed under any law or regulation of the United States, the State of Nevada, or any other province where its assets may be located, or any municipality, for the purpose of creating and maintaining the security interest granted to the Lender pursuant to this agreement. 6.10 It will do all acts that are necessary to maintain its existence under the laws of the jurisdiction of its incorporation and will obtain, renew and maintain in full force and effect all authorizations, approvals, consents, licenses, permits and exceptions as may be required to enable it to observe and perform the obligations on its part to be performed under this agreement and all agreements delivered and the security interest granted in connection with or incidental to this agreement. 6.11 It will give Lender written notice of any Event of Default immediately on the occurrence of such an event. 6.12 It will give the Lender written notice of the occurrence of any material litigation, proceeding or dispute affecting the Borrower or GBEM and will provide to the Lender all reasonable information requested by the Lender concerning the status of any such litigation, proceeding or dispute. 7. Negative Covenants The Borrower covenants with the Lender that so long as any amounts advanced under the Loan remain outstanding, that it will not, and will cause GBEM to not, without the prior written consent of the Lender: 7.1 Borrow money from any person other than the lender, directly or indirectly, including lease-back arrangements and other such financing arrangements. 7.2 Issue any share capital or options or other form of contingent rights thereon. 7.3 Redeem, purchase or otherwise acquire, either directly or indirectly, any of its shares, or declare or pay any dividend on any of its shares of whatever class, or in any other manner make payments to its shareholders except for usual remuneration or reimbursement in respect of employment. 7.4 Lend money to, invest in, or become contingently liable by guarantee or otherwise for the obligations of, any person, firm or body corporate. 7.5 Consolidate, merge or otherwise combine with any other corporation or acquire the shares or assets of any corporation, firm or partnership, or sell, lease or transfer or otherwise dispose of all or a substantial part of its assets. 7.6 Enter into or be a party to any contract for the purchase of materials, supplies or other property if the contract requires that payments for those materials, supplies or other property shall be made regardless of whether or not delivery is ever made of the materials, supplies or other property. 7.7 Make sales to an associated corporation except on a cash basis and a price equal to a fair market price, provided that net sixty days will be construed as a cash basis for the purposes of this paragraph. 7.8 Enter into any partnership, joint venture or similar agreement or arrangement with any other person, firm or corporation. 7.9 Other than as disclosed herein, create, suffer or permit to exist any mortgage, pledge, lien, charge, assignment by way of security, hypothecation, security interest, security agreement, trust or arrangement having the effect of security, any type of preferential arrangement or other encumbrance of any kind whether or not similar to the foregoing to exist on or with respect to any asset. 7.10 Do any act which could adversely affect the ranking or validity of the security interests created, granted or intended to be created or granted to the Lender. 7.11 Change the general nature of the business of the Borrower or GBEM. 8. Events of Default The principal advanced under the Loan and all interest payable together with all of the moneys payable pursuant to this agreement shall, at the option of the Lender, become due and payable and any security held by the Lender for the payment thereof shall, at the option of the Lender, become enforceable in each and every of the following events (an "Event of Default"), upon demand after any such event: 8.1 If the Borrower does not apply the Loan Proceeds to the Purposes or makes default in the repayment of any installment of principal or interest under the Loan (or Note) when it becomes due and payable. 8.2 If the Borrower fails to perform or observe any of the covenants contained in this agreement or in any of the security delivered pursuant to this agreement and any failure shall not be remedied within ten (10) days following notice being given to the Borrower. 8.3 If any representation, warranty, certificate, statement or report made in connection with this agreement or in connection with advances under the Loan is false or erroneous in any material respect. 8.4 If any indebtedness of the Borrower for liabilities other than to the Lender becomes due prior to the stated maturity date, unless and to the extent that the same shall be contested in good faith and by appropriate proceedings by the Borrower. 8.5 If the Borrower or GBEM becomes the subject of bankruptcy proceedings or goes into liquidation, either voluntarily or under an order of a court of competent jurisdiction, or makes a general assignment for the benefit of its creditors. 8.6 If the Borrower or GBEM removes any part of its property and assets out of their current location. 8.7 If the Borrower or GBEM abandons all or any part of its property and assets or ceases or threatens to cease to carry on its business, or threatens to file for bankruptcy. 8.8 If any execution, sequestration, extent, or any other process of any court (including appointment of a receiver) becomes enforceable against the Borrower or GBEM or if a distress or analogous process is levied on the property and assets of the Borrower or GBEM, and the execution, sequestration, extent, distress or process, remains unsatisfied for a period as would permit the property or a part of it to be sold. 8.9 If the Borrower or GBEM shall permit any amount which has been admitted is due by the Borrower or GBEM or is not disputed to be due by it and forms or is capable of being made a charge on any part of the property and assets of the Borrower or GBEM to remain unpaid for fifteen days after the amounts are due. 8.10 If the Lender in good faith believes that the ability of the Borrower to pay any of its obligations to the Lender or to perform any of the covenants contained in this agreement is materially impaired from its current circumstances or the security referred to in this agreement is impaired or is in jeopardy. 9. General 9.1 The Borrower covenants that it will execute or cause to be made, done or executed, all further and lawful acts, deeds, things, devices, conveyances and assurances whatsoever for effecting the purposes and intent of this agreement as counsel for the Lender shall reasonably advise or request. 9.2 Notice to be given shall, save as otherwise specifically provided, being writing addressed to the party for whom it is intended and shall not be deemed received until actual receipt by the other party except if sent by telex or facsimile, in which case it shall be deemed received on the business day next following the date of transmission. The mailing, telex and facsimile addresses of the parties shall be: (a) As to the Borrower: Great Basin Management Co., Inc. 3400 Kauai Court Reno, NV 89509 Telephone: 702-689-7450 Facsimile: 702-689-7489 Attention: Dr. Anthony Taylor (b) As to the Lender: Fischer-Watt Gold Company,Inc. 1410 Cherrywood Drive Coeur d'Alene, ID 83814 Telephone: 208-664-6757 Facsimile: 208-667-6516 Attention: Mr. George Beattie With copy to: Jones & Keller, P.C. 1625 Broadway, #1600 Denver, CO 80202 Telephone: 303-573-1600 Facsimile: 303-893-6506 Attention: Clifford R. Pearl,Esq. or any other mailing, telex or facsimile addresses as the parties from time to time may notify the other. 9.3 This agreement and all other agreements, security and documents to be delivered in connection with this agreement shall be governed by and construed in accordance with the laws of the State of Nevada and the federal laws of the United States. 9.4 This agreement shall be binding on and enure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that the Borrower shall not, without the prior written consent of the Lender, assign any rights or obligations with respect to this agreement. 9.5 Any provision of this agreement which is or becomes prohibited or unenforceable in any jurisdiction shall not invalidate or impair the remaining provisions of this agreement which shall be deemed severable from the prohibited or unenforceable provision and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable that provision in any other jurisdiction. 9.6 No amendment, supplement or waiver of any provision of this agreement or any other agreements provided for or contemplated, nor any consent to any departure by the Borrower, shall in any event be effective unless it shall be in writing and signed by the Lender and then the waiver or consent shall be effective only in the specific instance for the specific purpose for which it has been given. 9.7 No waiver or act or omission of the Lender shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or breach by the Borrower of any provision of this agreement or the results of the rights resulting from it. 9.8 Time shall be of the essence for this agreement. 9.9 This agreement shall remain in full force and effect until the payment and performance in full of all of the Borrower's obligations under this agreement. 9.10 This agreement constitutes the entire agreement among the parties and cancels and supersedes any prior agreements, undertakings, declarations or representations, written or verbal in respect of it. IN WITNESS WHEREOF the parties have caused this Loan Agreement to be executed by their respective officers duly authorized. FISCHER-WATT GOLD COMPANY, INC. By: /s/ George Beattie President GREAT BASIN MANAGEMENT CO., INC. By: /s/ Dr. Anthony Taylor President EX-11 10 Fischer-Watt Gold Company, Inc. Computation of Earnings Per Share For the Six Months Ended July 31, 1995 Assumptions: Three Months Six Months Ended Ended July 31, 1995 July 31, 1995 Net income for the period $ 569,000 $ 491,000 Common shares outstanding 12,344,000 12,344,000 Options outstanding to purchase equivalent shares 2,713,000 2,713,000 20% limitation on assumed repurchase 2,469,000 2,469,000 Average exercise price per share $.66 $.66 Average market value per quarter per common share to be used $ .28 $ .17 Computations: Application of assumed proceeds ($ 1,783,000) Toward repurchase of outstanding common shares at applicable market value $ 691,000 $ 420,000 Reduction of debt 262,000 262,000 Purchase of U.S. Government Securities 830,000 1,101,000 _________ _________ $ 1,783,000 $ 1,783,000 Adjustment of net income: Actual net income $ 569,000 $ 491,000 Interest increase (5 3/4%) less 9% tax effect 10,000 30,000 _________ _________ Adjusted net income $ 579,000 $ 521,000 Adjustment of shares outstanding: Actual outstanding 12,344,000 12,344,000 Net additional shares issuable (2,713,000 - 2,469,000) 244,000 244,000 _________ ________ Adjusted shares outstanding 12,588,000 12,588,000 Earnings per share: Before adjustment $ .05 $ .04 After adjustment $ .05 $ .04 EX-27 11 ARTICLE 5 FINANCIAL DATA SCHEDULE FOR THE 2ND QTR 10-QSB
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JULY 31, 1995 CONTAINED IN FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JULY 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000844788 FISCHER-WATT GOLD COMPANY, INC. 1,000 U.S. DOLLARS 6-mos JAN-31-1995 FEB-01-1995 JUL-31-1995 1 $ 124 346 2 0 0 477 243 36 827 162 100 12 0 0 (553) 827 692 692 51 345 (230) 0 24 502 11 491 0 0 0 491 .04 .04