-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RkMqhptnPZ1/mpxsDzod+ookpHhbOIecgc+P7l6P2O0yp+i1rEKLOiBCeSvpdwOk vVMq3ld5onpQYpmb0sVg/Q== 0001025894-97-000163.txt : 19970701 0001025894-97-000163.hdr.sgml : 19970701 ACCESSION NUMBER: 0001025894-97-000163 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19970630 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEWGOLD INC CENTRAL INDEX KEY: 0000878808 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 161400479 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20722 FILM NUMBER: 97632936 BUSINESS ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 320 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7028234000 MAIL ADDRESS: STREET 1: 5190 NEIL RD STREET 2: SUITE 320 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: WAREHOUSE AUTO CENTERS INC /DE DATE OF NAME CHANGE: 19950510 10KSB/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-KSB/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended Commission File No. January 31, 1996 0-20722 WAREHOUSE AUTO CENTERS,INC. --------------------------- (Debtor-in-Possession) Delaware 16-1400479 (State or other jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) NewGold Inc. 5190 Neil Road, Ste. 320 Reno, Nevada 89502 (Address of principal executive offices) (702) 823-4000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Each Class Name of Each Exchange on Which Registered - ------------------- ----------------------------------------- Units, consisting of one share of Common Stock, OTC Bulletin Board $.005 par value, one Redeemable Class A Common Stock Purchase Warrant and one Redeemable Class B Common Stock Purchase Warrant Common Stock, $.005 par value OTC Bulletin Board Redeemable Class A Common Stock Purchase Warrants OTC Bulletin Board Redeemable Class B Common Stock Purchase Warrants OTC Bulletin Board Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO X ------ ------ Indicate by check mark if disclosure of delinquent in response pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. X ----- Registrant's gross revenues for its most current fiscal year were $2,818,004. The aggregate market value of voting stock held by non-affiliates of the Registrant was approximately $197,951 as of November 21, 1996. As of November 21, 1996, Registrant had 3,299,191 shares of Common Stock, par value $.005, issued and outstanding. Documents Incorporated by Reference Parts of the Exhibits filed with Registrant's Registration Statement on Form SB-2 (File No. 33-49920), and Amendments thereto, declared effective on October 15, 1993. THE REGISTRANT HEREBY AMENDS THIS REPORT FOR THE SOLE PURPOSE OF THE ELECTRONIC FILING OF EXHIBITS WHICH WERE PREVIOUSLY FILED IN PAPER FORMAT. THE PORTIONS OF THIS REPORT OMITTED FROM THIS AMENDMENT AND PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSSION ARE INCORPORATED BY THIS REFERENCE. ITEM 13: EXHIBITS, LIST AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 2 Plan of Reorganization 3.1 Certificate of Incorporation of Registrant(1) 3.1(a) Amendment to Certificate of Incorporation of Registrant 3.2 By-Laws of Registrant (1) 10.1 Contract of Sale for Relief Canyon Mine 10.2 Agreement for Lease, Purchase and Sale of Property re: the Mission Mine 10.3 Lease Agreement for Office Space in Reno, Nevada 23 Consent of Ciaccia & Catarisano, LLP, independent public accountants for the Registrant (b) Reports on Form 8-K. None - ---------- (1) Incorporated by reference: Exhibits filed with Registrant's Registration Statement on Form SB-2 (File No. 33-49920), and Amendments thereto, declared effective on October 15, 1993. SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. NEWGOLD, INC., a Delaware corporation Date: Jan 21,1997 By: /s/ ------------- ----------------------------------- Arthur Scott Dockter, President Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated. Signature Title Date /S/ President, Chief Executive Officer and 1/21/97 - -------------------- Director ----------- Arthur Scott Dockter /S/ Chief Financial Officer and Director Jan 21, 1997 - -------------------- ------------ Robert W. Morris /S/ Secretary/Treasurer and Director 1/21/97 - -------------------- ------------ Edward Mackay INDEX TO EXHIBITS Exhibit No. Description of Exhibit ------- ---------------------- 2 Plan of Reorganization 3.1 Certificate of Incorporation of Registrant(1) 3.1(a) Amendment to Certificate of Incorporation of Registrant 3.2 By-Laws of Registrant (1) 10.1 Contract of Sale for Relief Canyon Mine 10.2 Agreement for Lease, Purchase and Sale of Property re: the Mission Mine 10.3 Lease Agreement for Office Space in Reno, Nevada 23 Consent of Ciaccia & Catarisano, LLP, independent public accountants for the Registrant - ---------- (1) Incorporated by reference: Exhibits filed with Registrant's Registration Statement on Form SB-2 (File No. 33-49920), and Amendments thereto, declared effective on October 15, 1993. EX-2 2 EXHIBIT 2 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF NEW YORK In re: ) CHAPTER 11 ) WAREHOUSE AUTO CENTERS, INC., ) Case No. 95-21279 ) Debtor. ) - ---------------------------------------) ORDER CONFIRMING PLAN The plan under Chapter 11 of the Bankruptcy Code filed by Warehouse Auto Centers, Inc., on November 4, 1996, or a summary thereof, having been transmitted to creditors and equity security holders; and It having been determined after hearing on notice that the requirements for confirmation set forth in 11 U.S.C. Section 1129(a) have been satisfied; IT IS ORDERED THAT: The plan filed by Warehouse Auto Center, Inc. on November 4, 1996, is confirmed. IT IS FURTHER ORDERED that the debtor shall, with in 90 days after the date of the entry of this order; (1) file a report of substantial consummation and final report; or (2) take appropriate action to amend the plan. Failure to comply with these requirements may result in conversion of the case. IT IS FURTHER ORDERED that all fees payable to the United States Trustee pursuant to 28 U.S.C. Section 1930 shall be paid within 10 days of the entry of this order. IT IS FURTHER ORDERED that the reorganized debtor or the disbursing agent under the plan shall be responsible for timely payment of quarterly fees incurred pursuant to 28 U.S.C. ss.1930(a)(6) until the case is dismissed, converted or closed by the court with a final decree (whichever is first). After confirmation, said party shall file with the court and serve on the United States Trustee a monthly financial report for each month (or portion thereof) the case remains open in a format prescribed by the UST and provided to the debtor by the UST. Said report shall set forth all disbursements of the reorganized debtor so that quarterly fee amounts can be determined; and 1 IT IS FURTHER ORDERED that the proceeds of the Debtor Certificates held in escrow by Smith & Lyons, Barristers and Solicitors of Toronto, Canada, may be released to the debtor in accordance with the terms of the Plan of Reorganization; and IT IS FURTHER ORDERED that all warrants and options of Warehouse Auto Service, Inc. are cancelled pursuant to the terms of the Plan of Reorganization. IT IS FURTHER ORDERED that the Escrow Bank Accounts held by the debtor at First National Bank of Rochester may be released to the debtor to effectuate the Plan of Reorganization; and IT IS FURTHER ORDERED that pursuant to Bankruptcy Rules 2002(a)(7) and 2002(i)&(m), Notice of Hearings on all applications for approval of compensation and/or reimbursement of Professional Persons employed under Bankruptcy Code ss.ss.327 or 1103, whose retention has been approved by prior Order of this Court, shall be deemed good and sufficient for all purposes if served more than 20 days prior to the date of the entry of this Order or the hearing date set hereafter thereupon, by regular mail by any party upon the Counsel retained by the Official Unsecured Creditors' Committee appointed herein pursuant to 11 USC ss.1102, on Counsel for the Debtor, on the Office of the United States Trustee, and on all persons appearing and requesting service; and IT IS FURTHER ORDERED, that fees and disbursements requested in Lacy, Katzen, Ryen and Mittleman, LLP's first application filed herein on July 25, 1996, are hereby allowed in the amount of $12,843.25 plus $587.72 in disbursements and that fees and disbursements requested in its second application filed herein are hereby allowed in the amount of $8,498 plus the sum of $600.00 for 2.4 hours expended by said firm in reviewing the ballots of Claimants, assisting creditors in voting and appearing in the prior applications pending before this Court plus $581.71 in disbursements being a total of $21,941.25 in fees and $1,175.43 in disbursements on all applications for a total final award $23,110.68; and IT IS FURTHER ORDERED, that Howard, Solochek, Nashban and Weber is hereby allowed, subject to further review on appropriate notice, a fee in the amount of $17,710.50 together with disbursements in the amount of $1,872.59 for acting as Lead Counsel to the Official Unsecured Creditors' Committee for a total final award of $19,583.09; and 2 IT IS FURTHER ORDERED, that the Debtor shall forthwith pay or cause to be paid, in cash all fees and disbursements due Counsel for the Committee approved in this Order, provided, however, that Howard, Solocheck, Nashban and Weber and Lacy, Katzen, Ryen & Mittleman, LLP shall be liable to disgorge all or any part of their fees awarded hereby, if upon hearing after notice as required above, the Court shall for good cause shown, modify this award of fees and disbursements. Dated: November , 1996 --------------------------- U.S.B.J. Approved as to Form Lacy, Katzen, Ryen & Mittleman, LLP By: _______________________________ Stephen P. Mayka, Esq. Approved as to Form U.S. Trustee By: _______________________________ Trudy A. Nowak 3 Warehouse Auto Centers, Inc 2452 West Henrietta Road Rochester, New York 14623 November 1, 1996 Re: Chapter 11 Plan of Reorganization and Ballot For Approval Dear Creditor: As you are aware, Warehouse Auto Centers, Inc., was put into involuntary bankruptcy by a group of creditors on June 25,1995, in the United States Bankruptcy Court for the Western District of New York. The company tried to reorganize itself; but this did nothing but deplete what little assets it had left and increase it's losses. Many attempts were made to raise additional funds but to no avail and on August 28, 1996, the company sold its remaining assets to a group of investors led by it's former President for $375,000.00 cash. The company is a publicly held corporation with over 300 shareholders and almost 3 million shares of issued and outstanding stock. The stock is currently traded on the NASDAQ Bulletin Board. Because of this, the group of investors were able to locate a company who was searching for a publicly traded shell, New Gold Inc., a gold mining company whose headquarters is located in Reno, Nevada. This has resulted into the two companies entering into a merger agreement to take the company out of bankruptcy. To this end, (1) The administrative creditors, which consists of post petition debt and professional fees will be paid one share of common stock in the new reorganized company for each dollar of debt; (2) The Class 4, unsecured creditors will receive one share of common stock in the newly organized company for each $42.00 dollars of debt and (3) Current shareholders of Warehouse Auto Centers, Inc. will receive one share of stock in the newly formed company for each 65 shares of Warehouse stock they possess. We would like the plan to be accepted by the creditors of every class of impaired claims, ie. a claim that is not paid in full. To be accepted by a class of claims, the plan must be accepted by more than one-half of the creditors in the class and by creditors holding at least 2/3 of the total dollar amount of claims in the class. YOUR VOTE ON THE ACCEPTANCE OR REJECTION OF THE PLAN IS IMPORTANT. Enclosed with this letter are the following: 1. An official ballot for you to cast your vote of acceptance or rejection of the plan. This ballot must be properly completed and filed with the Clerk of the Bankruptcy Court, located at 100 State Street, Rochester, New York 14614 by November 18, 1996. We strongly encourage you to vote to accept our plan. Please fill out this ballot and return it to the Clerk of the Bankruptcy Court at the above address in time for your vote to be counted. 2. Notice of Hearing 3. Debtor's Disclosure Statement with Exhibits. 4. Debtor's Plan of Reorganization 5. New Gold, Inc. description of properties and Financial Statement. Please review all of these enclosed materials carefully. Very truly yours, Warehouse Auto Centers, Inc. UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NEW YORK In Re: Case No. 95-21279 WAREHOUSE AUTO CENTERS, INC. Debtor (s) Chapter 11 BALLOT FOR ACCEPTING OR REJECTING PLAN FILED BY THE ABOVE DEBTOR ON SEPTEMBER, 26. 1996 The Plan referred to in this Ballot can' be confirmed by the Court and thereby made binding upon you if it is accepted by the holders of two-thirds in amount and more than one-half in number of claims in each class and the holders of two-thirds in amount of equity Security interests in each class voting on the Plan. In the event the requisite acceptances are not obtained, the Court may nevertheless confirm the Plan if the Court finds that the Plan accords fair, and equitable treatment to the class rejecting it. To have your vote count, you must complete and return this Ballot. 1. The Undersigned, a holder of a claim against the Debtor in the unpaid Principal Amount of $______________________. 2. The undersigned, the holder of ___________________ shares of common stock of the above-named debtor, represented by Certificate(s) No.___________(or held in my/our brokerage account no.)______________at (name of broker-dealer) ________________________ (Check one box) _____________Accepts __________Rejects ------------------ November ,1996 Print or Type Name -------------- ------------------ Signature ------------------ Address RETURN THIS BALLOT TO: Clerk, U.S. Bankruptcy Court ON OR BEFORE U.S. Courthouse NOVEMBER 18, 1996. 100 State Street Rochester, New York 14614 . WESTERN DISTRICT OF NEW YORK UNITED STATES BANKRUPTCY COURT In re: Case No.95-21279 WAREHOUSE AUTO CENTERS, INC., Debtor(s). COMBINED ORDER TO SHORTEN TIME, AND APPROVING DISCLOSURE STATEMENT AND FIXING TIME FOR FILING ACCEPTANCES AND REJECTIONS OF PLAN COMBINED WITH NOTICE THEREOF A Disclosure Statement and Plan of Reorganization under Chapter 11 of the Bankruptcy Code having been filed by Warehouse Auto Centers, Inc., the debtor herein, on September 26, 1996; a Hearing on Notice having been had on October 31, 1996 and it having been determined that the disclosure statement contains adequate information; and the debtor having applied to the Court at the hearing for an order shortening time for the hearing on confirmation, the filing of acceptances or rejections of the plan, and the Court having approved the combined order to shorten time, it is ORDERED and NOTICE is hereby given, that; A. That the Amended Disclosure Statement filed by Warehouse Auto Centers, Inc., the debtor, is approved; B. Ballots accepting or rejecting this plan may be filed with the Clerk, United States Bankruptcy Court, Room 1220, 100 State Street, Rochester, New York 14614 at any time before the confirmation hearing or any continuation thereof; and C. Within five (5) days after the entry of this Order, the plan, the disclosure statement and a ballot shall be mailed to creditors, equity security holders and other parties in interest and shall be transmitted to the United States Trustee as provided by the Federal Rule of Bankruptcy Procedure 3017(d); D. That time is shortened so that November 21, 1996 at 10:30 a.m., is fixed for the hearing on confirmation of the plan to be held at United States Bankruptcy Court, Room 2300, 100 State Street, Rochester, New York 14614; E. November 18. 1996 is fixed as the last date for filing and serving written objections to confirmation of the plan, pursuant to Federal Rule of Bankruptcy Procedure 3020(b)(1). Dated: November 1, 1996 /S/ BY THE COURT UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF NEW YORK IN RE: BK # 95-21279 WAREHOUSE AUTO CENTERS, INC. AFFADAVIT OF MAILING Debtor(s). STATE OF NEW YORK) COUNTY OF MONROE ) SS: I, LEONARD RELIN, being sworn says that: I am over 18 years of age and reside at Rochester, New York. On October 10, 1996, I served the ORDER SHORTENING TIME AND FIXING DATES, TIMES AND PLACES OF HEARING TO CONSIDER APPROVAL OF THE DISCLOSURE STATEMENT PURSUANT TO RULES 2002(b) and 9006 (c)(1) and ORDER AND NOTICE FOR HEARING ON DISCLOSURE STATEMENT TO THE DEBTOR, ITS CREDITORS AND OTHER PARTIES IN INTEREST by either hand delivery, U.S. Postal Service addressed to each of the following persons at their last known addresses as follows and as per the attached matrix: Trudy Nowak, Esq., U.S. Trustee's Office, 100 State Street, Room 609, Rochester, New York 14614 Warehouse Auto Centers, Inc., 2452 West Henrietta Road, Rochester, New York 14623 Stephen P. Mayka, Esq., Lacy, Katzen, et al., 130 East Main Street, 3rd Floor, Rochester, New York 14604 Albert Solochek, Esq., Howard, Solochek & Weber, S.C., 324 E. Wisconsin Avenue, Suite 1100, Milwaukee, WI 53202 Internal Revenue Service, Attn: Matthew Root, Esq., Suite 500, Guaranty Building, 28 Church Street, Buffalo, New York 14202 Elaine Zipp Cole, Esq., NYS Dept. of Taxation & Finance, 259 Monroe Avenue, 3rd Floor, Rochester, New York 14607 United States Attorney General's Office 100 State Street, Room 609, Rochester, New York 14614 /S/ LEONARD RELIN Sworn to before me this 23 day of October, 1996. /S/ Notary Public Leonard Relin 1 East Main Street Rochester, New York 14614 (716) 454 4336 Attorney for Debtor UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NEW YORK In re ) Case No. 95-21279 WAREHOUSE AUTO CENTERS, INC. ) Debtor's Disclosure Statement ----------------------------- ) Chapter 11 ) Date: November 21, 1996 Debtor ) Time: 10:30 A.M. ) - ----------------------------- DEBTOR'S DISCLOSURE STATEMENT Warehouse Auto Centers, Inc., the Debtor, provides this Disclosure Statement (hereinafter "Statement") to all its known creditors in order to disclose that information deemed by the Debtor to be material, important and necessary for the Debtor's creditors and equity holders to arrive at a reasonably informed decision in exercising their right to vote on the Plan of Reorganization (hereafter "The Plan") presently on file with the Bankruptcy Court. A copy of the Plan accompanies this Statement. Creditors and equity holders may vote on the Plan by filling out and mailing the accompanying ballot to the Bankruptcy Court, or may attend such hearing and present the ballot in person at that time. As a Creditor your vote is important The Plan can be confirmed by the Court if accepted by the holders of two-thirds in amount and more than one-half in number of claims of each class voting on the Plan. In the event the requisite acceptances are not obtained, the Court may, never-the-less, confirm the Plan if the Court finds that the Plan accords fair and equitable treatment to the class rejecting. No representations concerning the Debtor particularly as to its future business operations, value of property, or the value of any Promissory notes, or equity instruments to be issued under the Plan, other than as set forth in this Statement are authorized by the Debtors. Any representations or inducements to secure acceptance which are other than that contained in this Statement should not be relied on by you in arriving at your decision: and. any such additional representations and inducements should be reported to counsel for Debtor. Leonard Relin or the U. S. Trustee. who. in turn, shall deliver such information to the Bankruptcy Court for such action as may be deemed appropriate. THE INFORMATION CONTAINED HEREIN HAS NOT BEEN SUBJECT TO A CERTIFIED AUDIT. DEBTOR WARRANTS THAT TO THE BEST OF ITS KNOWLEDGE THE INFORMATION CONTAINED HEREIN IS TRUE AND ACCURATE. TABLE OF CONTENTS TO DEBTOR'S DISCLOSURE STATEMENT Outline of Plan of Reorganization Page 4 Description of Exhibits Page 5 Description of Debtor's Business History Before Filing Page 5 Description of Debtors Business History After Filing Page 6 Description of Newgold, Inc. Page 6 Gold Mining Industry Economics Page 6 Competition Page 7 Suppliers and Materials Used Page 8 Property, Plant and Equipment Page 8 Employees Page 8 Description of Insider Transactions Page 8 Market for Reorganized Company's stock Page 8 Post Petition and Current Operations Page 9 Creditor's Committee Page 9 Present Assets Page 10 Description of Pending Litigation Page 10 Regulatory Issues Page 10 Recent Legislative and Regulatory Changes Page 11 Debts Page 11 Financial Condition of the Debtor Following Confirmation Page 11 Officers and Directors of the Successor Company Page 12 Classification and Treatment of Claims Page 14 Status and Resale of the Securities to be Issued Under the Plan Page 15 Federal Income Tax Consequences to Creditors of the Debtors Page 16 TABLE OF CONTENTS TO DEBTORS DISCLOSURE STATEMENT (Continued) Alternatives to the Plan Page 17 Liquidation Analysis Page 17 Risk Factors Page 18 Other Page 19 Signatures Page 20 Exhibits Outline of Plan of Reorganization As more fully set forth hereinafter, the Debtor has: (1) (i) paid its secured debts in full in cash; (ii) proposes to pay its unsecured trade debts and other unsecured liabilities in full with stock in the reorganized Debtor's successor; (iii) to pay Section 364 loans and Debtor Certificate holders according to their tenor and to offer them the opportunity to convert their debt to equity in the reorganized Debtor's successor as payment, (iv) to pay Administrative Claims incurred during the Bankruptcy proceedings in stock ; (v) to merge with Newgold, Inc., a gold mining company, by acquiring 100% of the outstanding shares of Newgold's stock in exchange for shares of stock in the reorganized Debtor; (vi) to dilute existing shareholders through a reverse split of pre-petition stock; (vii) appoint a new Board of Directors and management in the reorganized Debtor, and; (2) the Company ceased operating its auto parts business and redirected its business by becoming engaged in the natural resource industry--namely gold mining and processing. The Debtor has ceased to be in the auto parts business. The Debtor proposes to issue stock and warrants in the corporation to creditors and dilute existing equity holders by a 1:65 reverse split of pre-petition stock. In addition, The Debtor proposes to acquire and/or merge with Newgold, Inc., a gold mining company, with proven and probable gold reserves valued at approximately $50,000,000 by exchanging stock in the reorganized Debtor for 100% of the outstanding stock in Newgold, Inc. Newgold, Inc. has significant cash reserves and an operating gold mine located in Relief Canyon near Lovelock, Nevada. The Debtor further proposes to offer Section 364 lenders the opportunity to convert their loans/Certificates of Indebtedness to equity in the reorganized successor to the Debtor. The agreement to acquire and/or merge with Newgold, Inc. will become effective only if the Debtor's proposed Plan of Reorganization is confirmed by the Court. Confirmation of the Plan of Reorganization is a condition precedent to the acquisition and/or merger with Newgold, Inc. Description of Exhibits A. Most recent "Monthly Operating Report" submitted to the US Trustee B. Treatment of Classes and Interests under the Plan C. Cash Flow Projections for the Reorganized Debtor for the Period January 1, 1997 through December of 2003 D. Pro Forma Balance Sheet assuming Plan confirmation E. Liquidation Analysis F. Summary of Merger/Acquisition Agreement between Newgold, Inc. and Debtor (the full agreement has been filed with the Court). G. Summary of Engineering Reports and Independent Evaluations of Newgold, Inc.'s gold reserves (the actual reports have been filed with the Clerk of the Bankruptcy Court and may be viewed there. The reports are too voluminous to include with this Disclosure Statement). H. Unaudited financial statements of Newgold, Inc. Description of Debtors Business History Before Filing The Debtor opened its first Auto Parts Store in 1994 at Rochester, New York with the intent of developing a chain of Warehouse Automotive Parts and Accessory Superstores. The Debtor opened its first store in Rochester, New York in 1994 and a second store in Cleveland, Ohio in January of 1995. The Company was filed in a Chapter 11 proceeding, involuntarily, by certain of its unsecured creditors on June 29, 1995 as a result of its inability to timely meet its financial obligations. Description of Debtor's Business History After Filing Since the Chapter 11 filing, the Debtor has closed its Cleveland store and Rochester executive offices and moved its corporate offices into the Rochester store. However, the Debtor continued to sustain losses aud to deplete its inventories. Recently, on August 28,1996, the Bankruptcy Court granted Debtor's motion to sell all of its assets for the cash sum of $375,000, which has been used to pay the following Creditors: (1) Rent on the Debtor's premises in the amount of $77,199.21; (2) DIP lenders in the amount of $200,000; and (3) Secured Creditors in the amount of $69.326.42 leaving a cash balance of $28,287.65 in escrow. Description of Newgold, Inc. Newgold, Inc. ("Newgold") was incorporated in the state of Nevada in 1993. In August 1994, it adopted a plan to review, acquire and develop mining opportunities currently available in the U.S. mining environment. None of the prior management of Warehouse Auto Centers, Inc. including Brian Thomas the founder, are or will be involved as an officer, director or manager of Newgold, Inc. Newgold's goal has been to acquire small to medium sized precious metals mines which have drill indicated reserves and little or no permitting requirements prior to the commencement of production. The ultimate goal of the organization is to become a junior sized gold production organization diversified in various aspects of the mining industry. For many years, companies in the mining industry have focused their efforts on the large-scale, long term mining targets. This effort has left a substantial number of properties that did not meet with the long term goals and large corporate overheads of these companies. Newgold has seen this as an opportunity to develop a broad based multi- project mining company. Newgold is currently reactivating its Relief Canyon Mine in Lovelock, Nevada, and has acquired two other properties. It is anticipated that Newgold operations will have annual production of 60,000 troy ounces of gold by the end of 1997 and will be operating profitably. Revenue projections for the year 1996 are $10.2 million. Growth is projected to be 33% to 100% annually through the year 2000. Newgold has current proven and probable reserves of $50,000,000. The Relief Canyon Mine is owned 50% by Newgold, Inc. and 50% by Casmyn Corp., a Colorado corporation which is publicly traded on the NASDAQ Bulletin Board. Casmyn Corp. purchased its 50% interest for $1,398,000, of which $773,000 has been paid to date. Gold Mining Industry Economics In 1995 a total of 73.8 million troy ounces (there are 12 troy ounces to a pound) of gold were produced worldwide. Of this amount the United States produced 10.5 million troy ounces or 14.3% of the worlds gold production. Of this amount, 6.76 million troy ounces were produced in the State of Nevada which represents 9.1% of the total worlds gold production. The United States ranks fourth in gold production behind South Africa, Australia and the Commonwealth of Independent States (the former Soviet Union). The bulk of the U.S. gold production is now being conducted using the cyanide heap leaching technique. The technique recovers disseminated gold which is microscopic in size and not visible to the naked eye. Ore is blasted, crushed and agglomerated with cement and lime. The gold bearing ore is then placed on slightly inclined plastic lined pads and leached with a cyanide solution. The cyanide solution (aqua regia) converts the microscopic gold to a solution which then flows into a "pregnant pond". The solution from the pregnant pond is then pumped through carbon columns where the gold is collected on the carbon. The solution, sans the gold, is then returned to a barren pond where it is reinvigorated and re-pumped back over the heaps--thus creating a continuos closed leaching circuit. The collecting carbon (which is manufactured from coconut shells) has an affinity for gold similar to steel or iron attaching itself to a magnet. The carbon columns are then flushed with heated cyanide which returns the gold back into a solution and which is then pumped into electrowinning cells where the final gold product is collected on steel wool through electroplating. The gold laden steel wool, in turn, is fired in a furnace which converts the microscopic gold collected into a dore (or miners) bar. This dore bar is then sold to a refinery (such as Engelhardt) which completes the process of refining the gold into a .999 fine gold bar. Currently the national average cash cost for heap leach gold recovery is $220 per troy ounce. Gold is currently selling in the $380 to $390 per troy ounce range. Competition Upon reorganization, the Debtor's successor will be subject to competition from a number of companies within the gold mining industry which may have greater financial resources and experienced management than the reorganized successor to the Debtor. Further, the economic success of the reorganized Debtor's successor will be subject to the fluctuations of gold prices which cannot be forecast with any degree of accuracy. Suppliers and Materials Used The reorganized Debtor's successor uses various mining related supplies. It is not dependent on any one supplier for any of the various gold mining materials used. Property, Plant and Equipment The Debtor currently owns no property. On August 28, 1996, pursuant to the Court's Order, the Debtor sold all of its assets for $375,000 in cash. Employees The Debtor currently has no employees. Description of Insider Transactions On August 28, 1996, a group of investors led by Richard Dale, former President of Warehouse Auto purchased the inventory, furniture, fixtures and equipment for $375,000 in cash. From these proceeds the D.I.P. Loan of $200,000 was repaid certain officers and directors including Richard Dale, Eugene O'Donovan, Nathan Morton and W. John Devine. Under the Plan, any and all outstanding options, warrants or other rights or commitments by Debtor to issue any securities or pay any benefits to any person or business entity shall be canceled and rendered null and void. With respect to insiders of Newgold, Scott Dockter, the President and Chairman of the Board, received 6,701,358 shares of Newgold Common Stock as consideration for services and contributions of cash and assets in the approximate sum of $500,000. Mr. Edward Mackay received 3,800,000 shares of Newgold Common Stock for capital contributions to Newgold in the approximate amount of $1,500,000. Market for Reorganized Debtor's Stock The Debtor's stock is currently traded on the NASDAQ Electronic Bulletin Board under the symbol WHAC. The Debtor's stock transfer agent is American Stock Transfer located at 40 Wall Street, New York, N.Y. 10005. The reorganized Debtor intends to continue market making activities under the reorganized Debtor's new name of Newgold, Inc. Post Petition and Current Operations The Debtor continued to operate in the normal course of business but recognized a serious erosion of its assets and cash flow and losses over the year in which it has been under the protection of the Court. The Debtor determined that it could not continue to operate as a going concern in the auto parts business without a significant infusion of new capital. The Debtor was unable to obtain such new capital and in August 1996 sold all of its tangible assets for $375,000 in cash. Creditor's Committee The Creditor's Committee was appointed on August 1, 1995. Albert Solochek of the firm of Howard, Solochek & Weber, S.C. and Stephen Mayka, Esq. of the firm of Lacy, Katzen, Ryen & Mittleman were appointed as Co-Counsel to the Committee and actively participated in the case representing the unsecured creditors. The Debtor has preserved its rights to investigate and pursue any claims and causes of action it may have as against third party creditors, insiders and all other persons and entities subsequent to confirmation, except for accounts receivables which were previously sold. It has designated the official Unsecured Creditors Committee as its agent to investigate and bring such claims, solely for the benefit of holders of allowed unsecured claims. Any sums collected from the prosecution of such claims shall be applied first to the cost of investigation and suit, thereafter to any fees due the court and the Office of the United States Trustee on account of such actions or proceedings and then distributed, pro rata, to unsecured creditors holding allowed unsecured claims. The Debtor does not believe that there are any preferences by the Debtor in significant amount which may be recovered. Virtually all the trade creditors had suspended shipments on credit substantially before the filing of the involuntary petition and, most, if not all, purchases were being made on a C.O.D. basis. Further, the Debtor knows of no voidable transfers or claims against insiders or third parties or entities which may be pursued without significant investigation and significant trial cost. Since the Debtor lacks funds to bring these actions it has assigned the same to the Creditor's Committee as its agent. The Committee currently has no funds with which to pursue such actions but will attempt to sell such claims or find counsel who is willing to undertake the same strictly on a contingency fee basis and who will advance all cost and disbursements including court fees and fees due the United States Trustee in order to bring such cases. In the event the Committee cannot do so or obtain alternative funding for such actions, the Committee may, without liability to any party and in the exercise of its sole discretion, abandon the same. The Committee is continued in existence until it disbands itself for the purposes of bringing these actions. Present Assets All of the assets of the Debtor were sold pursuant to a Court Order by the U. S. Bankruptcy Court on August 28,1996 for $375,000 in cash. The Debtor currently has no assets other than $28,287.65 cash on deposit.. Description of Pending Litigation Debtor is not aware of any litigation against it, either threatened or pending. Newgold is currently involved as a plaintiff in litigation to establish its property interest in certain mining claims situated in Inyo County, California. None of the claims in the case seek to impose liability on liability or threaten its assets. Regulatory Issues The Reorganized Debtor (i.e. Newgold, Inc.) is not aware of any recent or proposed legislative or regulatory changes which may have any impact on its future operations. The Reorganized Debtor will be operating in the mining industry and will be subject to regulation by the following government agencies: Local Government (Counties): Special Use Permits Building Permits Air Quality Permits Landfill Permits Environmental Protection: Zero Discharge Permit Bureau of Land Management: Plan of Operations Permit Forest Service: Plan of Operations Permit Department of Wildlife: Notification Mine Safety and Health: Notification of Start Up State Fire Marshall: Fire Health Department: Septic and Water Systems Each regulatory agency will require at least application or consideration by each of these governmental agencies. Therefore, in the selection process each property will require an evaluation of lead time and completion of permits to start up. The Reorganized debtor will be subject to future control by these governmental agencies, which may promulgate new regulations in the future which may have an adverse effect on its mining operations. Recent Legislative and Regulatory Changes The Reorganized Debtor (i.e. Newgold, Inc.) is not aware of any recent or proposed legislative or regulatory changes which may have an impact on its future operations. Debts As of June 29, 1995, the Debtor had approximate unsecured scheduled debts amounting to $2,392,967. 19. During the pendency of this case, the Court approved DIP loans in the amount of $200,000. These DIP loans were repaid from proceeds of a sale of the Debtor's assets which was approved by the Court on August 28, 1996. On September 25, 1996, the Court agreed to allow the Debtor to sell Debtor Certificates pursuant to Section 364 of the Code in the maximum amount of $5,000,000. The funds will be used as fresh start capital which contemplates a change in business direction and strategy by the acquisition and/or merger of the Debtor with Newgold, Inc. Financial Condition of the Debtor Following Confirmation See Exhibit D attached to this Disclosure Statement. THE ATTACHED FINANCIAL PROJECTIONS REPRESENT AN ESTIMATE OF FUTURE EVENTS THAT MAY OR MAY NOT OCCUR. IT IS PROBABLE THAT SOME OF THE ASSUMPTIONS ON WHICH THE FINANCIAL PREDICTIONS ARE BASED WILL NOT MATERIALIZE AND THAT UNANTICIPATED EVENTS AND CIRCUMSTANCES WILL OCCUR. THEREFORE, THERE CAN BE NO ASSURANCE, NOR REPRESENTATIONS MADE, THAT THE FINANCIAL PROJECTIONS OR RELATED ASSUMPTIONS WILL CONSTITUTE AN ACCURATE REFLECTION OF THE ACTUAL OPERATING CASH FLOW OF THE REORGANIZED OR SUCCESSOR COMPANY DURING THE PERIOD INDICATED. THE FINANCIAL PROJECTIONS SHOULD NOT BE RELIED UPON TO INDICATE THE ACTUAL RESULTS THAT WILL BE OBTAINED. The Debtor is not now current in its reporting to the Securities and Exchange Commission. Newgold, Inc. has agreed to compensate the accounting firm of Ciaccia & Catarisano LLP to bring the Debtors books and records current and to complete the Debtor's 10-K for the year ending January 31, 1996, as well as, the requisite 10-Q's and federal, state and local tax returns which are due or will be due up to the date of Confirmation of the Plan. Additionally, Newgold, Inc. has commissioned its independent accountants, Burnett Umphress & Kilgur, to audit and certify its books and records. It is anticipated that by the Effective Date, the Reorganized Debtor's books and records (i.e. for both the Debtor and Newgold) will be certified so as to facilitate the accounting merger of the two entities for SEC and NASDAQ purposes. Officers and Directors of the Successor Company Following confirmation of the Plan of Reorganization, the following individuals will constitute the directors, executive officers and significant employees of the reorganized successor company: Name Address Age Position - -------------------- -------------------- --- ------------------- Arthur Scott Dockter 5190 Neil Road, #320 40 President, CEO Reno, NV. 89502 Director Robert W. Morris 5190 Neil Road, #320 56 CFO, Director Reno, NV. 89502 Edward Mackay 5190 Neil Road, #320 43 Secretary, Director Reno, NV. 89502 Michael Morrison 1025 Ridgeview Dr. 50 Director Suite#400 Reno, NV. 89509 A Biography of each follows: Arthur Scott Dockter is the founder, Chairman of the Board and President of Newgold, Inc., a privately held Nevada corporation since 1993 and has supervised the development of three gold mining properties. He is also founder of Riverfront Development Corporation, a privately held corporation which is currently in the process of refurbishing a 152,000 sq. ft manufacturing facility on 71 acres near Sacramento, California. Prior to 1993, Mr. Dockter was a self-employed general engineering contractor specializing in dams, levies and mining projects. Robert W. Morris has been a Certified Public Accountant for 30 years with 13 years in public accounting including six years with Arthur Anderson & Co., and 17 years as a treasurer and controller for private corporations. Mr. Morris graduated from Indiana University in 1961 with a B.S. Degree in Accounting. Edward Mackay has been an independent real estate developer since 1980. He is a member of the Rural Builders Council of California and the Council for Rural Housing and Development. During his many years in the development field, Mr. Mackay has interfaced closely with federal, state and local governmental agencies, as well as syndicators, tax credit agencies, financial lenders, architects, engineers and others. Mr. Mackay has acquired land, developed, designed, constructed, syndicated and managed multi-family and elderly housing projects totaling more than $59,300,000; and successfully syndicated over $30,000,000 through public and private investment partnerships. He attended Stanford University at Palo Alto, California; Oregon State University at Corvallis, Oregon, and graduated from Eastern Oregon College in 1978, obtaining his Bachelor of Arts Degree in General Studies. Michael Morrison has been a licensed practicing attorney in Reno, Nevada for 20 years specializing in the areas of corporate, business and securities laws. Mr. Morrison is also admitted to practice in the States of California and the District of Columbia. He serves as an officer and director of several public and private corporations. He graduated from McGeorge School of Law, University of Pacific, in 1976 with a J.D. Law Degree, and from the U.S. Air Force Academy in 1968 with a B.S. Degree in Science, Engineering Management. Stock Ownership of Officers, Directors, Key Personnel and Control Persons of the Reorganized Company After Confirmation Name Position Stock Percentage Arthur Scott Dockter President, CEO 6,492,324 54% Director Edward Mackay Secretary/Treas. 2,644,293 18% Director Michael J. Morrison Director 12,500 less than 1% Classification and Treatment or Claims Payment of Administrative Claims -------------------------------- Payment of Secured, Unsecured and Equity Holders Claims ------------------------------------------------------- Class 1 Claims consisting of allowed administrative expenses, including attorney and accountant fees of the kind specified in Code Section 507 (a) (1) approved salaries of officers, and trade payables arising after commencement of the Case and commissions owed for the sale of Debtor Certificates, shall be paid in full by the Reorganized Debtor in cash on the effective date of the Plan or in stock in the reorganized Debtor at a ratio of one (1) share of stock for each $1 owed the Creditor. The Class 1 Claimants will have the right to "Put" to Newgold, Inc. or its Assignee, the stock for 15 days from the effective date of the Plan for $1.00 in cash for each share of new stock issued. Class 2 Administrative claims consisting of Priority Debtor Certificate holders in the approximate amount of $5,000,000. The holders of allowed claims in Class 2 shall be paid by the Reorganized-Debtor as originally agreed and such holders shall retain their respective security interests. Class 2 claimants, at their exclusive option, shall be allowed to exchange their claims for one (1) share of Common Stock of the Reorganized Debtor for each $1 of indebtedness. The common stock being offered will be set aside in trust for Class 2 claimants who shall have ninety (90) days from the date of confirmation of the Plan of Reorganization to exercise the conversion of their debt to equity. The Reorganized Debtor shall retain the right to sell said stock , from time to time, to non claimants with the proceeds to be paid to the Class 2 Claimants who opt not to convert. Any difference realized in the sale of equity in excess of the principal sum owed Class 2 Debtor Certificate holders, plus interest thereon, shall be retained by the Reorganized Debtor for working capital. Debtor Certificate holders shall be issued promissory notes bearing interest at 10% per annum. These notes must be surrendered by Debtor Certificate holders who elect to convert their debt to equity. Those who do not choose to convert shall be paid their principal and all accrued interest two years from the anniversary of the date of confirmation of this Plan. Class 2 will not be impaired under the Plan. Class 3 Administrative Claims consisting of Priority Unsecured New York State Sales Tax owed of approximately $30,000, U. S. Trustee's fees, Court Fees and State of Delaware Franchise Tax Fees, owed of approximately $2,653.00 for 1995 taxes and State of Ohio Sales tax of $1,826.95 and any 941 IRS taxes owed by the Debtor. Said claims shall be paid in cash on the Effective Date of the Plan. Class 4 Claims consist of 327 unsecured creditors with aggregate Claims amounting to approximately $2,392,967. Class 4 Creditors shall receive one (1) share of Common Stock in the Reorganized Debtor for each $42 of debt. Approximately 56,975 shares in the aggregate shall be issued to Class 4 claimants. Class 4 will be impaired under the Plan. Class 5 Claims consist of approximately 321 shareholders of record holding 3,299,191 shares of common stock which represents 100% of the total outstanding and issued shares of common stock of the Debtor. There are no other equity securities issued by the Debtor other than the one class of common stock. Existing Class 5 claimants will have their interest diluted by a factor of 1:65. In other words, existing shares shall be reverse split by a factor of 65 or 65 Shares shall be reduced to one (1) share of post-petition stock in the Reorganized Debtor. Existing Equity holders will be reduced on a pro-rata basis to a total of 50,000 shares in the aggregate. However, in no event will any existing shareholder of the Debtor hold less than two (2) shares after the reverse split. Shareholders shall be obligated to surrender their shares of stock to the Reorganized Debtor's transfer agent within six months of the effective date of the Plan. Any shares not surrendered within the time period shall be canceled and the shareholder who fails to surrender his shares shall have no further rights or recourse against the Reorganized Debtor as an equity holder. As of the date of the Plan accompanying this Disclosure Statement, the book value of the Debtor's shares is $0.00. Under the proposed Plan, existing shareholders of the Debtor, after dilution, will be $0.58 per share book value. Thus, Class 5 claimants will not be impaired under the Plan. Status and Resale of Securities to Be Issued Under the Plan Under Bankruptcy Code Section 1145, the original issuance of the successor company's Common Stock (hereinafter the "securities") under the Plan, will be exempt from the registration requirements of the Securities Act of 1933 and applicable state or local laws, rules or regulation requiring registration of securities. Resales of securities by a claimant or shareholder receiving the same directly under the Plan, will also be exempt. provided the claimant or shareholder is not an underwriter. Generally a claimant or shareholder is not an underwriter if he (1) has not become a claimant or debtor with a view to distribution of any securities to be received in exchange for claims under the Plan, (2) has not offered to sell the securities from others where that offer is with a view to distribution and under an agreement made in connection with the Plan, (3) has not offered to buy the securities from others where that offer is with a view to distribution and under an agreement made in connection with the Plan, and (4) is not a control person of the Debtor as that term is used in the Securities Act of 1933. The determination of whether a particular claimant or shareholder would be deemed to be an underwriter is necessarily an individual one, and any claimant or shareholder considering reselling Securities received under the Plan should consult a securities advisor to determine whether he would be considered an underwriter and, therefore, ineligible for the exemption described above. Section 1145 of the Bankruptcy Code does not provide the only means for reselling bankruptcy related securities, and it does not eliminate or otherwise affect the availability of any other exemption for resale under the Securities Act of 1933. THE FOREGOING IS INTENDED AS GENERAL INFORMATION ONLY, AND ANY PERSON DESIRING TO RESELL ANY SECURITIES RECEIVED PURSUANT TO THE PLAN IS URGED TO CONSULT A SECURITIES ADVISOR FOR THE AVAILABILITY OF ANY REGISTRATION EXEMPTION. THE COMMON STOCK ISSUED UNDER THE PLAN ARE NOT NOW READILY TRANSFERABLE. NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN WHICH MAY ACCRUE TO SHAREHOLDERS. UNDER BANKRUPTCY CODE SECTION 1145, THE ORIGINAL ISSUANCE OF THE REORGANIZED DEBTOR'S EQUITIES, OR EQUITY SECURITIES OF A SUCCESSOR TO THE DEBTOR (I.E. NEWGOLD, INC.) WILL BE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS REQUIRING REGISTRATION OF SECURITIES. ADDITIONALLY NO FEDERAL, STATE OR LOCAL TRANSFER TAX CAN BE IMPOSED ON SECURITIES ISSUED UNDER THIS PLAN. Federal Income Tax Consequences to Creditors of the Debtor The tax consequences of the implementation of the Plan, to a claimant receiving reorganized or successor to the Debtors securities, will depend in part on whether the Claimant's present debt claim constitutes a "Security" for federal income tax purposes. The determination as to whether the claim of any particular claimant constitutes a "Security" for federal income tax purposes is complex, and depends on the specific facts and circumstances surrounding the original nature of the claim. Generally, claims arising out of the extension of trade credit have been held to be securities, while corporate debt obligations evidenced by written instruments with maturities, when issued, of ten years or more, have generally been held to be securities. The Debtor expresses no view with respect to whether the claims of any particular Creditor constitutes a "Security" for federal income tax purposes and urges each Creditor to consult his own tax advisor. A Creditor who exchanges his existing claim for the securities of the reorganized or successor Debtor may recognize income or loss in respect of consideration received on account of accrued interest attributable to his existing claim, and gain or loss on the exchange of the principal of the claim for the reorganized or successor to the Debtor's securities. The Bankruptcy Tax Act of 1980 reversed prior law by providing that income attributable to accrued, but unpaid interest, will be treated as ordinary income, regardless of whether the Creditor's existing claims are capital assets in his hands and the exchange is pursuant to a tax reorganization. THE FOREGOING IS A GENERALIZATION OF THE FEDERAL TAX CONSEQUENCES TO CREDITORS RECEIVING SECURITIES UNDER THE DEBTOR'S PLAN AND IS NOT TO BE RELIED UPON. CREDITORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX TREATMENT TO THEM OF SECURITIES ISSUED BY THE REORGANIZED COMPANY. Alternatives to the Plan The Debtor believes that the Plan provides its Creditors and Equity Holders with the earliest and greatest possible value that can be realized on their claims. The alternatives to confirmation of the Plan are the submission of an alternative plan of reorganization by the Debtor or any other party in interest, or the liquidation of the Debtor's estate. Liquidation Analysis The Debtor has performed an analysis to determine whether Creditors and Equity Holders will receive more under the proposed Plan than such Creditors would receive under a Chapter 7 liquidation. In Chapter 7, all post-petition administrative claims and debts, taxes, costs of liquidation and all allowed professional fees and secured creditors claims would have to be paid prior to a distribution to general unsecured creditors. Additionally, all Section 364 lenders and "Debtor Certificate" holders would have to be paid in full prior to any administrative or unsecured Creditors, as they hold a blanket lien on all assets of the Debtor pursuant to Section 364 (d) of the Bankruptcy Code. The Debtor believes that a Chapter 7 liquidation would yield no funds to any unsecured creditors and only partially pay Administrative creditors. By contrast, the Debtor's proposed Plan will result in Creditors and Equity Holders receiving securities in the reorganized successor to the Debtor. The Plan, therefore, provides a greater return to Creditors and Equity Holders than the return which would result from conversion of this case under Chapter 7. See Exhibit E. Risk Factors The transactions contemplated by the Plan may have tax consequences upon interested parties. Nothing contained in the Plan or this Disclosure Statement should be construed as advice with respect to the income tax consequences of acceptance or rejection of the Plan. Each party should review such tax consequences with a tax advisor. Creditors and Equity Holders are cautioned that while there is and will be a public market for the successor to the reorganized Debtor's equity securities, the equity securities being issued under the Plan will be a "designated security " under Securities & Exchange Commission Rules. It will be a major goal of the new management of the reorganized Successor to the Debtor to seek listing on a nationally recognized exchange so as to eliminate the 'designated security" status of the equity securities being issued under the Plan. However, the Debtor makes no representations that the reorganized successor to the debtor will ever achieve listing equity securities issued on any public stock market exchange Claimants are further cautioned that there are no assurances regarding the performance or value of securities issued pursuant to the Plan. The future price of the securities will be subject to numerous factors, none of which can be accurately forecast since economic activity may fluctuate depending upon the general condition of the economy and future business of the reorganized successor to the Debtors. Claimants should also be aware that Debtor Certificate holders could require cash payments at the time of confirmation of the Plan. This is due to the fact that Note holders are administrative claimants and are therefore entitled to be paid in full in cash unless they agree otherwise. If some or all of the Debtor Certificate holders insist on taking cash rather than stock as payment it would substantially impact the projections and operations of the successor to the Debtor. The Debtor believes, based upon personal conversations that Debtor Certificate holders will exchange their administrative expense claim for stock in the successor to the reorganized Debtors. However, Debtor Certificate holders are not legally obligated to do so. Other Certificates of Indebtedness. Prior to the filing of the Plan of Reorganization and Disclosure Statement the Debtor moved the Bankruptcy Court to authorize it to sell $5,000,000 in Code Section 364 Certificates of Indebtedness ("Debtor Certificates"). The motion to allow the sales of the Debtor Certificates was granted on September 11, 1996 and an order signed on September 25, 1996. Finders Fees. The Debtor has agreed to issue to David Rinker and Christina Nichols, 5.000 shares each of Common Stock in the Reorganized Debtor as a finders fee . They were instrumental in bringing about the transactions involving the assets being acquired under the Plan of Reorganization. Additionally, the Debtor has agreed to issue 1,000 shares as a finders fee to Steve Nichols who introduced the parties to the Debtor. Consulting. The Reorganized Debtor has agreed to pay $10,000 in cash and issue 7,500 shares of the Reorganized Debtor's Common Stock to Dan-Com, Inc, for consulting services rendered. Dan-Corn, Inc. is a firm which specializes in coordinating mergers of solvent businesses into public companies which are under protection of Chapter 11 of the Bankruptcy Code. Change of Corporate Name, The Reorganized Debtor will change its name to Newgold, Inc. and recapitalize at 50,000,000 shares of Common Stock authorized, .001 par value. Michael J. Morrison. The Debtor has agreed to issue 12,500 shares of Common Stock in the Reorganized Debtor to Michael Morrison, ESQ. as a finder's fee. Asset Acquisition. The Reorganized Debtor will issue a total of 12,000,000 shares of its Common Stock to existing shareholders of Newgold, Inc. and thus acquire 100% of the outstanding new shares of Newgold, Inc. and, therefore, its assets described in the Disclosure Statement. Other Corporate Matters. The Board of Directors of the Reorganized Debtor shall be authorized to take whatever actions are necessary in order to bring the Reorganized Debtor into conformance with securities laws and regulations including, but not limited to, amending the Reorganized Debtor's by-laws and Articles of Incorporation. RESPECTFULLY SUBMITTED /s/ Leonard Relin - ------------------------------ Leonard Relin, Attorney at Law WAREHOUSE AUTO CENTERS, INC. Debtor in Possession /s/ Nathan P. Morton - ----------------------------- Nathan P. Morton, Chairman Board of Directors EXHIBIT A United States Bankruptcy Court Eastern District of New York In re Warehouse Auto Centers, Inc. MOST RECENT "MONTHLY OPERATING REPORT" SUBMITTED TO THE US TRUSTEE Cash Flow Statement of Chapter 11 Debtor-In-Possession for the Period June 1 through June 30, 1996 Beginning cash balance (from previous report) . ($32,347) Receipts Sales receipts, net of sales tax ..... $ 89,542 Sales tax collected .................. 5,543 -------- $ 95,085 Disbursements Store operations Merchandise purchases ................ $ 52,917 Payroll and related taxes ............ 23,406 Rent ................................. 1,500 Insurance ............................ 8,308 Utilities ............................ 1,672 Lease payments ....................... 1,591 Advertising .......................... 500 Bank charges ......................... 1,566 Other ................................ 1,396 --------- Total store operations ..................... $ 92,856 Total store cash flow ...................... $ 2,229 Home office Payroll and related taxes ............ $ 8,646 --------- Total home office .......................... $ 8,646 Store and home office cash flow ............ ($ 6,417) Write-off of outstanding checks ............ 27,705 --------- Consolidated net cash flow, less adjustments $ 21,288 Ending cash balance ........................... ** ($11,059) ========= **Includes deposits and checks outstanding at June 30, 1996, but excludes balance retained in the DIP Escrow Account (pursuant to the DIP Loan). EXHIBIT B TREATMENT OF CLASSES AND INTEREST UNDER THE PLAN
Reconciliation of bank accounts to Warehouse Auto records at June 30, 1996 Fleet Fleet M&T Cash Checking Credit Cds Payroll On Hand Total Balance per bank statement $1,093 $1,982 $4,127 $3,000 $10,202 Deposits in transit at month end 4,725 2,401 7,126 Checks outstanding at month end 21,741 6,646 28,387 Balance per Warehouse Auto records ($15,923) $4,383 ($2,519) $3,000 ($11,059)
EXHIBIT C CASH FLOW PROJECTIONS FOR THE REORGANIZED DEBTOR FOR THE PERIOD JANUARY 1, 1997 THROUGH DECEMBER 2003 WAREHOUSE AUTO CENTERS, INC. COMMON STOCK DISTRIBUTION UNDER PLAN OF REORGANIZATION Number of Shares of Percent Description of Class Stock to be Distributed Class 1 - Administrative 250,000 1,436% Class 2 - Debtor Certificates 5,000,000 28.756% Class 3 - Priority Tax Claims 0 0.000% Class 4 - Unsecured Creditors 56,975 0.328% Class 5 - Equity Holders 50,000 0.288% Newgold Acquisition 12,000,000 69.013% Holders 23,500 0.135% Consulting 7,500 0.043% --------- -------- Total 17,387,975 100.000% EXHIBIT D PRO FORMA BALANCE SHEET ASSUMING PLAN CONFIRMATION
NEWGOLD, INC. PRO FORMA INCOME STATEMENT FOR YEARS ENDING DECEMBER 31, Note 1997 1998 1999 2000 2001 Production 60 117 117 117 117 Gold ounces (000's) Gross Revenue (000's) 1 $23.400 $45,630 $45,630 $45,630 $45,630 Smelter charges 2 234 456 456 456 456 NSR royalties 3 390 761 761 761 761 -------- -------- -------- -------- -------- Net revenue 22,776 44,413 44,413 44,413 44,413 Mining costs 4 13,200 25,740 25,740 25,740 25,740 Gross profit 9,576 18,673 18,673 18,673 18,673 Administrative costs 5 2,640 5,148 5,148 5,148 5,148 Income before taxes 6,936 13,525 13,525 13,525 13,525 Income taxes 6 2,771 5,407 5,407 5,407 5,407 Net income $4,164 $8,118 $8,118 $8,118 $8,118 ======== ======== ======== ======== ======== Income per share 7 $0.24 $0.48 $0.48 $0.48 $0.48 ======== ======== ======== ======== ========
Notes: 1 Assumes production ounces sold at an average $390 per ounce. 2 Assumes smelter processing charges at 1% of market value. 3 Assumes 2.5% NSR royalty payable on 2/3 of production. 4 Assumes mining cost of $220 per ounce of production. 5 Assumes administrative costs budgeted at 20% of mining costs. 6 Assumes combined federal and state tax rate of 40% on income over $335,000 plus $131,000. See Note 7 of pro forma 12/31/96 balance sheet, loss carry forwards not applied to 1997-2001. 7 Assumes 17,000,000 shares outstanding for pro forma period. EXHIBIT D NEWGOLD, INC. PRO FORMA CONSOLIDATED BALANCE SHEET December 31, 1996
ASSETS Notes CURRENT ASSETS Cash 350,000 Cash investments 4,409,438 Total Current Assets 7 4,759,438 OTHER ASSETS Reclamation bonds posted 600,000 INVESTMENTS Cerro Gordo property 1 200,000 Golden Asset mine 622,945 Relief Canyon Ltd. 2 1,500,000 Washington Gulch mine 3,000,000 5,322,942 --------- --------- Total Assets 10,682,380 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 3 700,000 Accrued payroll 4 22,075 ------- Total Current Liabilities 722,075 SHAREHOLDERS' EQUITY Common Stock - Authorized, 50,000,000 shares Issued and outstanding, 17,000,000 shares 6 9,400,305 Plus retained earnings 5 560,000 --------- Total Shareholders' Equity 9,960.305 10,682,380 ========== See notes next page
EXHIBIT D NEWGOLD, INC. PRO FORMA CONSOLIDATED BALANCE SHEET December 31, 1996 Notes 1 Purchase of Cerro Gordo property renegotiated to $100,000 cash plus 100,000 shares of stock. 2 Drill program capitalized 3 Thirty days operating costs 4 One week payroll 5 Does not reflect accumulated deficits of Warehouse Auto Parts which may be available as loss carry forwards against future income. Therefore, no income tax provision made for 1996 only. 6 Reconciliation of common stock capital Common Stock issued 6/30/96 3,687,805 Subscription capital received 5,000,000 Shares issued for Cerro Gordo property 100,000 Capital from private placement in September 600,000 Shares issued to holder of paid in capital 12,500 ------- 9,400,305 7 Cash Reconciliation Subscription 5.000,000 Private placement 600,000 Balance from Casmyn 623,000 --------- Total investment cash 6,223,000 Net income from 5,000 ounces at $112 per ounce 560,000 Less liabilities paid and amounts capitalized (2,023,562) Cash on hand 12/31/96 4,759,438 EXHIBIT E
LIQUIDATION ANALYSIS Warehouse Auto Centers, Inc Exhibit E LIQUIDATION ANALYSIS ASSETS BALANCE SHEET ADJUSTMENTS LIQUIDATED VALUE CASH(1) $20,000 $20,000 RECEIVABLES $0 $0 OTHER ASSETS $0 $0 $0 ------ ------ ------ TOTAL $20,000 $0 $20,000 LIABILITIES POST PETITION COST OF AUCTION $0 ACCOUNTS PAYABLE $0 ADMINISTRATIVE EXPENSES $250,000 $250,000 REPAY DEBTOR CERTIFICATES $0 $0 INTEREST ON DEBTOR CERTIFICATES $0 $0 SECURED DEBT $0 $0 $0 ------ ------ ------ TOTAL $250,000 NET VALUE FOR PRE-PETITION DEBT ($230,000) PRE-PETITION DEBT $2,437,759 ($2,437,759) AVAILABLE FOR DISTRIBUTION $0
Notes (1) Includes remaining case in escrow from sale of assets per Court Order of August 28, 1996 EXHIBIT F MERGER/ACQUISITION AGREEMENT BETWEEN NEWGOLD, INC. AND DEBTOR Not Included EXHIBIT G SUMMARY OF ENGINEERING REPORT & INDEPENDENT EVALUATIONS OF NEWGOLD, INC.'S GOLD RESERVES (Copies of Reports which are too voluminous have been filed with the Clerk of the U.S. Bankruptcy Court where they can be reviewed) Proving up gold mining properties consists of a number of steps which are performed by professional geologists. The following steps are required to be taken to verify gold reserves: 1) Geological mapping of the mining claims to determine favorable rocks for hosting the gold deposits. 2) Rock chip samples are collected by geologists, and then analyzed to determine gold and silver content. 3) Geophysical surveys may also be performed to assist with determining the extent of gold mineralization. Electrical, magnetic and density properties of rocks are determined in these surveys. 4) Data from all initial phases are analyzed by the geologists and targets are selected for testing and definition of potentially mineralized areas. 5) Drill rigs, either core or percussion, are deployed. Samples of the drilled rock materials are collected systematically from the drilled holes, and sent to laboratories for analyses of gold, silver and other elements. 6) Mining engineers and geologists study the resultant data, applying economic constraints to determine the profitability of the mining operation. A mine plan is designed, based on the limits of profitable operation defined ("orebodies"). 7) Permits are obtained from Federal, State and local agencies once the profitable operating parameters are identified. Bonds are posted with the pertinent agencies upon approval of the permits. 8) Mining commences on the identified orebodies. Terminology for defining the types of gold ore reserves are as follows: 1) Proved Ore Reserves: stated in terms of minable tons or volumes and accompanying grades in which the corresponding economic gold mineralization has been defined with strong degree of assurance in three dimensions by excavation or drilling. 2) Probable Ore Reserves: sampled by drill holes, excavations and/or underground openings at locations too widely spaced to ensure continuity but close enough to give a reasonable indication of continuity and where geoscientific data are known with a reasonable level of reliability. 3) Inferred Mineral Resources: inferred from drill holes, underground excavations, or other geoscientific evidence where the lack of data is such than continuity cannot be predicted with confidence and where geoscientific data may not be known with strong degree of certainty. Newgold, Inc. has four mining properties. Its Relief Canyon Mine is located in Pershing County, Nevada and is in reactivational status of former operations. Newgold, Inc. purchased the mine on January 10, 1995. Newgold has spent the past ten months permitting the project and is currently extending heap leaching pads for newly discovered ore. The Relief Canyon Mine is scheduled to recommence operations and gold productions in October, 1996. An evaluation of the project was performed by the engineering firm of Watts, Griffis and McOust, and an initial positive feasibility report was issued on February 28, 1996. The Report delineates 310,000 oz gold contained in 13.5 million tons of ore in proven reserve category, with additional reserves established in the probable and inferred category. These latter reserves will be augmented and upgraded to proven reserve category following the supplemental Fall 1996 drilling program. EXHIBIT H UNAUDITED FINANCIAL STATEMENTS OF NEWGOLD, INC. BALANCE SHEET DECEMBER 31, 1995 ASSETS CURRENT ASSETS Cash $909 Note receivable 38,074 Due from officer 26,939 Prepaid expenses 2,150 ------- Total Current Assets 68,072 INVESTMENTS Golden Asset mine 602,942 Relief Canyon mine 1,216,071 1,819,013 --------- TOTAL ASSETS $1,887,085 ========== LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $209,277 Accrued payroll 5,656 Payroll taxes payable 49,529 Payable to affiliated companies 307,935 Notes payable to individuals 1,189,305 Notes payable-Investments 456,407 ---------- Total Current Liabilities 2,218,109 SHAREHOLDERS' EQUITY (DEFICIT) Common Stock - Authorized, 1,000 shares 1,000 Issued and outstanding, 100 shares ---------- Less accumulated deficit ($332,024) ---------- Shareholders' Deficit (331,024) ---------- TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $1,887,085 ========== See Notes to Financial Statements EXHIBIT H NEWGOLD, INC. STATEMENT OF LOSS AND ACCUMULATED DEFICIT FOR SIX MONTHS ENDING DECEMBER 31, 1995 INCOME Sales of gold and silver $40,773 EXPENSES Assay and refining expenses 2,000 Accounting fees 4,655 Vehicle expenses 723 Bank service charges 2,578 Vendor service charges 9,049 Dues and subscriptions 53 Interest expense 15,419 Legal and professional 3,343 Licenses and permits 4,727 Travel 3,014 Meals and entertainment 494 Office supplies 2,270 Postage 645 Printing 212 Outside services 5,368 ADP fees 662 Laboratory fees 818 Miscellaneous 850 Equipment rental 1,605 Equipment fuel and oil 1,545 Repairs and maintenance 572 Supplies 5,168 Wages 35,255 Payroll taxes 4,215 Exhibit H (cont'd.) Telephone 3,447 Engineering fees 6,500 ---------- Total Expenses 115,187 NET LOSS (74,415) Accumulated Deficit - December 31, 1994 (257,609) ---------- Accumulated Deficit - December 31, 1995 ($332,024) ---------- See Notes to Financial Statements EXHIBIT H NEWGOLD, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDING DECEMBER 31, 1995 Cash Flows from Operating Activities Net Income (Loss) ($74,415) Adjustments to reconcile Net Loss to Net Cash Used by Operating Activities (Increase) in Note receivable (38,074) Decrease in Due from officer 20,871 (Increase) in Prepaid expenses (2,150) Increase in Accounts payable 97,642 Increase in Accrued payroll 5,656 Increase in Payroll taxes payable 48,615 Increase in payable to affiliated companies 234,077 ---------- Total adjustments 366,637 ---------- Net cash provided by Operating Activities 292,222 Cash Flows from Investing Activities Net Cash Payments on purchase of Relief Canyon (1,112,306) Cash Flows from Financing Activities Cash borrowings from individuals 866,805 Payments on Notes Payable for Golden Asset (52,500) ---------- Net Cash Provided by Financing Activities 814,305 ---------- Net Increase (Decrease) in Cash (5,779) Cash at Beginning of the Year 6,688 ---------- Cash at End of Year $909 ========== See Notes to Financial Statements NEWGOLD, INC. Notes to Financial Statements For The Year Ending December 31, 1995 Note 1 - Summary of Significant Accounting Policies ------------------------------------------ Business Activity - Newgold, Inc. (the Company) was incorporated in the State of Nevada on September 1, 1993 and began operations on May 16, 1994. The Company is engaged in the acquisition of inactive mining properties that have potential to be reopened as productive gold mines. The Company uses drill data of others to determine areas of proven reserves and engages engineers and geologists to review geological formations to define target areas to implement drill programs that will establish additional areas for mining gold and silver bearing ore. Income and Expense Recognition - The Company uses the accrual method of accounting where income is recognized when earned and expenses are recorded as they are incurred. As Relief Canyon property and equipment had not been placed into service as of the balance sheet date, all expenditures exceeding gold revenues from clear water tests of the equipment, have been capitalized. Investments - Investments are stated at cost and represent the leasehold cost of mineral rights and costs incurred for equipment and its refurbishment. Maintenance and repairs to equipment in production are charged to expense as incurred. Income Taxes - The Company has filed to be treated as a partnership under Subchapter S of the Internal Revenue Code; therefore, no income tax provision has been made in the financial statements. Note 2 - Related Party Transactions -------------------------- At December 31, 1995, the Company is 100% owned by Arthur Scott Dockter. In lieu of wages, the shareholder has been paid advances by the Company. There is an account receivable from Mr. Dockter of $26,939 as of December 31, 1995. A former officer and shareholder sold his 30% interest in the Company to Mr. Dockter as of June 30, 1995. There is a note receivable from the former shareholder for $38,074 for repayment of advances paid to him in lieu of salary. The note bears interest at 12% per annum. The Company has an account payable of $307,935 to Riverfront Development Corporation, an affiliated company. Of this balance at December 31, 1995 $250,000 represents used material and equipment sold to Relief Canyon to refurbish the mine's processing building and equipment. The remainder represents cash advances and expenses paid by Riverfront Development for the benefit of the Company. Note 3 - Notes Payable - Individuals --------------------------- The Company has borrowed funds from 19 individuals under Investor's Agreements which promises repayment of the principle plus net profit percentage interest (NPI) in the net income of each mine. The total borrowed from individuals for the Golden Asset mine is $382,500 and the lenders have been granted a total NPI of 46% of net income generated by this mine. The total borrowed from individuals for the Relief Canyon mine is $806,805 and they have been granted a total NPI of 59.5% in the net income generated by this mine. Note 4 - Notes Payable - Investments --------------------------- In the acquisition of the Golden Asset mine, the Company assumed total debt of $572,642. Alta Gold Corporation sold its interests to the Company for $322,642. The Company paid a deposit of $200,000 and has made two of the $10,000 monthly payments through March 1995. The balance payable at December 31, 1995 was $102,642. The Company agreed to pay $250,000 to Christiansen Company for earthwork at the mine prior to purchase by the Company. Christiansen has agreed to delay payment of this debt until the Company has the mine in full operation. The processing building, leach ponds and mineral rights of Relief Canyon mine were acquired from Welsh & Associates for the sum of $500,000. The contract required a down payment of $100,000 and twelve monthly payments of $35,166 including interest at 10%. The balance due of $103,765 at December 31, 1995 represents the last three monthly principal payments. Note 5 - Operating Rents --------------- The mineral rights lease for Golden Asset mine requires future annual minimum lease payments to the landowner of $10,000 in lieu of 2.5% royalty on Net Smelter Return for gold purchased by a smelter. A mineral rights lease for Relief Canyon mine requires future annual minimum lease payments of $13,125 to Santa Fe Pacific Gold Corporation for 800 acres of land and $12,500 minimum royalty in lieu of 2.5% royalty on Net Smelter Return for gold purchased by smelter. There are 39 unpatented claims on land owned by the Federal government. These claims require a minimum annual rent of $3,900 payable to the Bureau of Land Management to remain active as claims of the Company. Note 6 - Contingencies ------------- Payroll Taxes - Payroll taxes payable of $49,529 represent delinquent amounts. Payments have been made subsequent to the balance sheet date. However, there will be additional interest and penalties. At this time, the Company is unable to estimate the additional amounts due. Liens - A vendor who did earthwork for the Company at Golden Asset has filed a lien against the property for $95,534. At this time, the Company is unable to estimate when the vendor will be paid. EXHIBIT I NEWGOLD, INC. BALANCE SHEET JUNE 30, 1996 ASSETS CURRENT ASSETS Cash $24,273 Due from officer - Note 2 56,969 Prepaid expenses 16,573 ----------- Total Current Assets 97,815 INVESTMENTS Cerro Gordo property - Note 7 611,000 Golden Asset mine 622,942 Relief Canyon Ltd - Notes 2 and 8 1,398,000 Washington Gulch mine 3,000,000 5,631,942 ----------- TOTAL ASSETS $5,729,757 =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $215,159 Accrued payroll due officer - Note 2 83,259 Payroll taxes payable - Note 6 42,605 Payable to affiliated companies - Note 2 622,397 Notes payable to individuals - Note 3 517,500 Notes payable-Investments-Current - Note 4 422,642 ----------- Total Current Liabilities 1,923,562 LONG TERM LIABILITIES Notes payable-Investments - Note 4 500,000 ----------- Total Liabilities 2,423,562 SHAREHOLDERS' EQUITY Common Stock - Authorized, 50,000,000 shares 3,687,805 Issued and outstanding, 11,440,958 shares Additional paid-in capital 12,500 Less accumulated deficit ($394,110) ----------- Total Shareholders' Equity 3,306,195 ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,729,757 =========== See Notes to Financial Statements NEWGOLD, INC. STATEMENT OF LOSS AND ACCUMULATED DEFICIT FOR SIX MONTHS ENDING JUNE 30, 1996 INCOME Option income $100,000 EXPENSES Vehicle expenses 1,073 Fees and service charges 577 Premium to redeem notes to individuals 27,500 Insurance 1,992 Legal and professional 14,488 State fees 10,285 Travel and entertainment 5,465 Office supplies and postage 935 Outside services 1,050 Rent 10,000 Equipment rental 23,925 Computer expense 1,550 Supplies 1,720 Wages 37,253 Payroll taxes 3,790 Telephone 448 Note receivable write off 19,037 ----------- Total Expenses 161,087 ----------- NET LOSS (61,087) Accumulated Deficit - December 31, 1995 (333,023) ----------- Accumulated Deficit - June 30, 1996 ($394,110) =========== See Notes to Financial Statements NEWGOLD, INC. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDING JUNE 30, 1996 Cash Flows from Operating Activities Net Income (Loss) ($61,087) Adjustments to reconcile Net Loss to Net Cash used by Operating Activities Decrease in Note receivable 38,074 (Increase) in Due from officer (31,030) (Increase) in Prepaid expenses (14,423) Increase in Accounts payable 5,882 Increase in Accrued payroll 77,603 (Decrease) in Payroll taxes payable (6,925) Increase in Notes payable to individuals 27,500 Increase in payable to affiliated companies 314,462 ----------- Total adjustments 411,143 ----------- Net cash provided by Operating Activities 350,056 Cash Flows from Investing Activities Cash Payments to purchase Cerro Gordo property (21,000) Cash Payments on Golden Asset mine (20,000) Cash Payments on Relief Canyon mine (181,929) ----------- Net Cash Payments on Investment Activities (222,929) Cash Flows from Financing Activities Net cash payments on Investment Notes Payable (103,765) ----------- Net Increase (Decrease) in Cash 23,362 Cash at Beginning of the Period 911 ----------- Cash at End of Period $24,273 =========== See Notes to Financial Statements NEWGOLD, INC. Notes to Financial Statements For Six Months Ending June 30, 1996 Note 1 - Summary of Significant Accounting Policies ------------------------------------------ Business Activity - Newgold, Inc. (the Company) was incorporated in the State of Nevada on September 1, 1993 and began operations on May 16, 1994. The Company is engaged in the acquisition of inactive mining properties that have potential to be reopened as productive gold mines. The Company uses drill data of others to determine areas of proven reserves and engages engineers and geologists to review geological formations to define target areas to implement drill programs to establish additional gold and silver bearing ore areas. Income and Expense Recognition - the Company uses the accrual method of accounting where income is recognized when earned and expenses are recorded as they are incurred. Investments - Investments are stated at cost and represent the leasehold cost of mineral rights, expenditures for equipment or refurbishment and reclamation bonds posted. Maintenance and repairs to equipment in production are charged to expense as incurred. Note 2 - Related Party Transactions -------------------------- In lieu of wages through May 31, 1996, Scott Dockter, President, was paid advances by the Company. There is an account receivable from Mr. Dockter of $56,969 as of June 30, 1996. The account receivable will be offset against $83,259 in accrued salary when paid. The Relief Canyon mine was transferred at a cost of $1,398,000 to a Limited Liability Company on April 26, 1996 in exchange for 50% ownership of Relief Canyon, Ltd. Casmyn Corp. owns the other 50% of the LLC in exchange for $775,000 in cash and a commitment to pay an additional $623,000 after Relief Canyon Ltd. posts a reclamation bond with the U.S. Bureau of Land Management. In a Subsequent Event (Note 8), the Company acquired the interests of Casmyn Corp. in the Relief Canyon mine. The Company has an account payable of $287,901 to Riverfront Development Corporation, an affiliated company. Of this balance $250,000 represents used material and equipment sold to Relief Canyon in 1995 to refurbish the mine's processing building and equipment. The remainder is accumulated cash advances by Riverfront Development Corp. The Company has account payable to Relief Canyon Ltd. of $334,496 at June 30, 1996. Note 3 - Notes Payable - Individuals --------------------------- The Company had borrowed $1,189,305 from 19 individuals under Investor's Agreements. The Investor's Agreements have been replaced by a Common Stock issue and other notes payable to three individuals. One individual received stock for a portion of his loan and was given a note payable for $215,000. The note is due September 30, 1996 and bears interest at 8% per annum. Two individuals owed $275,000 chose not to exchange their notes payable for shares of stock. They are to be paid 110% of the amount loaned within 90 days. The note redemption premium of $27,500 has been accrued in notes payable and has been charged to expense. Note 4 - Notes Payable - Investments --------------------------- In the acquisition of the Golden Asset mine, the Company assumed total debt of $572,642 Alta Gold Corporation sold its interests to the Company for $322,642. The Company paid a deposit of $200,000 and has made two of the $10,000 monthly payments through March 1995. The balance payable at June 30, 1996 was $102,642. The Company agreed to pay $250,000 to Christiansen Company for earthwork at the mine prior to purchase by the Company. Christiansen has agreed to delay payment of this debt until the Company has the mine in full operation. The Cerro Gordo property was acquired from the owner on May 24, 1996 for $600,000. Another $16,000 was paid to geologists and attorneys for work relating to the property. The property was purchased with a $10,000 option payment, $90,000 payable within one year and lump sum payments of $250,000 each in 1998 and 1999. Note 5 - Operating Rents --------------- The mineral rights lease for Golden Asset mine requires future annual minimum lease payments to the landowner of $10,000 in lieu of 2.5% royalty on Net Smelter Return for gold purchased by a smelter. A mineral rights lease for Relief Canyon mine requires future annual minimum lease payments of $13,125 to Santa Fe Pacific Gold Corporation for 800 acres of land and $12,500 minimum royalty in lieu of 2.5% royalty on Net Smelter Return for gold purchased by smelter. There are 39 unpatented claims on land owned by the Federal government. These claims require a minimum annual rent of $3,900 payable to the Bureau of Land Management to remain active as claims of the Company. Note 6 - Contingencies ------------- Payroll Taxes - Payroll taxes payable of $42,605 represent delinquent amounts. There will be additional interest and penalties. At this time, the Company is unable to estimate the additional amounts due. Liens - A vendor who did earthwork for the Company at Golden Asset has filed a lien against the property for $95,534. At this time, the Company is unable to estimate when the vendor will be paid. Note 7 - Litigation ---------- The former owner of the Cerro Gordo property had executed a one year minerals lease in 1995 with another organization. As the lessee did not make the required monthly lease payments, the former owner advised the lessee that the lease had been terminated. The lessee has refused to give up the lease rights and the former owner has filed suit to terminate the lease. It is the opinion of counsel that the former owner will prevail. Note 8 - Subsequent Events ----------------- The Company has leased patented claims (personally owned) in the Cerro Gordo area and unpatented claims of the Mission mine in southern California. The gold reserves in these two properties more than equate to the reserves of the Cerro Gordo Unpatented Property (See Note 7). Casmyn Corp. has agreed to sell its interests in Relief Canyon Ltd. to the Company for $900,000 plus one million shares of restricted Newgold, Inc. stock. Casmyn Corp. purchased its interests in Relief Canyon Ltd. for $775,000 in cash plus a note for $623,000 which is canceled under the repurchase agreement (See Note 2). EXHIBIT I CLOSING STATEMENT ASSET SALE OF WAREHOUSE AUTO CENTERS, INC. August 29, 1996 - BK Case No. 95-21279 Purchase Price of Assets $375,000.00 PAYOFFS 1. Quality Automotive Company 23,209.00 2. Standard Electronics, Inc. 320.16 3. General Automotive Specialty Corp. 11,500.13 4. Interstate Tire Company 15,675.13 5. Michelin Tire Corp. 6,412.00 6. Crown Tire 5,000.00 7. Yokohama Tire 7,210.00 8. Gianniny Associates - Rent 77,199.21 9. Nathan Morton - Dip Lender 60,000.00 10. Richard Dale - Dip Lender 25,000.00 11. John Devine - Dip Lender 90,000.00 12. Eugene O'Donovan - Dip Lender 25,000.00 200,000.00 ------------- TOTAL PAYOFFS $346,525.63 EXPENSES PAID 1. Record UCC-3's with Monroe $ 52.00 County Clerk 2. Record UCC-3's with Department $ 56.00 of State 3. Advanced Quickprinting for copies $ 63.72 4. U.S. Postmaster for Postage $ 15.00 ------------- TOTAL EXPENSES $ 186.72 Purchase Price $375,000.00 Less Payoffs 346,525.63 Less Expenses 186.72 ------------ BALANCE IN ESCROW ACCOUNT $ 28,287.65 ============ Leonard Relin 1 East Main Street Rochester, New York 14614 (716) 454 4336 Attorney for Debtor UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NEW YORK In re ) Case No. 95.21279 ) WAREHOUSE AUTO CENTERS, INC. ) Debtor's Plan of Reorganization ) ------------------------------- ) ) Chapter 11 ) ) Date: November 21, 1996 Debtor ) Time: 10:30 A.M. ) - -------------------------------------------- TABLE OF CONTENTS TO DEBTOR'S PLAN OF REORGANIZATION Article I Definitions and Interpretations Page 3 Article II Classification of Administrative Expenses and Priority Unsecured Tax Claims Page 8 Article III Classification of Claims Page 8 Article IV Classes of Claims or interests Not Impaired Under the Plan Page 9 1 Article V Classes of Claims or Interest Impaired Under the Plan Page 10 Article VI Title to Property; Discharge of Claims Page 10 Title to Property to be brought into the Estate Page 11 Retention of Claims Page 11 Notices Page 11 Record Dates for Determining Holders of Claims and Interest Page 11 Jurisdiction Page 11 Article VII Means of Execution and Implementation of the Plan Page 13 Article VIII The Effective Date of the Plan Page 13 Article IX Cram Down Provisions Page 14 Article X Modification of the Plan Page 14 Article XI Compliance with Section 1 123(a)(6) Page 14 Article XII Abandonment of Certain Claims Page 14 Article XIII Voting Page 16 Article XIV Miscellaneous Page 16 Article XV Other Page 18 Signature Page Page 19 2 UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF NEW YORK In re ) Case No. 95.21279 ) WAREHOUSE AUTO CENTERS, INC. ) Debtor's Plan of Reorganization ) ------------------------------- ) ) Chapter 11 ) Date: Debtor ) Time: - -----------------------------------) Debtor's Plan of Reorganization The above referenced Debtor hereby proposes the following Plan of Reorganization ("Plan") pursuant to the provisions of Chapter 11 of the United States Bankruptcy Code. ARTICLE I DEFINITIONS AND INTERPRETATIONS 1. For purposes of the Plan, the following terms shall have the respective meanings hereinafter set forth (such meanings to be equally applicable to both the singular and plural forms of such tern's defined). A term used in the Plan and not defined herein but that is defined in the Bankruptcy Code has the meaning set forth in the Bankruptcy Code. 3 a "Administrative Expenses or Claim" shall mean any Allowed Claim which is a cost or expense of administration in connection with this Chapter 11 case having priority in accordance with Section 503(b), Section 330 and/or Section 507(a)(l) of the Bankruptcy Code, including but not limited to any actual and necessary expenses of operating or liquidating the business of the Debtor-in-Possession, and all allowances of compensation or reimbursement of expenses to the extent allowed by the Bankruptcy Rules, including Post-Confirmation Expenses. b. "Allowed Claim" shall mean a scheduled non-disputed Claim that has been timely filed with the Clerk of the Bankruptcy Court by the Holder of the Claim within the applicable period of limitation fixed by Bankruptcy Court order, as to which Claim no written objection to the allowance thereof has been interposed within the period of time fixed by the Bankruptcy Court, or as to which Claim an objection to the Claim has been resolved by the Bankruptcy Court c. "Allowed Secured Claim" shall mean an Allowed Claim secured by a lien, security interest or other charge against or interest in property in which the Debtor has an interest, or which is subject to setoff under Section 553 of the Code, to the extent of the value, determined in accordance with Section 506(a) and (b) of the Code, of the interest of the Holder of such Allowed Claim in the Debtor's interest in such property, or to the extent of the amount subject to such setoff, as the case may be, and reduced by such further amount or amounts, if any, as may be determined by the Bankruptcy Court after notice and a hearing to be reasonable and necessary costs and expenses of preserving and disposing of such asset(s) pursuant to Section 506(c) of the Bankruptcy Code. d. "Claim" shall mean any claim as defined by Section 101(4) of the Code and any other debt or obligation of whatever character of the Debtor through Bar Date. e. "Plan Payments" shall mean the payments made by the Debtor pursuant to the Reorganization Plan. f. "Claimant" shall mean any holder of a claim against the Debtor that arose on or before the petition date or a Claim against the Debtor's estate of a kind specified in Section 502(g), (h)or (i) of the Bankruptcy Code. g. "Class" shall mean a category of Claims or interests, the holders of which hold substantially similar Claims or interests. 4 h. "Code" shall mean Title I of Public Law No. 95-598, as codified in Title 11 of the United States Code and any amendments thereto. i. "Confirmation Date" shall mean the date upon which the Confirmation Order is entered by the Court and becomes a Final Order. J. "Confirmation Order" shall mean the order entered by the Bankruptcy Court confirming the Plan. k. "Consummation Date" shall mean the date one business day after the Debtor's Plan has been fully completed and all claims disposed of in accordance with the terms of the Plan. l. "Court" shall mean the United States Bankruptcy Court for the Western District of New York in which the Debtor's Chapter 11 case, pursuant to which the Plan is proposed, is pending including any Bankruptcy Judge thereof, and any Court having competent jurisdiction to review Orders of, or to hear appeals from said Bankruptcy Court and Judge(s) thereof. "Court" shall also mean, to the extent any proceedings have been referred to the above Bankruptcy Court by the United States District Court for the Western District of New York, to that District Court. 2. "Creditors Committee" shall mean the official committee of unsecured creditors of the Debtor appointed by the Court pursuant to Section 1102 of the Bankruptcy Code, as constituted from time to time. a. "Creditor's Rights" shall mean all claims, suits, dam ages, actions, causes of action, allowances and claims in equity possessed by the Debtor and whether direct or indirect, absolute or contingent, liquidated or unliquidated, whether arising prior to or subsequent to the filing of the petition and entry of the Order for Relief which could be enforced by the Debtor in possession including but not limited to, all claims under 11 USC sections 510, 544, 547, 548, 549 & 550 and all like states statutes, including, but not limited to, Article 10 of the New York Debtor and Creditor Law except accounts receivables which have previously been sold. b. "Debtor" and "Debtor-in-Possession" shall mean Warehouse Auto Centers, Inc. or any successor Corporation or entity of Warehouse Auto Centers, Inc. 5 c. "Debtor's Assets" shall mean all the property, rights, claims and interests of the Debtor and/or Debtor-in- Possession, real or personal, tangible or intangible, and the proceeds thereof. d. "Disputed Claim" shall mean a Claim to which written objection to the allowance or classification thereof, in whole or part, has been timely filed by any party in interest and as to which no Final Order or Judgment sustaining or denying such objection or allowing or disallowing such Claim, in whole or in part, has been entered by the Court e. "Effective Date" shall mean the 10th day after confirmation date of the Plan. f. "Final Order of Judgement" shall mean an order of judgement of the Court: i. As to which the time to appeal, petition for centiorari , or seek reargument, rehearing or de novo review has expired and to which no appeal, reargument, centiorari petition, rehearing, or de novo review is pending, or ii. if an appeal, reargument, certiorari, rehearing or de novo review thereof has been sought, the order of the Court has been affirmed by the highest Court to which the order was appealed or from which the reargument, rehearing, or de novo review was sought, or certiorari has been denied, or the appeal is dismissed or rendered moot, and the time to take any further appeal or to seek certiorari or further reargument, rehearing or de novo review has expired. g. "Holder" of a Claim or interest shall mean the person holding a Claim or interest which was listed or filed with the Court, or the person to whom such Claim or interest was last transferred by the Final Order or Judgment of the Court substituting the transferee for the prior Holder thereof. h. "Insider" shall mean an insider as defined in Section 101(30) of the Bankruptcy Code. i. "Newgold" shall mean Newgold, Inc. a corporation which proposes to merge with the Debtor. 6 j. "Person" shall mean an individual, corporation, partnership, joint venture, trust, estate, unincorporated organization or governmental unit, or any agency or political subdivision of a government unit. k. "Plan" shall mean this Plan of Reorganization and any duly authorized amendment(s) thereto and modification(s) thereof. 1. "Post-Confirmation Expense" shall mean all expenses reasonably incurred subsequent to the Confirmation Date in consummating the Plan. m. "Priority Claim" shall mean all Unsecured Claims entitled to priority under 11 U.S.C. Section 507(a), (1), (3), (4), (5), (6), or (7), unless further specified. n. "Pro Rata", with respect to any creditor, shall mean in the proportion that the amount of the Allowed Claim of such creditor in any class as provided in Article II bears to the aggregate amount of all claims of creditors in such class, including in such aggregate amount both the Allowed Claims and any then unresolved Disputed Claims which may apply to that class of claims as of the date of any distribution payment pursuant to this Plan. o. "Reorganized Debtor" means Newgold, Inc. which company is merging with the Debtor and which name (Newgold, Inc.) shall be the corporate name of the Debtor after reorganization. p. "Unsecured Claim" shall mean all unsecured Allowed Claims, including, but not limited to: i. claims of creditors under executory contracts and unexpired leases that have heretofore been rejected by the Debtor under this Plan, and that may be rejected by the Debtor under this Plan, and that may be rejected by the Debtor prior to the Confirmation Date; ii. claims of general trade creditors; iii.loss and damage claims, overcharge claims, personal injury claims, liability claims; 7 iv. claims for monies paid to the Debtor by mistake and belonging to others, claims for C.O.D. monies collected by the Debtor that should have been paid over to others, insurance and surety bond c1aims, worker's compensation claims; and v. other obligations, liabilities, damages and claims of and against the Debtor of every type and nature whatsoever, incurred on or before the date of filing of the Chapter 11 Petition (June 6, 1995), including all claims arising from the rejection of leases and other executory contracts effective on June 6, 1995. as provided in this Plan and by Section 365 and Section 1123(b)(2) of the Code. ARTICLE II Classification of Administrative Expenses and Priority Administrative Claims 2.01 Class 1. Allowed administrative expenses, including attorney's and accountant fee's of the kinds specified ill Code Section 507(a)(l), approved salaries of officers and commissions owed for the sale of Debt Certificates. 2.02 Class 2. Claims Consisting of Code Section 364 Priority Debtor Certificate holders in the approximate amount of $5,000,000. 2.03 Class 3. Administrative claims consisting of Priority Unsecured New York State Sales Tax Claims in the approximate amount of $30,000, fees owed the U. S. Trustee's Office of the kind specified in Code Section 507(a)(1), Court fees, Franchise Tax Fees owed the State of Delaware for 1995 taxes of approximately $2,653.00 and State of Ohio Sales Tax of $1,826.95. ARTICLE III Classification of Claims 3.01 Class 4. Claims consisting of approximately 327 unsecured creditors in the approximate amount of $2,392.967. 8 3.02 Class 5. Claims consisting of approximately 321 equity holders of the debtor holding 3,299,191 shares of common stock in the Debtor. ARTICLE IV Classes of Claims Not Impaired Under the Plan 4.01 Classes 1, 2, 3 and 5 will not be impaired under the Plan. Class 1 Claims consisting of allowed administrative expenses, including attorney and accountant fees of the kind specified in Code Section 507 (a) (1) approved salaries of officers, and trade payables arising after commencement of the Case and commissions owed for the sale of Debtor Certificates, shall be paid in full by the Reorganized Debtor in cash on the effective date of the Plan or in stock in the Reorganized Debtor at a ratio of one (1) share of stock for each $1 owed the Creditor. The Class 1 Claimants will have the right to "Put" to Newgold, Inc. or its Assignee, the stock for 15 days from the effective date of the Plan for $1.00 in cash for each share of the new stock issued. Class 2 Claims consisting of Priority Debtor Certificate holders in the approximate amount of $5,000,000. The holders of allowed claims in Class 2 shall be paid by the Reorganized-Debtor as originally agreed and such holders shall retain their respective security interests. Class 2 claimants, at their exclusive option, shall be allowed to exchange their claims for one (1) share of Common Stock of the Reorganized Debtor for each $1 of indebtedness. The common stock being offered will be set aside in trust for Class 2 claimants who shall have ninety (90) days from the date of confirmation of the Plan of Reorganization to exercise the conversion of their debt to equity. The Reorganized Debtor shall retain the right to sell said stock ,from time to time, to non claimants with the proceeds to be paid to the Class 2 Claimants who opt not to convert. Any difference realized in the sale of equity in excess of the principal sum owed Class 2 Debtor Certificate holders, plus interest thereon, shall be retained by the Reorganized Debtor for working capital. Upon confirmation of the Plan of Reorganization, Debtor Certificate holders shall be issued promissory notes bearing interest at 10% per annum. These notes must be surrendered by Debtor Certificate holders who elect to convert their debt to equity. Those who do not choose to convert shall be paid their principal and all accrued interest two years from the anniversary of the date of confirmation of this Plan. 9 Class 3 Administrative claims consisting of Priority Unsecured New York Sales Tax claims owed approximately $30,000, U.S. Trustee fees, Court fees and State of Delaware Franchise Tax fees, owed of approximately $2,653.00 for 1995 taxes and State of Ohio Sales Tax of $1,826.95 and any 941 IRS taxes owed by the Debtor\. Said claims shall be paid in cash on the Effective Date of the Plan. Class 5 Claims consisting of approximately 321 shareholders holding 3,299,191 shares of common stock which represents 100% of the total outstanding and issued shares of common stock of the Debtor. There are no other equity securities issued by the Debtor other than the one class of common stock. Existing Class 5 claimants will have their interest diluted by a factor of 1:65. In other words existing shares shall be reverse split by a factor of 65 or, for each 65 shares of pre-petition stock, such 65 shares shall be exchanged for one (1) share of post- petition stock in the Reorganized Debtor. Existing equity holders will be reduced on a pro-rata basis to a total of 50,000 shares in the aggregate. However, in no event will any existing shareholder of the Debtor hold less than two (2) shares after the reverse split. Shareholders shall be obligated to surrender their shares of stock to the Reorganized Debtor's transfer agent within six months of the effective date of the Plan. Any shares not surrendered and exchanged within the time period shall be cancelled and the shareholder who fails to surrender his shares shall have no further rights or recourse against the Reorganized Debtor as an equity holder. ARTICLE V Classes of Claims or Interest Impaired Under the Plan 5.01 Classes 4 will be impaired under the Plan. Class 4 Claims consist of 327 unsecured creditors with aggregate claims amounting to approximately $2,392,967. Class 4 Creditors shall receive one (1) share of Common Stock in the Reorganized Debtor for each $42 of debt. Approximately 56,975 shares of Common Stock shall be issued to Class 4 claimants. ARTICLE VI 6.01 Title to Property; Discharge of Claims Except as otherwise provided in the Plan or the Confirmation Order, upon completion of all actions required by the Plan to be taken on or before the Confirmation Date, all property of the 10 estate wherever situated, shall vest in the Reorganized Debtor, free and clear of all claims and interest of creditors and equity holders of the Debtor. Any property that the Debtor abandons pursuant to the Bankruptcy Code and the approval of the Court would be deemed to vest in the Reorganized Debtor free and clear of all claims and interests of creditors immediately prior to abandonment. 6.02 Title to Property to be Brought into the Estate. Assuming Plan confirmation as a condition precedent, the Reorganized Debtor will acquire the assets of Newgold Inc. which are described in the Disclosure Statement accompanying this Plan. 6.03 Retention of Claims. Each claim or interest belonging to the Debtor of every kind and description shall be retained and shall be vested in the Reorganized Debtor, upon confirmation, and the reorganized successor to the Debtor may enforce, settle or adjust any such Claim or Interest. 6.04 Notices. Unless otherwise specifically provided in the Plan or the Bankruptcy Rules, any notice required or contemplated by any provision of the Plan shall be in writing and shall be sent by First Class Mail, postage prepaid, to the address of the person or entity entitled thereto, as it appears on the matrix list filed in connection with the service of the Disclosure Statement in the Case. 6.05 Record dates for Determining Holders of Claims and Interest. The date the order of the Bankruptcy Court approving the Disclosure Statement is entered shall be the record date for determining the holders of the Claims and Interests entitled to vote on the Plan, all in accordance with the provisions of the Bar Order. The Confirmation Date shall be the record date for determining the holders of the Claims and Interests which, if allowed, will be entitled to receive distributions under the Plan, provided, however, that this sentence shall not vary, affect, or impair the provisions of the Bar Order. 6.06 Retention of Jurisdiction. Following confirmation and prior to the completion of all actions required to be taken on the Confirmation Date or as soon as practicable thereafter, the Bankruptcy Court shall retain solely for the following purposes to which its jurisdiction shall be exclusive: 11 (a) to hear and determine any objections to Claims filed, both before and after Confirmation; (b) to supervise any distribution of funds or stock pursuant to this Plan; (c) to hear and determine all applications for compensation of professionals and reimbursement of expenses under Code Sections 330 and 331 including compensation of professionals employed by the Debtor for services rendered in connection with the Case, or in connection with the Plan and incident to the Case; (d) to hear and determine any and all pending motions for rejection of executory contracts or unexpired 1eases and the allowance of Claims resulting therefrom; (e) to hear and determine all claims and causes of actions arising prior to Confirmation that may exist in favor of the debtor or its successor or shall seek such a hearing and determination; (f) to enter orders enforcing and implementing the Plan and to resolve disputes arising under or in connection with the Plan; (g) to correct any defect, cure any omission or reconcile any inconsistency in the Plan, the Confirmation Order or any document executed in connection therewith, as may be necessary to carry out the purposes and intent of the Plan; and (h) to consider the modification of this Plan after confirmation pursuant to the Bankruptcy Code and Rules; and (i) Except as otherwise provided in the Plan, to make any determinations and to issue any orders to enforce, interpret or effectuate the Plan; and (j) to determine all questions and disputes regarding title to assets of the estate, and determination of all causes of action, controversies, disputes or conflicts, between the Debtor, the Creditors' Committee and any third party, including but not limited to, any right of the Debtor, or the provisions of the Code or applicable state or federal law; and 12 (k) to enter and Order concluding and terminating this Case; and (l) to determine such other matters as may be provided for in the Order of the Court confirming the Plan; and (m) to grant extensions of any deadline set herein; and (n) to enter and implement such orders as may be appropriate in the event that the Confirmation Order for any reason is stayed, reversed, revoked, modified or vacated, and; (o) to enforce all discharge provisions under the Plan, and; (p) to make such order(s) or give such direction(s) as may be appropriate under Sections 364,1109,1129,1141,1142 and 1145 of the Code. ARTICLE VII Means of Execution and Implementation of the Plan 7.01 Means of Execution. Remaining funds and funds generated from the sale of Certificates of Indebtedness and funds generated from the operation of the successor to the Debtor will be used to fund payment under the Plan other than the issuance of equity of the successor to the Debtor as specified herein. ARTICLE VIII The Effective Date of the Plan 8.01 Effective Date of the Plan. The effective date of the Plan shall be ten days after the Order of Confirmation becomes final, However, immediately upon confirmation of the Plan, the new management described in the accompanying Disclosure Statement shall take over management of the Reorganized Debtor. 13 ARTICLE IX Cram Down Provisions 9.01 Cram Down Provisions. In the event that any class of creditors is deemed impaired by the Plan of Reorganization, and the requisite majorities of such class or classes fail to approve the Plan, then the Debtor intends to confirm its Plan over the objection of any such dissenting class by the use of the provisions of the United States Bankruptcy Code, Section 1111, and any other provisions relating to the cram down of dissenting classes. ARTICLE X Modification of the Plan 10.01 Modification of the Plan. This Plan may be amended or modified by the proponents at any time prior to the Confirmation Date upon such notice as the Court may require. After the Confirmation Date, the proponents may, with the approval of the Court and so long as it does not materially and adversely affect the interests of creditors, remedy any defects or omissions or reconcile any inconsistencies in the Plan or in the Confirmation Order in such manner as may be necessary to carry out the purposes and intent of the Plan. ARTICLE XI Compliance with Section 1123(a)(6) 11.01 Compliance with Section 1123(a)(6). The Debtor shall within sixty (60) days after the Confirmation Date, cause a provision to be inserted in its corporate charter prohibiting it from issuing non-voting equity securities. However, the Debtor may issue a convertible debenture convertible to Common Stock, which Common Stock bears the right to vote. The Debtor presently has no class of securities possessing voting power other than its Common Stock. ARTICLE XII Abandonment of Certain Claims 12.01 Abandonment of Certain Claims. The Debtor herewith reserves to itself the right to collect and enforce all Creditor Rights except accounts receivables that have been previously sold which it could have brought as Trustee under Title 11 Section 101 et seq. and expressly reserves 14 the right to bring the same subsequent to the entry of an Order of Confirmation herein as if such Order had not been entered but in no event subsequent to the period of limitations prescribed by 11 USC Sections 546 & 549. The Debtor designates the Official Unsecured Creditors Committee appointed herein as agent for the purposes of enforcing such Creditors Rights in its name and stead with full powers of substitution. Such actions may be brought in the name of the Debtor or in the name of the Official Unsecured Creditors Committee. Debtor agrees to cooperate with the Unsecured Creditors Committee in the prosecution of such actions and to render such assistance as may be reasonable at the time, without cost to the Official Unsecured Creditors Committee. All sums recovered by the Creditors Committee in the enforcement of the Creditors Rights shall be retained in escrow by counsel to the Committee and applied, first to the cost of prosecuting such actions, including all reasonable attorneys fees, costs and disbursements incurred; second to the payment of any fees due the court and the Office of the United States Trustee on account of the bringing or prosecution of such actions. The net proceeds remaining, if any, shall be distributed by the Committee solely to general unsecured creditors on the allowed unsecured claim of each, pro rata. The Official Unsecured Creditors Committee shall remain in existence until such time as counsel for the Committee shall notify the Court in writing that it has disbanded itself and abandoned the attempt to collect such Creditors Rights. The Debtor shall have no liability for any counsel fees, costs or disbursements incurred in the investigation or prosecution of any Creditors Rights by the Committee. The Committee shall be free to investigate and pursue none, some or all the Creditors Rights claims which may be available to the Debtor. It is acknowledged that the Debtor made few if any preferential transfers which could be recovered under I USC Section 547 to third party creditors herein having virtually suspended payments well in advance of the involuntary filing. It is further acknowledged that claims against insiders may be difficult to investigate and prosecute and that there are no funds currently available to pay the costs of such in the litigation or prosecution. Therefore, the Committee may abandon all such Creditors Rights without action at any time it deems investigation or pursuit of the same diseconomic. 15 ARTICLE XIII VOTING 1 3.01 Claimants Entitled to Vote are those whose claims are "impaired" by the Plan. A claim to which the legal, equitable, or contractual rights are altered, or an interest that is adversely affected, is impaired. Only Class 4 interests are impaired under the Plan; therefore, it is important that you vote. If you fail to vote, your rights may be jeopardized. 13.02 Impaired Claimants may vote to accept or reject the Plan by indicating their acceptance or rejection on the appropriate ballot. 13.O3 EXECUTED BALLOTS MUST BE RECEIVED PRIOR TO 5:00 PM. (Eastern Daylight Time) ON:_________________________ Ballots should be mailed to: U. S. Bankruptcy Clerk of the Court, 100 State Street, Rochester, New York 14614. ANY BALLOTS RECEIVED AFTER THAT DATE MAY NOT BE INCLUDED IN ANY CALCULATION TO DETERMINE WHETHER THE CREDITORS HAVE VOTED TO ACCEPT OR REJECT THE PLAN. 13.04 A Class of Claims will have accepted the Plan if it is accepted by creditors holding at least two-thirds in amount and more than one-half in number of the holders of allowed claims that actually vote on the Plan. Only those votes received will be counted. ARTICLE XlV Miscellaneous 14.01 Notices. All notices required or permitted to be made in accordance with the Plan shall be in writing and shall be delivered personally or by fax or other telegraphic means or mailed by registered or certified mail, return receipt requested: (a) If to Debtor: Warehouse Auto Centers, Inc. % Leonard Relin 2452 West Henrietta Road Rochester, New York 14623 (b) With copies to: Leonard Relin, Esq. One East Main Street Rochester. New York 14614 16 and Albert Solochek, Esq., Attorney for Creditors Committee Howard, Solochek & Weber, S.C. 324 E. Wisconsin Avenue, #1100 Milwaukee, WI 53202 (c) If to a holder of an Allowed Claim or Allowed Interest, at the address set forth in its allowed proof of claim or proof of interest, or, if none, at its address set forth in the schedules prepared and filed with the Court pursuant to Rule 1007(b). (d) Notice shall be deemed given when received. Any person may change the address at which it is to receive notices under the Plan by sending written notice pursuant to the provisions of this Section to the person to be Charged with the knowledge of such change. 14.02 Effective Date. For purposes of all determinations to be made pursuant to the Code in respect of the Plan or any Claims or Interests, the "Effective Date" of the Plan shall be 10 days after Confirmation of the Plan. 14.03 Written Objections. The Debtor or any other party in interest may file with the Court confirmation of the Plan, a written objection to the allowance of any Claim. This provision is not intended to abridge the right of the Debtor to modify the Plan pursuant to Bankruptcy Code 1127. 14.04 Reporting Company Representation. The Company represents that it is a reporting company under Section 13 and 15(d) of the Securities and Exchange Act of 1934 and will be in continued compliance with the applicable requirements for the continuing of trading in the Security on the date the Debtor offers or sells the securities to the investors. 14.05 Implementation of the Plan. The Plan is to be implemented consistent with the terms of the Bankruptcy Code. The Plan shall be implemented beginning on the effective date of the Plan by the distribution of stock by the Debtor in accordance with the provisions of the Plan. The debtor agrees to use its best efforts to fully implement and consummate the Plan. 14.06 Complete Satisfaction, Discharge, and Release. The payments, distributions and other treatments provided in respect of each Allowed Claim in this Article shall be in complete Satisfaction. discharge, and release of such Allowed Claim. 17 ARTICLE XV Other 15.01 Certificates of Indebtedness. Prior to the filing of the Plan of Reorganization and Disclosure Statement the Debtor moved the Bankruptcy Court to authorize it to sell $5,000,000 in Code Section 364 Certificates of Indebtedness ("Debtor Certificates"). The Court approved the Debtor's motion to sell Debtor Certificates on September 25, 1996. 15.02 Finders Fees. The Debtor has agreed to issue to David Rinker and Christina Nicho1s 5,000 shares each of Common Stock in the Reorganized Debtor as a finders fee. Additionally, the Debtor has agreed to issue 1,000 shares as a finders fee to Steve Nichols who introduced the parties to the Debtor and to issue 12,500 shares of Common in the Reorganized Debtor to Michael Morrison, ESQ. as a finder's fee. Said parties were instrumental in bringing about the transactions involving the assets being merged under the Plan of Reorganization. 15.03 Consulting. The Reorganized Debtor has agreed to pay $10,000 in cash and issue 7,500 shares of the Reorganized Debtor's Common Stock to Dan-Com, Inc. for consulting services rendered. Dan-Com, Inc. is a firm which specializes in coordinating mergers of solvent businesses into public companies which are under protection of Chapter 11 of the Bankruptcy Code. 15.04 Change of Corporate Name. The Reorganized Debtor will change its name to Newgold, Inc. and recapitalize at 50,000,000 shares of Common Stock authorized, .001 par value. 15.05 Asset Acquisition. The Reorganized Debtor will issue a total of 12,000,000 shares of its Common Stock to existing shareholders of Newgold, Inc. and thereby acquire 100% of the outstanding shares of Newgold. Inc. and its assets described in the Disclosure Statement. A detailed description of Newgold. Inc. can be found in the accompanying Disclosure Statement. 15.06 Other Corporate Matters. The Board of Directors of the Reorganized Debtor shall take whatever actions are necessary in order to bring the Reorganized Debtor into conformance with securities laws and regulations including, but not limited to, amending the Reorganized 18 Debtor's by-laws and Articles of Incorporation. Respectfully submitted this 4 day of November, 1996. WAREHOUSE AUTO CENTERS, INC. By: /S/ Nathan P. Morton Nathan P. Morton, Chairman Board of Directors DEBTOR By: /S/ Leonard Relin Leonard Re1in, Esq. ATTORNEY FOR DEBTOR 19 EX-3.(I) 3 EXHIBIT 3.1(a) CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF WAREHOUSE AUTO CENTERS, INC. The undersigned, being the President and Secretary of the corporation, Warehouse Auto Centers, Inc., hereby declare that the original Articles of the corporation were filed with the Secretary of State of the State of Delaware on June 6, 1991. Based upon a Plan of Reorganization approved by the U.S. Bankruptcy Court in the Western District of New York on November 25, 1996 and the majority vote of the stockholders holding 100 % of the outstanding shares in the corporation; and pursuant to 242 of Delaware General Corporation Law, the undersigned hereby amend the Articles of Incorporation of Warehouse Auto Centers, Inc. as follows: FIRST: The name of the Corporation is NEWGOLD INC. FOURTH: The total numbers of shares of stock which the Corporation shall have the authority to issue is 50,000,000 shares of Common Stock, par value $.001 per share. THE UNDERSIGNED, being the President and Secretary of Warehouse Auto Centers, Inc. hereby declare and certify that the facts herein stated are true, and , accordingly have hereunto set their hands this 26th day of November, 1996, /S/ --------------------------- A. Scott Dockter, President /S/ --------------------------- Edward Mackay, Secretary STATE OF NEVADA ) ) SS COUNTY OF WASHOE ) On this 26th day of November, 1996, before me, a Notary Public, personally appeared A. Scott Dockter, who acknowledged to me that he is the President of Warehouse Auto Centers, Inc. and Edward Mackay, who acknowledged to me that he is the Secretary of Warehouse Auto Centers, Inc. and that they know the contents of and executed the above instrument. RITA SUE DICKSON /S/ Notary Public, State of Nevada Notary Public Washoe County Expires Apr. 21, 1997 EX-10 4 EXHIBIT 10.1 CONTRACT OF SALE ---------------- J. D. WELSH & ASSOCIATES, INC., a Nevada corporation, herein called "Seller,"agrees to sell to NEWGOLD, INC., a Nevada corporation, herein called "Buyer," and Buyer agrees to purchase from Seller the mining property, located in Pershing County, Nevada, commonly known as the "Relief Canyon Mine," and more particularly described in attached Exhibit "A" (the "Property"), including the equipment described in attached Exhibit "B," on the terms and conditions set forth in this Agreement. 1. Purchase Price and Payment. The purchase price for the property shall be the sum of Five Hundred Thousand Dollars ($500,000.00), payable by Buyer to Seller as follows: (a) Upon closing, on or before January 10, 1995, Buyer shall pay Seller $100,000.00; (b) The balance of the purchase price shall be paid in 12 equal payments of $35,166.36, which includes interest for one year at 10 percent. $35,166.36 on February 10, 1995. $35,166.36 on March 10, 1995. $35,166.36 on April 10, 1995. $35,166.36 on May 10, 1995. $35,166.36 on June 10, 1995. $35,166.36 on July 10, 1995. $35,166.36 on August 10, 1995. $35,166.36 on September 1, 1995. $35,166.36 on October 10, 1995. $35,166.36 on November 10, 1995. $35,166.36 on December 10, 1995. $35,166.36 on January 10, 1996. 2. Bonds and Santa Fe Lease. All bonds relating to the operation of the Property will be transferred to Buyer. In further consideration of the purchase price, Seller shall assign the Santa Fe Lease which affects the property to Buyer and obtain Santa Fe's consent to such assignment before November 1, 1994. Upon assignment, Buyer agrees to make a collateral assignment of said lease to Seller to secure Buyer's obligation to perform all of the Lessee's obligations under the lease which accrue after the date of this agreement, and Buyer's obligations under this agreement. 1 3. Equipment. Upon execution of this agreement, Seller shall deliver to Buyer a bill of sale for the equipment described in Exhibit "B" and Buyer shall execute and deliver to Seller a security agreement grant to Seller a security interest in the equipment to secure Buyer's obligations under this agreement. 4. Covenants of Buyer. 4.1. Insurance. Buyer shall at all times keep the property and improvements on the property insured against loss or damage by fire or other casualty to the amount of the reasonable value of improvements on the Property by an insurance company or companies approved by Seller. The insurance policies shall be made payable, in case of loss, to Seller. 4.2 Taxes. Buyer shall pay when due all taxes and assessments of every nature, levied, assessed, or accruing on the Property after the execution of this Contract, and shall timely pay any Proceeds on Minerals Tax attributable to Buyer's operations at the Property. 4.3 Indemnification. Buyer shall indemnify and save and hold Seller and its employees, representatives, agents and principals harmless from and against any and all costs, losses, liabilities, damages, lawsuits, claims and expenses incurred in connection with or arising out of or resulting from or incident to the condition of the Property or Buyer's activities on the Property, which occur or arise after the date of this Contract. Buyer's indemnity shall include without limitation all reasonable and necessary costs and expenses of defending any claim arising (and any lawsuit instituted asserting such claim) with respect to any matter as to which Buyer's indemnity is applicable, and reasonable attorneys' fees and costs incurred in connection therewith, whether or not such claim is ultimately defeated, and any amounts paid incident to any compromise or settlement of any such claim. 4.4 Liens and Encumbrances. Buyer shall pay when due all claims for labor performed and materials furnished for any construction, alteration, repair or mining operation upon the Property, and shall comply with all laws affecting the Property or relating to any alterations or improvements that may be made thereon. Should any lien or encumbrance be placed against the Property by reason of any act or thing done by Buyer, then within 30 days of the date of filing or recording of the lien, Buyer shall cause the same to be discharged or shall deliver to Seller a corporate surety bond or other security approved by Seller indemnifying Seller against any loss or damage by reason thereof. 2 4.5 Notice of Non-Responsibility. Except for work of improvement resulting from emergency, before any work or improvement is commenced, Buyer shall give written notice thereof to Seller to enable Seller to record a notice that Seller is not responsible for such work. 4.6 Protection of Property. Buyer promises to properly care for and keep the Property in good condition, order and repair; to care for, protect and repair all buildings and improvements situate thereon; and otherwise to protect and preserve the Property and the improvements thereon and not commit or permit any waste or deterioration of the Property. 4.7 Hazardous Waste. Buyer shall comply with all federal, state and local laws, ordinances, regulations, rules, and orders relating to health, safety, environmental protection, and storage, discharge or disposal of harmful, toxic or hazardous waste, and water and air quality with respect to the Property and Buyer's use of the Property. Buyer shall not cause any deposit, disposal, release, discharge, treatment, process, work, leakage, spillage, emission of or pollution by any harmful, toxic, hazardous, or noxious materials or substances on the Property. Buyer agrees to indemnify and hold Seller and the Property free and harmless, from and against any and all claims, demands, fines, penalties, settlements, suits, losses, liabilities, damages, injuries, costs or expenses, including attorney's fees. 5. Possession and Legal Title. Buyer shall be entitled to enter into possession of the Property on the date of this Contract and to continue in possession of the Property sq long as Buyer is not in default in the performance of this Contract. Seller shall retain legal title as a security interest in the Property until Buyer has paid the balance of the purchase price as required by this Contract. 6. Default. 6.1 Events of Default. Buyer shall be in default under this Contract of Sale in the event that Buyer shall fail, neglect, or refuse to make any payment at the time provided herein, fail to comply with any of the other provisions set forth in this Contract of Sale, make a general assignment for the benefit of creditors, or become insolvent, or upon the filing of a petition by or against Buyer under any state or federal law relating to the relief of debtors, to the extent that such law allows a default hereunder resulting from the filing of such petition. 6.2 Seller's Remedies. In the event of Buyer's default in the performance of any of the provisions contained in this Contract of Sale, then Seller may at any time thereafter, without limiting Seller in the exercise of any right or remedy which Seller 3 may have by reason of such default, exercise any or all of the following remedies: 6.2.1 Buyer agrees that all moneys paid to Seller by virtue of this Contract of Sale shall immediately become the property of Seller. In the event of Buyer's default in the performance of any of the provisions contained in this Contract of Sale, and this Contract of Sale is terminated pursuant to Section 7, then (a) Seller shall be released from any and all obligations, either at law or in equity, to transfer the property to Buyer; (b) Buyer shall relinquish all rights under this Contract of Sale; and (c) all moneys theretofore paid by Buyer shall be. retained by Seller as liquidated damages for the breach of this Contract of Sale. The parties agree that in the event of Buyers default, it would be difficult to fix or estimate the actual damage to Seller. On the basis of the facts now known to the parties, the parties agree that the moneys theretofore paid by Buyer to Seller at the time of Buyer's breach shall compensate Seller for damages which would accrue by reason of such default. 6.2.2 Seller may, at Seller's option, after the expiration of the 35 day notice described in Section 6.3., below, declare the unpaid balance of the purchase price immediately due and payable; and Buyer agrees to immediately pay such amount to Seller. 6.2.3 Seller may institute an appropriate action against Buyer for specific performance or this Contract of Sale or to terminate Buyer's rights under this Contract of Sale and for damages sustained by Seller; including but not limited to all payments required by Buyer pursuant to this Contract of Sale plus the amount necessary to restore the property to the condition it was in at the date Buyer received possession by reason of this Contract of Sale, reasonable use excepted. 6.2.4. Seller may pursue any other remedy now or hereafter available to Seller under the laws of judicial decisions of the State of Nevada. 6.2.5 In the event of termination of Buyer's right to purchase by reason of such default, (a) Buyer will become a tenant at will of Seller; (b) Buyer will peaceably vacate the Property; and (c) Seller may re-enter the property and take possession thereof and remove all persons therefrom, using any and all lawful means to do so, including the remedies for unlawful detainer pursuant to NRS Chapter 40. 4 6.2.6. It is understood and agreed that any failure on the part of Seller to exercise any of Seller's rights or remedies in the event of default, at any particular time, shall not constitute a waiver of Seller's option to exercise such rights or remedies at any other time. 7. Default Procedure In the event of Buyer's default, if Seller shall desire to terminate the right of Buyer to purchase the property pursuant to this Contract of Sale, then Seller shall file with the escrow holder designated by Seller, in duplicate, a notice and demand for termination of the rights of Buyer. Thereupon, the escrow holder shall promptly mail, by certified or registered mail, return receipt requested, one copy of such notice to Buyer. Unless the default is cured within 35 days following the date of mailing of Seller's notice, then the escrow holder is specifically authorized by Buyer, without further instructions, to comply with Seller's demand for delivery of the underlying Quitclaim Deed, and to terminate the escrow upon payment of the escrow holder's charges for the termination of the escrow. Buyer agrees that upon, and as a condition to, curing of any default following preparation of Seller's notice with respect to default, Buyer shall pay or reimburse Seller for all reasonable costs and expenses, including attorney's fees incurred in connection with such default, termination of this Contract of Sale or cure of such default. 8. Quitclaim Deed. Buyer shall deposit with the escrow holder a Quitclaim Deed executed by Buyer in favor of Seller for the Property, to be held by the escrow holder until such time as this Contract of Sale is paid in full by Buyer. At such time the escrow holder shall return the Quitclaim Deed to the Buyer. In the event, however, the buyer breaches this contract by nonpayment or any other material breach, the escrow holder shall at the direction of the Seller deliver the Quitclaim Deed to Seller in accordance with Section 6 of this Contract. 9. Grant, Bargain, and Sale Deed. Seller agrees to deposit with escrow holder a Grant Bargain and Sale Deed executed by Seller to Buyer. It shall be recorded as soon as Seller has received the payments as herein provided to be made by Seller. Escrow holder is instructed that in the event of default by Buyer, that said deed shall be returned to Seller upon demand. 10. Acceleration/Due on Sale. In the event Buyer shall sell, transfer or convey, or contract to sell, transfer or convey, the Property, or any portion 5 thereof, or any interest therein, then, at the option of Seller, the then unpaid balance of this Contract of Sale shall forthwith become due and payable although the time of maturity otherwise expressed shall not have arrived. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions 11. Prepayment. Buyer reserves the right to prepay this Contract of Sale at any time. 12. Miscellaneous. 12.1. Attorney's Fees. Should any litigation be commenced between the parties hereto concerning the Property, this Contract, or the rights and duties of either in relation thereto, the party, Buyer or Seller, prevailing in such litigation shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for his attorney's fees in such litigation which shall be determined by the court in such litigation or in a separate action brought for that purpose. 12.2. Entire Agreement. This instrument contains the entire agreement between Buyer and Seller respecting the Property, and any other agreement or representation respecting the Property or the duties of either Buyer or Seller in relation thereto not expressly set forth in this instrument is null and void. 12.3. Notices. Unless otherwise provided herein, any notice, tender, or delivery to be given hereunder by either party to the other may be effected by personal delivery in writing or by registered or certified mail. Mailed notices shall be addressed as set forth below, but each party may change its address by written notice in accordance with this paragraph. Notices shall be addressed as follows: If to Seller: Mr. John D. Welsh J.D. Welsh & Associates, Inc. 331 Freeport Blvd. Sparks, NV 89431 If to Buyer: Mr. Scott Docktor Newgold, Inc. P.O. Box 230 Clarksburg, CA 95612 6 12.4. Binding Effect This Agreement shall bind and inure to the benefit of the respective successors and assigns of the parties. 12.5. Choice of Law. This Contract of Sale shall be governed by the laws of the State of Nevada. 12.6. Time of Essence. Time is of the Essence for purposes of this Agreement. 12.7. Additional Documents. Buyer and Seller agree to execute such additional documents, including escrow instructions , as may be reasonably required by the escrow holder to carry out the terms of this Contract. 12.8. Corporate Authority. The undersigned president of Seller represents that Seller corporation has taken all action necessary to authorize the execution and performance of this agreement. Execution IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement the day and year first above written. SELLER: J. D. WELSH & ASSOCIATES, INC. By /S/ JOHN D WELSH 1/10/95 ------------------------ JOHN D. WELSH, President BUYER: NEWGOLD, INC. By /S/ SCOTT DOCKTOR 1/10/95 SCOTT DOCKTOR, President 7 EXHIBIT "A" A. The following described unpatented lode mining claims situated in Section 18, Township 27 North, Range 34 East, MDB&M, Pershing County Nevada: Assessor's Parcel No. 15-050-08 NAME OF CLAIM ROLL PAGE BLM NMC - ------------- ---- ---- ------- L 1 152 220 266846 L 2 152 222 266847 L 3 152 224 266848 L 4 152 226 266849 L 5 152 228 266850 L 6 152 230 266851 L 7 152 232 266852 L 8 152 234 266853 L 9 152 236 266854 L 10 152 238 266855 L 11 152 240 266856 L 12 152 242 266857 L 13 152 244 266858 L 14 152 246 266859 L 15 152 248 266860 L 16 152 250 266861 L 17 152 252 266862 L 18 152 254 266863 L 25 152 268 266870 L 27 152 272 266872 L 29 152 276 266874 L 31 152 280 266876 B. Those certain unpatented lode mining claims situate in Section 16, Township 27 North, Range 34 East, MDB&M, Pershing County, Nevada: Assessor's Parcel No. 15-050-10 NAME OF CLAIM ROLL PAGE BLM NMC - ------------- ---- ---- ------- R 1 141 444 260031 R 2 141 445 260032 R 3 141 446 260033 R 4 141 447 260034 R 5 141 448 260035 R 6 141 449 260036 R 8 141 451 260038 C. Those certain unpatented lode mining claims situate in Section 20, Township 27 North, Range 34 East, MDB&M, Pershing County, Nevada. Assessor's Parcel No. 15-050-016 NAME OF CLAIM ROLL PAGE BLM NMC - ------------- ---- ---- ------- PEG #1 194 543 415010 PEG #2 194 544 415011 PEG #3 194 567 415012 PEG #4 194 545 415013 R 17 141 460 260047 R 19 141 462 260049 R 21 141 464 260051 R 23 141 466 260053 R 25 141 468 260055 RF 7 141 478 260065 APPURTENANT RIGHTS I. Improvements All buildings, fixtures, leach pads and other facilities and improvements now on the unpatented mining claims described in Exhibit "A" to the Agreement not previously transferred to J.D. Welsh & Associates, Inc. pursuant to the Reclamation Contract. II. Water Rights The water and water rights owned by Sellers under State of Nevada Appropriation Number 47334. III. Permits All permits and approvals held by Sellers with respect to operations at the Relief Canyon Mine, including all surface disturbance permits, air quality permits, state mining facilities permits, BLM plans of operation, water discharge permits, industrial pond permits, dam safety, reclamation permits or other similar permits or approvals or applications-for such permits or approvals related to operations at the mine. EXHIBIT B Relief Canyon Inventory Installed Pumps Pump - Allis Chalmers Serial No. 841-5160-302-1 Motor - U.S. Electric 60 HP Serial No. R 6308-06-605-S Pump - Allis Chalmers Serial No. 841-5160-502-2 Motor - U.S. Electric 60 HP Serial No. R 6302-05-624-S Pump - Allis Chalmers Serial No. 52-11-826-001 Motor - Toshiba 15 HP Serial No. B0154FLF2U2H Pump - Allis Chalmers Serial No. P3821-2 Motor - Dayton 10 HP Serial No. RB215TTFS8032APL Pump - Allis Chalmers Serial No.52288 Motor - Baldor 7.5 HP Serial No. M3769T Pump - Allis Chalmers Serial No. P3346-3 A480L25 1CE Motor - General Electric 5 HP Serial No. 26BC02XP Pump - Armstrong Serial No.133088 7.75 Motor - Baldar 5 HP Serial No. JPM3615T Relief Canyon Inventory Installed Pumps (cont'd) Pump - Fowler Pump Serial No. F841 11 82 Motor - Teco 3 HP Serial No. Unknown Pump - Allis Chalmers Serial No. P3310-CL80 Motor - U.S. Electric 1.5 HP Serial No. FA883-00-965 K137R018 Pump - Allis Chalmers Serial No.841-51603-07-1 Motor - Kingmotor 1 HP Serial No.13206350505 Pump - Allis Chalmers Serial No.641-51603-04-1 Motor - U.S. Electric 1 HP Serial No. F-A876-00-974-K157R05 Pump - U.S. Electric .75 HP (Jet) Serial No. P55BGT-606 Pumps - 2 Submersible Extra Motors U.S. Electric 60 HP Serial No. 6301/P03N364R0-3GR American Standard 1.5 HP Serial No. TH41451F2 Dayton .75 HP Serial No. 46606372543-2A Marathon Electric 3 HP Serial No. RVK 184TTCF7358 ANL Martin Electric Serial No. 214116 AA Reliance Electric Serial No. 079383-20-T Relief Canyon Inventory Tanks Alaskan Copper Brass Co. 8 ft x 24 ft. Stainless Steel Serial No. Unknown Manufacture - Unknown 8ft x 8ft Steel Serial No. Unknown Fiber-Dyne Corp 12 ft. x 12 ft Fiberglass Serial No. J2046 Poly Cal Plastics Corp. 100 gal. Serial No. Unknown Manufacture - Unknown 300 gal. Plastic Serial No. Unknown Mix Tank 300gal. Mixer Serial No. Unknown Motor - Westinghouse 2 HP Serial No. 78-5B752 Tank 16 ft x 16 ft- Steel Serial No. Unknown Equipment 5 7' x 7' Carbon Absorption Columns 2 Tyler Vibrating Screens Serial No.55-832 and 55-833 Relief Canyon Inventory Equipment (cont'd.) 2 - Dewatering Screens Manufacture - Unknown Serial No. Unknown Lighting Mixer 1.5 HP Mixer Serial No.841217103 Motor Serial No. 5KS182FL233AP Air Compressor Receiver Tank Serial No. TF 129267 Motor - Dayton 5 HP Serial No. F346 09-E84K09 00014 Boiler- Parker Boiler Serial No.35115 Water Softener Manufacture - Water Refining Serial No. Unknown Bag House Ultra-Kleen Corp. Serial No. BV-36-100 Over-Head heaters Reznor Co. Serial No. Unknown Roll Crusher Roskamp Corp. Serial No. K7545 Motor - Dayton 5 HP Serial No. R92102M831 Water Softening Equipment - Complete Relief Canyon Inventory Equipment (cont'd.) Jaw Crusher Morse Brothers, Inc. Serial No. J04-564 Motor - Baldar 2 HP Serial No. WM 3558T Pressure Vessels Talman Steel Corp. Serial No. A-5931 Brunner Engineering Serial No. Unknown Manufacture - Unknown Serial No. 200-3311 McCook Butler Serial No. 85266 Electrical Equipment Sierra Transformer Serial No. 500TUL22GE Toshhiba/Houston Control Panel Serial No. Unknown Westinghouse Transformer Serial No. T64E02942 2 - Transformer Winding Sets Serial No. M8NL16 Acme Electric Corp. Transformer Serial No. T-1-53312-3 Asco Delta Pump Control Serial No. Unknown Selectric Electric Pump Control Serial No. Unknown Relief Canyon Inventory Buildings Butler - Steel 40 ft- x 60 ft. x 12 f:. hgt. (Disassembled) Butler - Steel/Cinder Block 60 ft. x 90 ft. x 30 ft. hgt Fully equipped with electrical, water, heating, ventilation, and Sewage Systems 2 - Wood/Frame Construction 10 ft. x 20 ft. Single Pitch Roof 2 - Wood/Frame Construction 8 ft. x 10 ft. Fencing 1920 ft. of chain link with posts, top-rail, and fittings 4 miles of 5 strand barbed wire and posts Pipe 2,260 ft. of 6" Yellomine 13,380 ft. of 2" Yellomine 6,480 of 10" HDPE 7,700 ft. of 6" HDPE 3,400 ft of 2" HDPE 1,000 ft. of 10" Steel 500 ft. of 6" Flex Plastic 200 ft- of 2" Rubber/Quick Couplers Vehicles 1989 Ford F250 VIN FTEF26N1KPB42497 EX-10 5 EXHIBIT 10.2 AGREEMENT FOR LEASE/PURCHASE AND SALE OF PROPERTY THIS AGREEMENT is made and entered into this 2nd day of September, 1996, by and between JOEI JAMIESON, and individual, and T.K.M. CORPORATION, with addresses at 72616 Two Mile Road, Twenty-Nine Palms, California 92277 ("Seller") and NEWGOLD, INC., a Nevada corporation, with address at 5190 Neil Road, Suite 320, Reno, Nevada 89502 ("Buyer"). W I T N E S S E T H: This Agreement is made and entered into with reference to the following facts: A. Seller is the owner, free and clear of all liens and encumbrances (except the rights of the U.S. Government as to unpatented mining claims, generally), of that certain property referred to as the Mission Mine, more particularly described in Exhibit "A" attached hereto and made a part hereof by reference ("the Property"), together with all equipment and other personal property situate thereon, more particularly described in Exhibit "B" attached hereto and made a part hereof by reference (the "Equipment"). B. Seller desires lease/sell to Buyer, and Buyer desires to lease/purchase from Seller the Property, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, and other good and valuable consideration, receipt of which is hereby acknowledged, it is agreed by the parties as follows: 1. Lease/Purchase and Sale of Property. Seller hereby leases/sells the Property to Buyer subject to the following: (a) The purchase price shall be paid pursuant to Paragraph 2 hereof. (b) In the event Buyer fails to tender the purchase price, pursuant to the terms hereof, this Agreement will be terminated, the Property surrendered to Seller and all payments made to Seller shall be retained and deemed full consideration for the rights granted Buyer hereunder. (c) Buyer shall have exclusive physical possession of the Property, and the exclusive right to mine the Property, as of the date of this Agreement. 2.Purchase Price. The total purchase price for the Property shall be the sum of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS U.S. ($3,500,000.00), payable as follows: (a) $5,113.00 concurrent with the execution of this Lease/Purchase Agreement; (b) Beginning September 5, 1996, $5,000.00 per month for the first 90 days of this Lease/Purchase Agreement; (c) Beginning December 5, 1996, $8,000.00 per month for an additional 90 days, unless production begins during this second 90-day period, in which event NSR payments will be payable as set forth below; (d) At the end of the above 180 days, Buyer will make a one-time payment of $300,000.00 to Seller for the purchase of the Equipment. This payment shall be credited to the total purchase price of $3,500,000.00. Upon such payment, Seller shall deliver a Bill of Sale for such equipment, free and clear of all liens and encumbrances of whatsoever nature. The parties waive the bulk sale requirements of the Uniform Commercial Code. (e) Beginning March 5, 1997, Buyer will begin to pay Seller the greater of 2.5% NSR1 or minimum monthly payments as follows: $10,000.00 per month through February, 1998; $20,000.00 per month through February, 1999; $30,000.00 per month through February, 2000; $40,000.00 per month through February, 2001; $50,000.00 per month through February, 2002; $60,000.00 per month through February, 2003; and $70,000.00 per month through February, 2004, until the aggregate purchase price of $3,500,000.00 has been paid in full. All lease/purchase payments will be credited to the total purchase price. (f) Amounts of monthly 2.5% NSR payments exceeding the minimum monthly payments will be applied against the monthly payment of the final (7th) year until paid in full, then to the monthly payments of the sixth year until paid in full, etc., except as provided in Paragraph 2(g) below. - -------- 1 The term NSR (net smelter returns) from sales of gold, as used herein, means the amount of earned revenues, as the term earned revenues is used in accordance with generally accepted accounting principles, payable to Buyer by any smelter or other purchaser of gold contained in ores, minerals, mineral substances and concentrates produced therefrom mined from the Property, less all assaying, sampling, transportation and smelting charges. In the event such minerals are treated or smelted at facilities owned or controlled, in whole or in part, by Buyer, the term NSR from sales of gold shall mean the amount of earned revenues, as the term earned revenues is used in accordance with generally accepted accounting principles, which would have been payable to Buyer from a bona fide purchaser of gold produced from the Property, less all assaying, sampling, transportation and smelting charges. (g) In the event of Force Majeure (Paragraph 11(m)) and Buyer is forced to reduce or discontinue mining activities, the scheduled lease/purchase payments in the second through seventh year will be reduced to a minimum monthly payment of $10,000.00. Upon resumption of mining activities, the minimum monthly payments shall resume as if unreduced and excess 2.5% NSR will be credited against the prior minimum monthly payments until paid current. (h) All payments due hereunder shall be deemed delinquent if not received by Seller within ten (10) days of the date due and shall incur a late fee of $100.00 per day until paid in full. 3.Warranties of Seller. Seller represents and warrants to Buyer as follows: (a) That Seller has not entered into any other contracts to sell, transfer, mortgage, or assign the Property or the Equipment. (b) During the Lease/Purchase Period, Seller will not take any action to adversely affect the rights of Buyer hereunder. (c) As of the date of Closing, the Property shall be free and clear of all liens, encumbrances, chattel mortgages or conditional sales contracts, except for claims of the U.S. Government as to unpatented mining claims. (d) That Seller has taken all action necessary to lease/sell the Property and sell the Equipment and has full power and authority to do so. (e) That the area covered by the subject unpatented mining claims, and each of them, has been and is properly and validly located under the mining laws of the United States of America and the State of California; that assessment work on the mining claims, and each of them, has been performed at the time, in the manner, and to the extent required by law, or annual payments have been made as required by law; that the mining claims are all in good standing, subsisting and valid as of the date hereof, and are free and clear of all liens, encumbrances, leases and claims of third parties, except only rights reserved to the United States in respect of unpatented mining claims generally. 4.Warranties of Buyer. Buyer represents and warrants to Seller as follows: (a) That prior to August 30 of each year during the Lease/Purchase Period herein, Buyer will give Seller 45 days' advance written notice of payment of annual BLM maintenance fees and assessment fees and taxes due to Riverside County and will provide to Seller a copy of a receipt evidencing payment of same within 60 days of said payment. 5. Condition of Property. Buyer acknowledges that it has inspected the Property and the Equipment. 6. Closing and Conditions to Closing. Closing shall occur on the date the purchase price of $3,500,000.00 is paid in full by Buyer. The period between the date hereof and Closing shall be deemed the Lease/Purchase Period. Closing shall take place at the offices of Buyer in Reno, Nevada, at a time mutually convenient to both Seller and Buyer. Prior to closing, the following conditions must be satisfied: (a) Buyer must have completed a favorable due diligence study on the Property and be satisfied as to the titles and status thereof. (b) All payments due hereunder, including any late charges, annual assessment fees, or other charges of whatsoever nature due and payable by Buyer, shall be paid in full. 7. Obligations Upon Closing. At the Closing: (a) Seller shall execute and deliver to Buyer a Quit Claim Deed as to the unpatented mining claims in a form mutually deemed appropriate to legal counsel for Buyer and Seller. The Quit Claim Deed shall be good and sufficient to convey to Buyer the fee simple of the said mining claims, warranting that the area covered by the said mining claims and each of them is properly and validly located under the mining laws of the U.S. and the State of California and are free and clear of all liens, encumbrances, leases and claims of third parties, except rights reserved by the United States in respect of unpatented mining claims generally. 8. Indemnity by Seller. Seller shall indemnify Buyer against any loss, damage, cost or expense that Buyer shall incur or suffer as a result of the breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or representation made by Seller herein and for the benefit of Buyer. 9. Indemnity of Buyer. Buyer shall indemnify Seller against any loss, damage, cost or expense that Seller shall incur or suffer as a result of the breach, untruth or inaccuracy of any promise, agreement, covenant, warranty or representation made by Buyer herein to and for the benefit of Seller. 10. Broker's /Finder's Fees. The parties warrant to and with each other that the transaction evidenced by this Agreement was initiated, negotiated and completed by the parties hereto directly, as principals, and without the intervention of any broker, dealer, agent or finder, except as otherwise provided herein. Each party agrees to indemnify and hold the other party harmless from and against any loss, damage, cost or expense, including without limitation, attorneys' fees and litigation expenses, resulting from any breach or breaches of the foregoing warranty. 11. Risk of Loss. Risk of loss, damage, or destruction of the Property and Equipment shall remain with Seller until the Closing, as to the Property, and until delivery of the Equipment and a Bill of Sale, as to the Equipment, which times risk of loss, damage or destruction of the Property/Equipment shall pass to Buyer. 12. Buyer's Rights During Lease/Purchase Period. During the Lease/Purchase Period hereunder, Buyer shall have the following rights and obligations: (a) Buyer, acting through its employees, agents or representatives, or any of them, may visit, inspect and examine the Property and by means of pumping, re-timbering, re- excavating, or otherwise drain and rehabilitate the mine shafts, tunnels, drifts and stopes. (b) Buyer may, by means of diamond drilling, trenching, tunneling, or otherwise by physical or chemical means, test and explore the ore reserves contained therein, providing it has received prior approval for same from the Bureau of Land Management. (c) Buyer may mine ore materials and minerals and remove, ship, treat, sell and dispose of the same and retain any proceeds therefrom for Buyer's own use only after payment to Seller of the lease/purchase payments and/or NSR payments due under Paragraph 2 hereof. Buyer may mine, assay and mill samples for assaying and mill sampling purposes and such samples shall be excluded from the operation of this provision up to an amount not exceeding ten tons. (d) Buyer agrees to pay all taxes levied and assessed upon the Property, or any part thereof, including taxes measured on production and also including taxes levied and assessed on improvements placed upon the Property by Buyer during the Lease/Purchase Period, commencing with taxes for the current year, and to make payment thereof, as required by the statutes of the State of California so that no default in taxes on the Property shall occur, and to deliver to Seller, upon request, the original or duplicate tax receipts for payments made. Should Buyer be in possession of the Property, under this Agreement, for only a portion of a year, the tax for that year shall be prorated between Seller and Buyer on the basis of taxes for the last preceding year. (e) Buyer shall keep accurate books of account showing the operations, and particularly showing ores mined and milled, or mined and shipped by Buyer, and permit Seller to examine such accurate information in response to any reasonable request in regard to the condition of underground workings of said Property, or any part thereof, or as to the general quality and quantity of ore exposed therein, and allow Seller to enter upon and into all parts of said premises from time to time, and at all reasonable times and hours, for the purpose of inspecting and surveying the same or taking samples of ore therefrom. (f) Buyer shall assume all responsibility in case of accident to any and all persons employed on the mining claims pursuant to this Agreement and shall comply with all provisions of the Workmen's Compensation laws of the State of California, as now existing, or as hereinafter amended. In addition, until the Closing and throughout the period covered by this Lease/Purchase Agreement, Buyer shall provide Seller with evidence of liability insurance on the Property and Workmen's Compensation insurance on all persons employed. (g) Buyer shall be responsible for the maintenance, repair and/or replacement of any and all mining machinery, equipment, tools and facilities now or subsequently installed or placed on the Property which it may desire to use in connection with its operations hereunder. (h) Buyer shall not, by any act or omission, permit or suffer any liens, encumbrances or legal process to be incurred or levied upon the Property, and Buyer shall serve, post and maintain such notices of non-responsibility as may be required by law to prevent liens from attaching to the Property. (i) Buyer shall pay all property taxes levied or assessed on any structures, equipment, materials, supplies, facilities or personal property which are owned by Buyer and placed upon the Property, whether such taxes are levied or assessed to Seller or Buyer. (j) Buyer shall conduct all of its operations on said Property in a good miner-like manner in accordance with generally accepted mining standards. (k) During the term of the Lease/Purchase Period, Buyer does hereby agrees to perform all assessment work required to be performed upon the mining claims, or pay annual fees due by law, and does further agree to furnish Seller with a detailed statement of all such work/payments in order that Seller may prepare and record all proper affidavits, notices and other documents required by law to evidence the performance of said annual assessment work and/or annual payments due under federal mining laws. (l) In the event Buyer does not exercise its right to purchase hereunder, Buyer agrees to surrender the Property to Seller in good condition, with written evidence of same from the Bureau of Land Management. Assuming all payments due hereunder are current, Buyer, will, however, have the right to remove any machinery and equipment placed by it within the Property including track, pipe, receivers and cables, but Buyer shall, if it terminates its right to purchase hereunder, leave all timber, chutes and ladders in place and in good condition. Buyer shall have the right to effect the removal of such machinery and equipment prior to the expiration of the Lease/Purchase Period, or within thirty (30) days thereafter. Any such machinery or equipment not removed prior to the expiration of said period of thirty (30) days following termination of this Agreement shall be deemed affixed to the Property and shall become and remain the property of Seller. (m) If, for any reason, there shall be a default on the part of Buyer during the Lease/Purchase Period, and Buyer shall fail or refuse to comply with any of the terms or provisions hereof, then, at the option of Seller, Seller may give notice in writing to Buyer of such default specifying the nature and character thereof and, unless the default shall be corrected, or action commenced to correct such default, within thirty (30) days after receipt by Buyer of such notice, then, at the option of Seller, this Agreement and all rights of Buyer hereunder shall be terminated and Buyer shall quietly and peaceably surrender the Property to Seller. 13.Patents. Throughout the term of this Lease/Purchase Agreement, Seller, or Buyer on behalf of Seller, shall have the right to proceed under the Mining Laws of the United States to patent any or all of the unpatented mining claims included in the Property. 14. Cancellation by Seller. If Buyer fails or refuses to pay any payments or NSR royalties when due hereunder, or fails to perform any other terms, conditions or covenants, or any part thereof, as provided herein, and such default continues for a period of thirty (30) days after receipt by Buyer of Seller's notice thereof, Seller or its agents may re-enter and take possession of the Property and this Agreement shall be forthwith terminated; provided, however, that upon such termination, Buyer shall be liable for all accrued financial obligations under this Agreement. However, in the event the default is not related to payment of monies, then Buyer shall not be deemed in default if it commences efforts to cure such default within thirty (30) days after receipt of Seller's notice thereof. 15.Cancellation by Buyer. If any of the following circumstances occur, Buyer may terminate this Lease/Purchase Agreement and be relieved of any and all further unaccrued financial obligations to Seller herein, upon thirty (30) days' written notice to Seller: (a) Buyer is unable to obtain state and BLM permits for mining in quantities required, in Buyer's opinion, for economical operation of the Property; (b) Buyer is unable to establish, in Buyer's opinion, sufficient mineral reserves exist on the Property to provide economical operation; or (c) Buyer is unable to continue mining operations due, in Buyer's opinion, to a lack of mineral reserves. 16. Miscellaneous. (a) Time. Time is of the essence of this Agreement and in the performance and enforcement of each of the promises, covenants, representations and warranties of the parties contained herein. (b) Entire Agreement. This Agreement constitutes the entire agreement of the parties and all prior rights, negotiations, obligations, agreements and representations, if any, are merged herein. (c) Binding Effects. This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective heirs, executors, administrators, successors and legal representatives. (d) Applicable Law. This Agreement shall be construed in accordance with the laws of the State of California. (e) Notices. Any notice or notices which any party hereto is required, or deems necessary, useful or convenient to give to any other party or parties hereto, at any time and from time to time, shall be in writing and shall be personally served upon or mailed to the parties by U.S. Mail, postage prepaid, certified, return receipt requested, at the following addresses: To Seller at: 2616 Two Mile Road Twenty-Nine Palms, California 92277 To Buyer at: 5190 Neil Road, Suite 320 Reno, Nevada 89502 With copies to: Michael J. Morrison, Esq. 1025 Ridgeview Drive, Suite 400 Reno, Nevada 89509 Notice shall be deemed given five (5) days after personal service or postmark by the U.S. Postal Service. (f) Attorneys' Fees and Costs. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys' fees and other costs and expenses incurred in that action or proceeding, in addition to any other relief to which it may be entitled. (g) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to constitute but one and the same instrument. (h) Captions. Article and paragraph captions contained in this Agreement are inserted only as a matter of convenience and reference. Said captions shall not be construed to define, limit, restrict, extend or describe this Agreement or the intent of any provision hereof. (i) Gender and Number. Whenever used in this Agreement and as required by the context of the transaction, the single number shall include the plural, the plural number shall include the singular, and masculine gender shall include the feminine and neuter. (j) Form of Association. As required by the context, the term "person" shall include individuals, partnerships, limited partnerships, corporations, estates and trusts. (k) Facsimile/Photocopies. The parties agree that a fully executed facsimile or photocopy of this Agreement shall have the same force and effect as the original. (l) Arbitration of Disputes. All claims, disputes and other matters in question between the parties to this Agreement, arising out of or relating to this Agreement or the breach thereof, shall be decided by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, unless the parties agree otherwise. No arbitration, arising out of or relating to this Agreement shall include, by consolidation, joinder, or in any other manner, any additional person not a party to this Agreement, except by written consent of the parties containing a specific reference to this Agreement and signed by any person sought to be joined. Any consent to arbitration involving an additional person or persons shall not constitute consent to arbitration of any dispute not described therein or with any person not named or described therein. This Agreement to arbitrate, and any agreement to arbitrate with an additional person or persons duly consented to by the parties to this Agreement, shall be specifically enforceable under the prevailing arbitration laws. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The award rendered by the arbitrators shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. The arbitration shall be by three (3) neutral arbitrators; one selected by each party to this Agreement and the third selected by the two selected by the parties. (m) Force Majeure. Whenever the time for performance of any act hereunder is limited and the performance thereof is hindered, prevented or delayed by any factor or circumstance beyond the reasonable control of the party obliged to perform and which said party could not have avoided by the use of due diligence, such as acts of God, fire, floods, or other acts of nature, riots or civil commotions, casualty or other cause, regulations, orders or requirements of the Government, embargos, war or other disabling causes, whether similar or different, then the time for the performance of any such act or obligation shall be extended for a period equal to the extent of such delay. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. T.K.M. CORPORATION, "Seller" By:________________________ By:________________________ JOEI JAMIESON, "Seller" NEWGOLD, INC., "Buyer" By:________________________ Arthur Scott Dockter, President MISSION MINE CLAIMS LIST AUGUST 1996 Mission Mine 1 Ward 1 through 9 9 Ward A, B, C 3 Star 1 through 4 and 10 5 New Duplex 1 New Duplex 1&2 2 New Dawn 2 1 22 CAMC Nos. 113882 through 113895 116957 through 116963 24370 MISSION MINE EQUIPMENT LIST 26TH JANUARY 1996 Ref. Photo Number No.'s 1 1a,b Detroit Diesel generator EM A-C 2a,b,c Seriel #262114512 Type: BRKT RPM 1800 KVA: 281 Cycles: 60 Volts: 208/240 Amps: 780/678 416/480 Phases: 3 PF: 0.8 Frame: 2300 Constr. Bk. 67 Powered By: G.M. Diesel 1271 V12 Model: #71257230 List: #KS15929 List 11-5 Total Hours: 1,205.8 2 3 G.M. Hercules Diesel Generator (100 KW) Seriel #105334 #47A6340 Speed: 1450 RPM Volts: 125-250 Amps: 400 Total Hours: 13,105 3 4 10KVA Dieter Diesel, 440 volt, 3 phase generator, air cooled Series #2602 4 5a,b Cutler Hammer CSS Switchboard Seriel #C85048844 Volts: 277/460 3 phase, 4 wire 60 Hertz 400 amp sully rating 400 section rating 5 25 KVA 110 volt single phase transformer 6 75 KVA, 33 phase transformer Seriel #T-1-59444-3 7 36 volt, 220 volt, 3 phase Seriel #82301079 8 D.C. Power Supply H.B.8. Equipment Division Model #L2000 9M Seriel #814585 DC 9 volts, 2000 amps Input AC 50, 230 volts 9 6a,b Precious metal electro winning electro- plating circuit Seriel #81458E 10 Miscellaneous electrial motors, new and used Air Compressors and Equipment 11 7a,b In Portable Building 8a,b,c Gardner-Denver vertical air compressor 600 cfm Bore L.P.6 Bore H.P. 43/4 Stroke 5 Model #WB 04011 Seriel #174721 Speed 870 rpm Pressure 100 psi Powered by: CAT Diesel, Diesel engine Caterpillar - Rookford P.T.O. Model PTA - 11450 Seriel #209256 Inclusive with pressure vessels 12 9 Two portable trailer mounted 150 cfm air compressors 10 Ingersoll - Rand and Jager 13 62 Air operated hoist and bucket 14 62 Underground drilling equipment 15 Miscellaneous new and used air motors 16 Compressor hoses and drill components Hoist, Crushing, Milling and Extractive Equipment 17 11a,b Ore Skip (2) 18 11a,b Man elevator 19 12a,b,c Hoist - U.S. Navy #21 Deck Wind Mfg by Westinghouse, 50 h.p., 250 V, DC with multiple speeds Sorgel Air cooled transformer H-ins, 20 KVA 60 cycles, 1-phase Seriel #X13594-6 20 64 Five underground ore cars (1.5 tons) 21a 45/46 Water tank - 18,000 gallon storage b Water tank - 6,000 - 7,000 gallon 22 43 3x2500 gallon fuel storage tanks 23 46,15, 4 storage hoppers - miscellaneous 16 60 ton: 85 ton on headname, 1(degree) crusher 24 16,17, 4x30', 2x10' and 1x5' conveyors, 18,22-26 7 in total 25 28,29 1x40' bucket elevator 26 29,30 3 storage hoppers, 50 tons each 27 21 1 Double Jaw Iowa crusher Cedar Rapids 18"x40" and 6"x40" Model DJ50, 50 tons per hour to minus 1 (degree) 20 Powered by: GMC 671 Diesel engine 28 26,27 1 Kennedy gearless cons crusher Model 25 1/2, #2851867, Electric powered, 50 hp motor 25 tons per hour to minus 1/4" 30 31,32 Rod Mill, Kennedy - Van Suan 33,34 5'x8', 13 ton rod charge capacity with rods 75 hp electric motor Machine #1389 Gear Box: Faulk Corp Model #71/2 gho M.O. 6920-0252 31 57 Hummer 3'x4' fine screen vibratory classifier 32 35,36 Wemco attritiion machine, size 20 3 tank agitator 33 38 Denver, 3 cell floatation unit, each 30"x36" 34 40 Hazen Quinn, 4 call floatation unit 18"x24" 35 41 1 shaker table concentrator 4"x9" 36 63 2 sand pumps 3", 7.5 hp electric motor 37 15,18, 4 goose-neck double bogey trailers, 8 wheel, 21,22, on which plant is mounted 23,27, 29,30, 31,32, 34,40 38 2 electric transformers in circuit 39 42 Various electrical overload, relay and starter panels 110/220/440 volts 40 1 explosive storage bunker 41 37 Sparkletts all-steel/rubber-lined clarifier 42 37 15-test precious metals gravity belt concerntraing table denver jig 43 8 fiberglass tanks, 8'x4' 44 Steel tailings trough, 30'x50'x2' 45 58,62 2x40' shipping containers 46 62 2x27' shipping containers 47 13 1 Comet radial arm saw, 24" carbide tipped blade 10 hp, 220/440 v 48 59 Speedy-melt amalting furnace with #70 crucibles 49 2 Screw feeders, 10"x8' 50 Vertical antenna tower Vehicles 51 48,49 1 Crane, Garwood, model 75B Detroit diesel powered model 471, 15 ton with drag line EX-10 6 EXHIBIT 10.3 OFFICE BUILDING LEASE This Lease between Duffel Financial and Construction Company a California Company ("Landlord'), and Newgold, Inc. a Nevada Corporation ("Tenant"), is dated May 20, 1996 1. LEASE OF PREMISES. In consideration of the Rent (as defined at Section 5.4) and the provisions of this Lease, Landlord leases to Tenant and Tenant leases from Landlord the Premises shown by diagonal lines on the floor plan attached hereto as Exhibit "A" and further described at Section 21. The Premises are located within the Building and Project described in Section 21. Tenant shall have the non-exclusive right (unless otherwise provided herein) in common with Landlord, other tenants, subtenants and invitees, to use of the Common Areas (as defined at Section 2e). 2. DEFINITIONS As used in this lease, the following terms shall have the following meanings: a. Base Rent (initial): $ Sixty-Two Thousand Three Hundred Ten and no / 100 per year. -------------------------------------------------- ($62,310.00) b. Base: The calendar year of 1996 c. Broker(s) Landlord's: None Tenant's: None d. Commencement Dale: August 01, 1996 e Common Areas: the building lobbies, common corridors and hallways, restrooms, garage and parking areas, stairways. elevators and other generally understood public or common areas. Landlord shall have the right to regulate or restrict the use of the Common Areas. f. Expense Stop: (fill in if applicable): $ 5.00 g. Expiration Dale: July 31, 2001 unless otherwise sooner terminated in accordance with the provisions of this Lease. h. Index (Section 5.2): United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, Annual with 4% CAP Average, Subgroup "All Items" (1967 = 100). i. Landlord's Mailing Address: P.O. Box 70187, Reno, Nevada - Mailing 5190 Neil Road, Suite 201, Reno, Nevada 89502 - Physical Address Tenant's Mailing address: P.O. Box 230, Clarksburg, CA 95612 j. Monthly Installments or Base Rent (initial): Five Thousand One Hundred Ninety-Two and 50/100 per month.($5192.00) k. Parking: Tenant shall be permitted, upon payment of the then prevailing monthly rate (as set by Landlord from time to time) to park Thirteen (13) cars on a non-exclusive basis in the area(s) designated by Landlord for parking. Tenant shall abide by any and all parking regulations and rules established from time to time by Landlord or Landlord's parking operator. Landlord reserves the right to separately charge Tenant's guests and visitors for parking. l. Premises: that portion of the Building containing approximately 3350 square feet of Rentable Area shown by diagonal lines on exhibit "A" located on the 3 rd floor of the Building and known as Suite 320. m. Project: The building of which the Premises are a part the "Building") and any other buildings or improvements on the real property ("the Property") located at 5190 Neil Road, Reno, Nevada and further described at Exhibit "B." The Project is known as U.S. Bank Center n. Rentable Area: as to both the Premises and the Project. the respective measurements of floor area as may from time to time be subject to lease by Tenant and all tenants of the Project. respectively, as determined by Landlord and applied on a consistent basis throughout the project. o. Security Deposit (Article 7):$ Five Thousand One Hundred Ninety-Two and 50/100 ($5,192.50) p. State: the State of Nevada q. Tenant's First adjustment date (Section 5.2): the first day of the calendar month following the Commencement Date plus 12 months r. Tenant's Proportionate Share: _______3.2____%. Such share is a fraction, the numerator of which is the Rentable Area of the Premises, and the denominator of which is the Rentable Area of the Project, as determined by Landlord from time to time. The Project consists of 1 building(s) containing a total Rentable Area of 104,144 square feet. s. Tenant's Use Clause (Article 8): General Offices t. Term: the period commencing on the Commencement Date and expiring at midnight on the Expiration Date. 3. EXHIBITS AND ADDENDA. The exhibits and addenda listed below (unless lined out) are incorporated by reference in this Lease: d. Rules & Regulations 4. DELIVERY OF POSSESSION. If for any reason Landlord does not deliver possession of the Premises to Tenant on the Commencement Date, Landlord shall not be subject to any liability for such failure, the Expiration Date shall not change and the validity of this Lease shall not be impaired, but Rent shall be abated until delivery of possession. "Delivery of possession" shall be deemed to occur on the date Landlord completes Landlord's Work as defined In Exhibit "C!' If Landlord permits Tenant to enter into possession of the Premises before the Commencement Date, such possession shall be subject to the provisions of this Lease, including, without limitation, the payment of Rent. 5. RENT. 5.1 Payment of base rent - Tenant agrees to pay the Base Rent for the Premises. Monthly Installments of Base Rent shall be payable in advance on the first day of each calendar month of the Term. If the Term begins (or ends) on other than the first (Or last) day of a calendar month, the Base Rent for the partial month shall be prorated on a per diem basis Tenant shall pay Landlord the first Monthly Installment of Base Rent when Tenant executes the Lease. 5.2 Adjusted Base Rent. a. The Base Rent (and the corresponding Monthly Installments of Base Rent) set forth at Section 2.a shall be adjusted annually (the "Adjustment Date"), commencing on Tenant's First Adjustment Date. Adjustments, if any, shall be based upon increases (if any) in the Index. The Index in publication three (3} months before the Commencement Date shall be the "Base Index!' The Index in publication three (3) months before each Adjustment Date shall be the "Comparison Index."As of each Adjustment Date, the Base Rent payable during the ensuing twelve month period shall be determined by increasing the initial Base Rent by a percentage equal to the percentage increase, if any, in the Comparison Index over the Base Index. If the Comparison Index for any Adjustment Date is equal to or less than the Comparison Index for the preceding Adjustment Date (or the Base Index in the case of First Adjustment Date), the Base Rent for the ensuing twelve-month period shall remain the amount of Base Rent payable during the preceding twelve-month period. When the Base Rent payable as of each Adjustment Date is determined, Landlord shall promptly give Tenant written notice of such adjusted Base Rent and the manner in which it was computed The Base Rent as so adjusted from time to time shall be the "Base Rent" for all purposes under this Lease. b. If at any Adjustment Date the Index no longer exists in the form described In this Lease, Landlord may substitute any substantially equivalent official index published by the Bureau of Labor Statistics or its successor. Landlord shall use any appropriate conversion factors to accomplish such substitution. The substitute index shall then become the "Index" hereunder. 5.3 Project Operating Costs. a. In order that the Rent payable during the Term reflect any increase in Project Operating Costs, Tenant agrees to pay to Landlord as Rent, Tenant's Proportionate Share of all increases in costs, expenses and obligations attributable to the Project and its operation all as provided below. b, If, during any calendar year during the Term, Project Operating Costs exceed the Project Operating Costs for the Base Year, Tenant shall pay to Landlord, In addition to the Base Rent and all other payments due under this Lease, an amount equal to Tenant's Proportionate Share of such excess Project Operating Costs in accordance with the provisions of this Section 5.3 b. (1) The term "Project Operating Costs" shall include all those items described in the following subparagraphs (a) and (b). (a) All taxes, assessments, water and sewer charges and other similar governmental charges levied on or attributable to the Building or Project or their operation, including without limitation, (i) real property taxes or assessments levied or assessed against the Building or Project, (ii) assessments or charges levied or assessed against the Building or Project by any redevelopment agency, (iii) any tax measured by gross rentals received from the leasing of the Premises, Building or Project, excluding any net income, franchise, capital stock, estate or inheritance taxes imposed by the State or federal government or their agencies, branches or departments; provided that if at any time during the Term any governmental entity levies, assesses or imposes on Landlord any (1) general or special, ad valorem or specific, excise, capital levy or other tax, assessment, levy or charge directly on the Rent received under this Lease or on the rent reserved under any other leases of space in the Building or Project, or (2) any license fee, excise or franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rent, or (3) any transfer, transaction, or similar tax, assessment, levy or charge based directly or indirectly upon the transaction represented by this Lease or such other leases, or (4) any occupancy use, per capita or other tax, assessment, levy or charge based directly or indirectly upon the use or occupancy of the Premises or other premises within the Building or Project, then any such taxes, assessments, levies and charges shall be deemed to be included in the term Project Operating Costs. If at any time during the Term the assessed valuation of, or taxes on, the Project are not based on a completed Project having at least eighty-five percent (85%) of the Rentable Area occupied, then the 'taxes" component of Project Operating Costs shall be adjusted by Landlord to reasonably approximate the taxes which would have been payable if the Project were completed and at least eighty-five percent (85%) occupied. (b) Operating costs incurred by Landlord in maintaining and operating the Building and Project, including without limitation the following: costs of (1) utilities; (2) supplies; (3) insurance (including public liability, property damage, earthquake, and fire and extended coverage insurance for the full replacement cost of the Building and Project as required by Landlord or its lenders for the Project: (4) services of independent contractors; (5) compensation (including employment taxes and fringe benefits) of all persons who perform duties connected with the operation maintenance, repair or overhaul of the Building or Project, and equipment, improvements and facilities located within the Project, including without limitation engineers, janitors, painters, floor waxes, window washers, security and parking personnel and gardeners (but excluding persons performing services not uniformly available to or performed for substantially all Building or Project tenants); (6) operation and maintenance of a room for delivery and distribution of mail to tenants of the Building or Project as required by the U.S. Postal Service (including, without limitation, an amount equal to the fair market rental value of the mail room premises); (7) management of the Building or Project, whether managed by Landlord or an independent contractor (including, without limitation, an amount equal to the fair market value of any on~site manager's office); (8) rental expenses for (or a reasonable depreciation allowance on) personal property used in the maintenance, operation or repair of the Building or Project; (9) costs, expenditures or charges (whether capitalized or not) required by any governmental or quasi-governmental authority; (10) amortization of capital expenses (including financing costs) (i) required by a governmental entity for energy conservation or life safety purposes, or (ii) made by Landlord to reduce Project Operating Costs; and (11) any other costs or expenses incurred by Landlord under this Lease and not otherwise reimbursed by tenants of the Project. If at any time during the Term, less than eighty-five percent (85%) of the Rentable Area of the Project is occupied, the "operating costs" component of Project Operating Costs shall be adjusted by Landlord to reasonably approximate the operating costs which would have been incurred if the Project had been at least eighty-five percent (85%) occupied (2) Tenant's Proportionate Share of Project Operating Costs shall be payable by Tenant to Landlord as follows: (a) Beginning with the calendar year following the Base Year and for each calendar year thereafter ("Comparison Year"), Tenant shall pay Landlord an amount equal to Tenant's Proportionate Share of the Project Operating Costs incurred by Landlord in the Comparison Year which exceeds the total amount of Project Operating Costs payable by Landlord for the Base Year. This excess is referred to as the "Excess Expenses" (b) To provide for current payments of Excess Expenses, Tenant shall, at Landlord's request, pay as additional rent during each Comparison Year, an amount equal to Tenant's Proportionate Share of the Excess Expenses payable during such Comparison Year, as estimated by Landlord from time to time. Such payments shall be made in monthly installments, commencing on the first day of the month following the month in which Landlord notifies Tenant of the amount it is to pay hereunder and continuing until the first day of the month following the month in which Landlord gives Tenant a new notice of estimated Excess Expenses. It is the intention hereunder to estimate from time to time the amount of the Excess Expenses for each Comparison Year and Tenant's Proportionate Share thereof, and then to make an adjustment in the following year based on the actual Excess Expenses incurred for that Comparison Year. (c) On or before April 1 of each Comparison Year after the first Comparison Year (or as soon thereafter as is practical), Landlord shall deliver to Tenant a statement setting forth Tenant's Proportionate Share of the Excess Expenses for the preceding Comparison Year. If Tenant's Proportionate Share of the actual Excess Expenses for the previous Comparison Year exceeds the total of the estimated monthly payments made by Tenant for such year, Tenant shall pay Landlord the amount of the deficiency within ten (10) days of the receipt of the statement. If such total exceeds Tenant's Proportionate Share of the actual Excess Expenses for such Comparison Year, then Landlord shall credit against Tenant's next ensuing monthly installment(s) of additional rent an amount equal to the difference until the credit is exhausted. If a credit is due from Landlord on the Expiration Date, Landlord shall pay Tenant the amount of the credit The obligations of Tenant and Landlord to make payments required under this Section 5.3 shall survive the Expiration Date. (d) Tenant's Proportionate Share of Excess Expenses in any Comparison Year having less than 365 days shall be appropriately prorated. (a) If any dispute arises as to the amount of any additional rent due hereunder, Tenant shall have the right after reasonable notice and at reasonable times to Inspect Landlord's accounting records at Landlord's accounting office and, if after such inspection Tenant still disputes the amount of additional rent owed, a certification as to the proper amount shall be made by Landlord's certified public accountant, which certification shall be final and conclusive. Tenant agrees to pay the cost of such certification unless it is determined that Landlord's original statement overstated Project Operating Costs by more than five percent (5%) (f) If this Lease sets forth an Expense Stop at Section 2f, then during the Term Tenant shall be liable for Tenant's Proportionate Share of any actual Project Operating Costs which exceed the amount of the Expense Stop. Tenant shall make current payments of such excess costs during the Term in the same manner as is provided for payment of Excess Expenses under the applicable provisions of Section 5.3b(2)(b) and (c) above. 5.4 Definition of Rent. All costs and expenses which Tenant assumes or agrees to pay to Landlord under this Lease shall be deemed additional rent (which, together with the Base Rent is sometimes referred to as the "Rent. The Rent shall be paid to the Building manager (or other person) and at such place, as Landlord may from time to time designate in writing, without any prior demand therefor and without deduction or offset, in lawful money of the United States of America 5.5 Rent control If the amount of Rent or any other payment due under this Lease violates the terms of any governmental restrictions on such Rent or payment, then the Rent or payment due during the period of such restrictions shall be the maximum amount allowable under those restrictions. Upon termination of the restrictions, Landlord shall, to the extent it is legally permitted, recover from Tenant the difference between the amounts received during the period of the restrictions and the amounts Landlord would have received had there been no restrictions. 5.6 Taxes Payable by Tenant. In addition to the Rent and any other charges to be paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for any and all taxes payable by Landlord (other than net income taxes) which are not otherwise reimbursable under this Lease, whether or not now customary or within the contemplation of the parties, where such taxes are upon, measured by or reasonably attributable to (a) the cost or value of Tenant's equipment. furniture, fixtures and other personal property located in the Premises, or the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, other than Building Standard Work made by Landlord, regardless furniture, fixtures and other personal property located in the Premises, or the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, other than Building Standard Work made by Landlord, regardless of whether title to such improvements is held by Tenant or Landlord; (b) the gross or net Rent payable under this Lease, including, without limitation. any rental or gross receipts tax levied by any taxing authority with respect to the receipt of the Rent hereunder; (C) the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (d) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. If it becomes unlawful for Tenant to reimburse Landlord for any costs as required under this Lease. the Base Rent shall be revised to net Landlord the same net Rent after imposition of any tax or other charge upon Landlord as would have been payable to Landlord but for the reimbursement being unlawful. 6. INTEREST AND LATE CHARGES. If Tenant fails to pay when due any Rent or other amounts or charges which Tenant is obligated to pay under the terms of this Lease, the unpaid amounts shall bear interest at the maximum rate then allowed by law. Tenant acknowledges that the late payment of any Monthly Installment of Base Rent will cause Landlord to lose the use of that money and incur Costs and expenses not contemplated under this Lease, including without limitation, administrative and collection costs and processing and accounting expenses, the exact amount of which is extremely difficult to ascertain. Therefore, in addition to interest, if any such installment is not received by Landlord within ten (10) days from the date it is due, Tenant shall pay Landlord a late charge equal to ten percent (10%) of such installment. Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the loss suffered from such nonpayment by Tenant Acceptance of any interest or late charge shall not constitute a waiver of Tenant's default with respect to such nonpayment by Tenant nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease. 7. SECURITY DEPOSIT. Tenant agrees to deposit with Landlord the Security Deposit set forth at Section 2.0 upon execution of this Lease. as security for Tenant's faithful performance of its obligations under this Lease. Landlord and Tenant agree that the Security Deposit may be commingled with funds of Landlord and Landlord shall have no obligation or liability for payment of interest on such deposit Tenant shall not mortgage, assign, transfer or encumber the Security Deposit without the prior written consent of Landlord and any attempt by Tenant to do so shall be void, without force or effect and shall not be binding upon Landlord. If Tenant fails to pay any Rent or other amount when due and payable under this Lease, or fails to perform any of the terms hereof, Landlord may appropriate and apply or use all or any portion of the Security Deposit for Rent payments or any other amount then due and unpaid, for payment of any amount for which Landlord has become obligated as a result of Tenant's default or breach, and for any loss or damage sustained by Landlord as a result of Tenant's default or breach, and Landlord may so apply or use this deposit without prejudice to any other remedy Landlord may have by reason of Tenant's default or breach. If Landlord so uses any of the Security Deposit, Tenant shall, within ten (10) days after written demand therefor, restore the Security Deposit to the full amount originally deposited; Tenants failure to do so shall constitute an act of default hereunder and Landlord shall have the right to exercise any remedy provided for at Article 27 hereof Within fifteen (15) days after the Term (or any extension thereof) has expired or Tenant has vacated the Premises, whichever shall last occur, and provided Tenant is not then in default on any of its obligations hereunder, Landlord shall return the Security Deposit to Tenant, or, if Tenant has assigned its interest under this Lease, to the last assignee of Tenant If Landlord sells its interest in the Premises, Landlord may deliver this deposit to the purchaser of Landlord's interest and thereupon be relieved of any further liability or obligation with respect to the Security Deposit 8. TENANT'S USE OF THE PREMISES. Tenant shall use the Premises solely for the purposes set forth in Tenant's Use Clause. Tenant shall not use or occupy the Premises in violation of law or any covenant, condition or restriction affecting the Building or Project or the certificate of occupancy issued for the Building or Project, and shall, upon notice from Landlord, immediately discontinue any use of the Premises which is declared by any governmental authority having jurisdiction to be a violation of law or the certificate of occupancy. Tenant, at Tenant's own cost and expense, shall comply with all laws, ordinances, regulations, rules and/or any directions of any governmental agencies or authorities having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, Impose any duty upon Tenant or Landlord with respect to the Premises or its use or occupation. A judgment of any court of competent jurisdiction or the admission by Tenant in any action or proceeding against Tenant that Tenant has violated any such laws, ordinances, regulations, rules and/or directions in the use of the Premises shall be deemed to be a conclusive determination of that fact as between Landlord and Tenant. Tenant shall not do or permit to be done any time, extended coverage or other insurance policy covering the Building or Project and/or property located therein, and shall comply with all rules, orders, regulations, requirements and recommendations of the Insurance Services Office or any other organization performing a similar function. Tenant shall promptly upon demand reimburse Landlord for any additional premium charged for such policy by reason of Tenant's failure to comply with the provisions of this Article. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstructor interfere with the rights of other tenants or occupants of the Building or Project, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose. nor shall Tenant cause. maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 9. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder, Landlord agrees to furnish to the Premises during generally recognized business days. and during hours determined by Landlord in its sole discretion, and subject to the Rules and Regulations of the Building or Project, electricity for normal desk top office equipment and normal copying equipment, and heating, ventilation and air conditioning ("HVAC") as required in Landlord's judgment for the comfortable use and occupancy of the Premises. If Tenant desires HVAC at any other time, Landlord shall use reasonable efforts to furnish such service upon reasonable notice from Tenant and Tenant shall pay Landlord's charges therefor on demand. Landlord shall also maintain and keep lighted the common stairs, common entries and restrooms in the Building. Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall the Rent be abated by reason of (i) the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, (ii) failure to furnish or delay in furnishing any such services where such failure or delay is caused by accident or any condition or event beyond the reasonable control of Landlord, or by the making of necessary repairs or improvements to the Premises, Building or Project. or (iii) the limitation, curtailment or rationing of, or restrictions on, use of water. electricity, gas or any other form of energy serving the Premises, Building or Project. Landlord shall not be liable under any circumstances for a loss of or injury to property or business, however occurring, through or in connection with or incidental to failure to furnish any such services. If Tenant uses heat generating machines or equipment in the Premises which affect the temperature otherwise maintained by the HVAC system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. Tenant shall not, without the written consent of Landlord, use any apparatus or device in the Premises, including without limitation, electronic data processing machines, punch card machines or machines using in excess of 120 volts, which consumes more electricity than is usually furnished or supplied for the use of premises as general office space, as determined by Landlord Tenant shall not connect any apparatus with electric current except through existing electrical outlets in the Premises, Tenant shall not consume water or electric current in excess of that usually furnished or supplied for the use of premises as general office space (as determined by Landlord), without first procuring the written consent of Landlord, which Landlord may refuse, and in the event of consent, Landlord may have installed a water meter or electrical current meter in the Premises to measure the amount of water or electric current consumed. The cost of any such meter and of its installation, maintenance and repair shall be paid for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand for all such water and electric current consumed as shown by said meters, at the rates charged for such services by the local public utility plus any additional expense incurred in keeping account of the water and electric current so consumed. If a separate meter is not installed, the excess cost for such water and electric current shall be established by an estimate made by a utility company or electrical engineer hired by Landlord at Tenant's expense. Nothing contained in this Article shall restrict Landlord's right to require at any time separate metering of utilities furnished to the Premises. In the event utilities are separately metered, Tenant shall pay promptly upon demand for all utilities consumed at utility rates charged by the local public utility plus any additional expense incurred by Landlord in keeping account of the utilities so consumed. Tenant shall be responsible for the maintenance and repair of any such meters at its sole cost. Landlord shall furnish elevator service, lighting replacement for building standard lights, restroom supplies window washing and janitor services in a manner that such services are customarily furnished to comparable office buildings in the area. 10. CONDITION OF THE PREMISES. Tenant's taking possession of the Premises shall be deemed conclusive evidence that as of the date of taking possession the Premises are in good order and satisfactory condition, except for such matters as to which Tenant gave Landlord notice on or before the Commencement Date. No promise of Landlord to alter, remodel, repair or improve the Premises, the Building or the Project and no representation, express or implied, respecting any matter or thing relating to the Premises, Building, Project or this Lease (including, without limitation, the condition of the Premises, the Building or the Project) have been made to Tenant by Landlord or its Broker or Sales Agent, other than as may be contained herein or in a separate exhibit or addendum signed by Landlord and Tenant. 11. CONSTRUCTION, REPAIRS AND MAINTENANCE. a. Landlord's Obligations. Landlord shall-perform Landlord's Work to the Premises as described in Exhibit "C." Landlord shall maintain in good order, condition and repair the Building and all other portions of the Premises not the obligation of Tenant or of any other tenant in the building. b. Tenant's Obligations. (1) Tenant shall perform Tenant's Work to the Premises as described in Exhibit "C." (2) Tenant at Tenant's sole expense shall, except for services furnished by Landlord pursuant to Article 9 hereof, maintain the Premises in good order, condition and repair, including the interior surfaces of the ceilings, walls and floors, all doors, all interior windows, all plumbing, pipes and fixtures, electrical wiring, switches and fixtures, Building Standard furnishings and special items and equipment installed by or at the expense of Tenant. (3) Tenant shall be responsible for all repairs and alterations in and to the Premises, Building and Project and the facilities and systems thereof. the need for which arise out of tenants use or occupancy of the premisses the installation, removal , use or operation of Tenant's Property (as defined in Article 13) in the Premises, (iii) the moving of Tenant's Property into or out of the building, or the act. Omission. Misuse or neglect of Tenant. its agents contractors, employees or invitees. (4) If Tenant fails to maintain the Premises in good order, condition and repair, Landlord shall give Tenant notice to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to promptly commence such work and diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work. Any amount so expended by Landlord shall be paid by Tenant promptly after demand with interest at the prime commercial rate then being charged by Bank of America NT & SA plus two percent (2%) per annum, from the date of such work, but not to exceed the maximum rate then allowed by law. Landlord shall have no liability to Tenant for any damage, inconvenience, or interference with the use of the Premises by Tenant as a result of performing any such work. c. Compliance with Law. Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances, and rules of any public authority relating to their respective maintenance obligations as set forth herein. d. Waiver by Tenant. Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford the Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises in good order, condition and repair. e. Load and Equipment limits. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord's structural engineer The cost of any such determination made by Landlord's structural engineer shall be paid for by Tenant upon demand. Tenant shall not install business machines or mechanical equipment which cause noise or vibration to such a degree as to be objectionable to Landlord or other Building tenants. f Except as otherwise expressly provided in this Lease, Landlord shall have no liability to Tenant nor shall Tenant's obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted by this Lease or by any other tenant's lease or required by law to make in or to any portion of the Project, Building or the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant's business in the Premises. Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Building's mechanical, electrical, plumbing, HVAC or other systems serving, located in, or passing through the Premises g. Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Building's mechanical, electrical, plumbing, HVAC or other systems serving, located in, or passing through the Premises. h. Upon the expiration or earlier termination of this Lease, Tenant shall return the Premises to Landlord clean and in the same condition as on the date Tenant took possession, except for normal wear and tear. Any damage to the Premises, including any structural damage, resulting from Tenant's use or from the removal of Tenant's fixtures, furnishings and equipment pursuant to Section 13b shall be repaired by Tenant at Tenant's expense. 12. ALTERATIONS AND ADDITIONS. a. Tenant shall not make any additions, alterations or improvements to the Premises without obtaining the prior written consent of Landlord. Landlord's consent may be conditioned on Tenant's removing any such additions, alterations or improvements upon the expiration of the Term and restoring the Premises to the same condition as on the date Tenant took possession. All work with respect to any addition, alteration or improvement shall be done in a good and workmanlike manner by properly qualified and licensed personnel approved by Landlord, and such work shall be diligently prosecuted to completion. Landlord may, at Landlord's option, require that any such work be performed by Landlord's contractor, in which case the cost of such work shall be paid for before commencement of the work. Tenant shall pay to Landlord upon completion of any such work by Landlord's contractor, an administrative fee of fifteen percent (15%) of the cost of the work. b. Tenant shall pay the costs of any work done on the Premises pursuant to Section 12a, and shall keep the Premises, Building and Project free and clear of liens of any kind. Tenant shall indemnify, defend against and keep Landlord free and harmless from all liability loss, damage, costs, attorneys' fees and any other expense incurred on account of claims by any person performing work or furnishing materials or supplies for Tenant or any person claiming under Tenant. Tenant shall keep Tenant's leasehold interest, and any additions or Improvements which are or become the property of Landlord under this Lease, free and clear of all attachment or judgment liens. Before the actual commencement of any work for which a claim or lien may be filed, Tenant shall give Landlord notice of the intended commencement date a sufficient time before that date to enable Landlord to post notices of non-responsibility or any other notices which Landlord deems necessary for the proper protection of Landlord's interest in the Premises, Building or the Project, and Landlord shall have the right to enter the Premises and post such notices at any reasonable time. c. Landlord may require, at Landlord's sole option, that Tenant provide to Landlord, at Tenant's expense, a lien and completion bond In an amount equal to at least one and one-half (1 1/2) times the total estimated cost of any additions, alterations or improvements to be made in or to the Premises, to protect Landlord against any liability for mechanic's and materialmen's liens and to insure timely completion of the work. Nothing contained in this Section 12c shall relieve Tenant of its obligation under Section 12b to keep the Premises, Building and Project free of all liens. d. Unless their removal is required by Landlord as provided in Section 12a, all additions, alterations and improvements made to the Premises shall become the property of Landlord and be surrendered with the Premises upon the expiration of the Term; provided, however, Tenant's equipment, machinery and trade fixtures which can be removed without damage to the Premises shall remain the property of Tenant and may be removed, subject to the provisions of Section 13b. 13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY. a. All fixtures, equipment, improvements and appurtenances attached to or built into the Premises at the commencement of or during the Term, whether or not by or at the expense of Tenant ("Leasehold Improvements"), shall be and remain a part of the Premises, shall be the property of Landlord and shall not be removed by Tenant, except as expressly provided in Section 13b. b. All movable partitions, business and trade fixtures, machinery and equipment, communications equipment and office equipment located in the Premises and acquired by or for the account of Tenant, without expense to Landlord, which can be removed without structural damage to the Building, and all furniture, furnishings and other articles or movable personal property owned by Tenant and located in the Premises (collectively "Tenant's Property" shall be and shall remain the property of Tenant and may be removed by Tenant at any time during the Term: provided that if any of Tenant's Property is removed, Tenant shall promptly repair any damage to the Premises or to the Building resulting from such removal. 14. RULES AND REGULATIONS. Tenant agrees to comply with (and cause its agents, contractors, employees and invitees to comply with) the rules and regulations attached hereto as Exhibit "D" and with such reasonable modifications thereof and additions thereto as Landlord may from time to time make. Landlord shall not be responsible for any violation of said rules and regulations by other tenants or occupants of the Building or Project. 15. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord reserves the following rights, exercisable without liability to Tenant for (a) damage or injury to property, person or business, (b) causing an actual or constructive eviction from the Premises, or (c) disturbing Tenant's use or possession of the Premises: a. To name the Building and Project and to change the name or street address of the Building or Project; b. To install and maintain all signs on the exterior and interior of the Building and Project: c. To have pass keys to the Premises and all doors within the Premises, excluding Tenant's vaults and safes; d. At anytime during the Term, and on reasonable prior notice to Tenant, to inspect the Premises, and to show the Premises to any prospective purchaser or mortgagee of the Project, or to any assignee of any mortgage on the Project, or to others having an interest in the Project or Landlord, and during the last six months of the Term, to show the Premises to prospective tenants thereof; and e. To enter the Premises for the purpose of making inspections, repairs, alterations, additions or improvements to the Premises or the Building (including, without limitation, checking, calibrating, adjusting or balancing controls and other parts of the HVAC system), and to take all steps as may be necessary or desirable for the safety, protection, maintenance or preservation of the Premises or the Building or Land lord's interest therein, or as may be necessary or desirable for the operation or Improvement of the Building or in order to comply with laws, orders or requirements of governmental or other authority. Landlord agrees to use its best efforts (except in an emergency) to minimize interference with Tenant's business in the Premises in the course of any such entry. 16. ASSIGNMENT AND SUBLETTING. No assignment of this Lease or sublease of all or any part of the Premises shall be permitted, except as provided in this Article 16. a. Tenant shall not, without the prior written consent of Landlord, assign or hypothecate this Lease or any interest herein or sublet the Premises or any part thereof, or permit the use of the Premises by any party other than Tenant. Any of the foregoing acts without such consent shall be void and shall, at the option of Landlord, terminate this Lease. This Lease shall not, nor shall any interest of Tenant herein, be assignable by operation of law without the written consent of Landlord. b. If at any time Qr from time to time during the Term Tenant desires to assign this Lease or sublet all or any part of the Premises, Tenant shall give notice to Landlord setting forth the terms and provisions of the proposed assignment or sublease, and the identity of the proposed assignee or subtenant. Tenant shall promptly supply Landlord with such information concerning the business background and financial condition of such proposed assignee or subtenant as Landlord may reasonably request Landlord shall have the option, exercisable by notice given to Tenant within twenty (20) days after Tenant's notice is given, either to sublet such space from Tenant at the rental and on the other terms set forth in this Lease for the term set forth in Tenant's notice, or, in the case of an assignment, to terminate this Lease. If Landlord does not exercise such option, Tenant may assign the Lease or sublet such space to such proposed assignee or subtenant on the following further conditions: (1) Landlord shall have the right to approve such proposed assignee or subtenant, which approval shall not be unreasonably withheld; (2) The assignment or sublease shall be on the same terms set forth in the notice given to Landlord: (3) No assignment or sublease shall be valid and no assignee or sublessee shall take possession of the Premises until an executed counterpart of such assignment or sublease has been delivered to Landlord: (4) No assignee or sublessee shall have a further right to assign or sublet except on the terms herein contained: and (5) Any sums or other economic consideration received by Tenant as a result of such assignment or subletting, however denominated under the assignment or sublease, which exceed, in the aggregate, (i) the total sums which Tenant Is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to any portion of the Premises subleased), plus (ii) any real estate brokerage commissions or fees payable in connection with such assignment or subletting, shall be paid to Landlord as additional rent under this Lease without affecting or reducing any other obligations of Tenant hereunder. c. Notwithstanding the provisions of paragraphs a and b above, Tenant may assign this Lease or sublet the Premises or any portion thereof, without Landlord's consent and without extending any recapture or termination option to Landlord, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from a merger or consolidation with Tenant, or to any person or entity which acquires all the assets of Tenant's business as a going concern, provided that (i) the assignee or sublessee assumes, in full, the obligations of Tenant under this Lease, (ii) Tenant remains fully liable under this Lease, and (iii) the use of the Premises under Article 8 remains unchanged. d. No subletting or assignment shall release Tenant of Tenant's obligations under this Lease or alter primary liability of Tenant to pay the Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting In the event of default by an assignee or subtenant of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee, subtenant or successor. Landlord may consent to subsequent assignments of the Lease or sublettings or amendments or modifications to the Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and any such actions shall not relieve Tenant of liability under this Lease. e. If Tenant assigns the Lease or sublets the Premises or requests the consent of Landlord to any assignment or subletting or; for any act that tenant proposes to do, then Tenant shall upon demand, pay Landlord an administrative fee of One Hundred Fifty and No/100ths Dollars ($150.00) plus any attorneys' fees reasonably incurred by Landlord in connection with such act or request. 17. HOLDING OVER. If after expiration of the Term, Tenant remains in possession of the Premises with Landlord's permission (express or implied), Tenant shall become a tenant from month to month only, upon all the provisions of this Lease (except as to term and ease Rent), but the "Monthly Installments of Base Rent" payable by Tenant shall be increased to one hundred fifty percent (150%) of the Monthly Installments of Base Rent payable by Tenant at the expiration of the Term. Such monthly rent shall be payable in advance on or before the first day of each month. If either party desires to terminate such month to month tenancy, it shall give the other party not less than thirty (30) days advance written notice of the date of termination. 18. SURRENDER OF PREMISES. a. Tenant shall peaceably surrender the Premises to Landlord on the Expiration Date, in broom-clean condition and in as good condition as when Tenant took possession, except for (i) reasonable wear and tear, (ii) loss by fire or other casualty, and (iii) loss by condemnation. Tenant shall, on Landlord's request, remove Tenant's Property on or before the Expiration Date and promptly repair all damage to the Premises or Building caused by such removal. b. If Tenant abandons or surrenders the Premises, or is dispossessed by process of law or otherwise, any of Tenant's Property left on the Premises shall be deemed to be abandoned, and, at Landlord's option, title shall pass to Landlord under this Lease as by a bill of sale. If Landlord elects to remove all or any part of such Tenant's Property, the cost of removal, Including repairing any damage to the Premises or Building caused by such removal, shall be paid by Tenant. On the Expiration Date Tenant shall surrender all keys to the Premises. 19. DESTRUCTION OR DAMAGE. a. If the Premises or the portion of the Building necessary for Tenant's occupancy is damaged by fire earthquake, act of God, the elements of other casualty Landlord shall, subject to the provisions of this Article, promptly repair the damage, if such repairs can' In Landlord's opinion, be completed within (90) ninety days. If Landlord determines that repairs can be completed within ninety (90) days, this Lease shall remain in full force and effect, except that if such damage is not the result of the negligence or willful misconduct of Tenant or Tenant's agents, employees, contractors, licensees or invitees, the Base Rent shall be abated to the extent Tenant's use of the Premises Is impaired, commencing with the date of damage and continuing until completion of the repairs required of Landlord under Section 19d. b. If in Landlord's opinion, such repairs to the Premises or portion of the Building necessary for Tenant's occupancy cannot be completed within ninety (90) days, Landlord may elect, upon notice to Tenant given within thirty (30) days after the date of such fire or other casualty, to repair such damage, in which event this Lease shall continue in full force and effect, but the Base Rent shall be partially abated as provided in Section 19a. If Landlord does not so elect to make such repairs, this Lease shall terminate as of the date of such fire or other casualty c. If any other portion of the Building or Project is totally destroyed or damaged to the extent that in Landlord's opinion repair thereof cannot be completed within ninety (90) days, Landlord may elect upon notice to Tenant given within thirty (30) days after the date of such fire or other casualty to repair such damage, in which event this Lease shall continue in full force and effect, but the Base Rent shall be partially abated as provided In Section 19a. If Landlord does not elect to make such repairs, this Lease shall terminate as of the date of such fire or other casualty. d. If the Premises are to be repaired under this Article, Landlord shall repair at its cost any injury or damage to the Building and Building Standard Work In the Premises. Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of any other Leasehold Improvements and Tenant's Property Landlord shall not be liable for any loss of business, inconvenience or annoyance arising from any repair or restoration of any portion of the Premises, Building or Project as a result of any damage from fire or other casualty. e. This Lease shall be considered an express agreement governing any case of damage to or destruction of the Premises, Building or Project by fire or other casualty, and any present or future law which purports to govern the rights of Landlord and Tenant in such circumstances in the absence of express agreement, shall have no application. 20. EMINENT DOMAIN. a. If the whole of the Building or Premises is lawfully taken by condemnation or in any other manner for any public or quasi public purpose, this Lease shall terminate as of tile date of such taking, and Rent shall be prorated to such date. If less than the whole of the Building or Premises is so taken, this Lease shall be unaffected by such taking, provided that (i) Tenant shall have the right to terminate this Lease by notice to Landlord given within ninety (90) days after the date of such taking if twenty Percent (20%) or more of the Premises is taken and the remaining area of the Premises is not reasonably sufficient for Tenant to continue operation of Its business, and (ii) Landlord shall have the right to terminate this Lease by notice to Tenant given within ninety (90) days after the date of such taking. If either Landlord or Tenant so elects to terminate this Lease, the Lease shall terminate on the 30 th day after either such notice. The Rent shall be prorated to the date of termination. If this Lease continues in force upon such partial taking, the Base Rent and Tenant's Proportionate Share shall be equitably adjusted according to the remaining Rentable Area of the Premises and Project. b. In the event of any taking, partial or whole, all of the proceeds of any award, judgment or settlement payable by the condemning authority shall be the exclusive property of Landlord, and Tenant hereby assigns to Landlord all of its right, title and interest in any award, judgment or settlement from the condemning authority. Tenant, however, shall have the right, to the extent that Landlord's award is not reduced or prejudiced, to claim from the condemning authority (but not from Landlord) such compensation as may be recoverable by Tenant in its own right for relocation expenses and damage to Tenant's personal property. c. In the event of a partial taking of the Premises which does not result in a termination of this Lease, Landlord shall restore the remaining portion of the Premises as nearly as practicable to its condition prior to the condemnation or taking, but only to the extent of Building Standard Work. Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of any other Leasehold Improvements and Tenant's Property. 21. INDEMNIFICATION. a. Tenant shall indemnify and hold Landlord harmless against and from liability and claims of any kind for loss or damage to property of Tenant or any other person, or for any injury to or death of any person, arising out of: (1) Tenant's use and occupancy of the Premises, or any work, activity or other things allowed or suffered by Tenant to be done in, on or about the Premises: (2) any breach or default by Tenant of any of Tenant's obligations under this Lease; or (3) any negligent or otherwise tortious act or omission of Tenant, its agents, employees, invitees or contractors. Tenant shall at Tenant's expense, and by counsel satisfactory to Landlord, defend Landlord in any action or proceeding arising from any such claim and shall indemnify Landlord against all costs, attorneys' fees, expert witness fees and any other expenses incurred in such action or proceeding. As a material part of the consideration for Landlord's execution of this Lease, Tenant hereby assumes all risk of damage or injury to any person or property in, on or about the Premises from any cause. b. Landlord shall not be liable for injury or damage which may be sustained by the person or property of Tenant. its employees, invitees or customers, or any other person in or about the Premises, caused by or resulting from fire, steam. electricity, gas, water or rain which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Building or Project or from other sources. Landlord shall not be liable for any damages arising from any act or omission of any other tenant of the Building or Project. 22. TENANT'S INSURANCE. a. All insurance required to be carried by Tenant hereunder shall be issued by responsible insurance companies acceptable to Landlord and Landlord's lender and qualified to do business in the State. Each policy shall name Landlord, and at Landlord's request any mortgagee of Landlord, as an additional insured, as their respective interests may appear. Each policy shall contain (i) a cross-liability endorsement, (ii) a provision that such policy and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord and that any coverage carried by Landlord shall be excess insurance, and (iii) a waiver by the insurer of any right of subrogation against Landlord, its agents, employees and representatives, which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives. A copy of each paid up policy (authenticated by the insurer) or certificate of the insurer evidencing the existence and amount of each insurance policy required hereunder shall be delivered to Landlord before the date Tenant is first given the right of possession of the Premises, and thereafter within thirty (30) days after any demand by Landlord therefor. Landlord may, at any time and from time to time, inspect and/or copy any insurance policies required to be maintained by Tenant hereunder. No such policy shall be cancellable except after twenty (20) days written notice to Landlord and Landlord's lender. Tenant shall furnish Landlord with renewals or "binders" of any such policy at least ten (10) days prior to the expiration thereof. Tenant agrees that if Tenant does not take out and maintain such insurance, Landlord may (but shall not be required to) procure said insurance on Tenant's behalf and charge the Tenant the premiums together with a twenty-five percent (25%) handling charge, payable upon demand Tenant shall have the right to provide such insurance coverage pursuant to blanket policies obtained by the Tenant, provided such blanket policies expressly afford coverage to the Premises, Landlord, Landlord's mortgagee and Tenant as required by this Lease. b. Beginning on the date Tenant is given access to the Premises for any purpose and continuing until expiration of the Term, Tenant shall procure, pay for and maintain in effect policies of casualty insurance covering (i) all Leasehold Improvements (including any alterations, additions or improvements as may be made by Tenant pursuant to the provisions of Article 12 hereof), and (ii) trade fixtures, merchandise and other personal property from time to time in, on or about the Premises, in an amount not less than one hundred percent (100%) of their actual replacement cost from time to time, providing protection against any peril included within the classification "Fire and Extended Coverage" together with insurance against sprinkler damage, vandalism and malicious mischief The proceeds of such insurance shall be used for the repair or replacement of the property so insured. Upon termination of this Lease following a casualty as set forth herein, the proceeds under (i) shall be paid to Landlord, and the proceeds under (ii) above shall be paid to Tenant. c. Beginning on the date Tenant is given access to the Premises for any purpose and continuing until expiration of the Term, Tenant shall procure, pay for and maintain in effect workers' compensation insurance as required by law and comprehensive public liability and property damage insurance with respect to the Construction of improvements on the Premises, the use, operation or condition of the Premises and the operations of Tenant in, on or about the Premises, providing personal injury and broad form property damage coverage for not less than One Million Dollars ($1,000,000.00) combined single limit for bodily injury, death and property damage liability. d. Not less than every three (3) years during the Term, Landlord and Tenant shall mutually agree ~ increases in all of Tenant's insurance policy limits for all insurance to be carried by Tenant asset forth in this Article. In the event Landlord and Tenant cannot mutually agree upon the amounts of said Increases, then Tenant agrees that all insurance,,policy limits as set forth in this Article shall be adjusted for increases in the cost of living in the same manner as is set forth in Section 5.2 hereof for the adjustment of the Base Rent. 23. WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive all rights of recovery against the other and against the officers, employees, agents and representatives of the other, on account of loss by or damage to the waiving party of its property or the property of others under its control, to the extent that such loss or damage is insured against under any fire and extended co~rage insurance policy which either may have in force at the time of the loss or damage. Tenant shall, upon obtaining the policies of insurance required under this Lease, give notice to its insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 24. SUBORDINATION AND ATTORNMENT. Upon written request of Landlord, or any first mortgagee or first deed of trust beneficiary of Landlord, or ground lessor of Landlord, Tenant shall, in writing, subordinate its rights under this Lease to the lien of any first mortgage or first deed of trust, or to the interest of any lease in which Landlord is lessee, and to all advances made or hereafter to be made thereunder. However, before signing any subordination agreement, Tenant shall have the right to obtain from any lender or lessor or Landlord requesting such subordination, an agreement in writing providing that, as long as Tenant is not in default hereunder, this Lease shall remain in effect for the full Term The holder of any security interest may, upon written notice to Tenant. elect to have this Lease prior to its security interest regardless of the time of the granting or recording of such security interest. In the event of any foreclosure sale, transfer in lieu of foreclosure or termination of the lease in which Landlord is lessee, Tenant shall attorn to the purchaser, transferee or lessor as the case may be, and recognize that party as Landlord under this Lease, provided such party acquires and accepts the Premises subject to this Lease. 25. TENANT ESTOPPEL CERTIFICATES. Within ten (10) days after written request from Landlord, Tenant shall execute and deliver to Landlord or Landlord's designee, a written statement certifying (a) that this Lease is unmodified and in full force and effect, or is in full force and effect as modified and stating the modifications; (b) the amount of Base Rent and the date to which Base Rent and additional rent have been paid in advance; (c) the amount of any security deposited with Landlord; and (d) that Landlord is not in default hereunder or, if Landlord is claimed to be in default, stating the nature of any claimed default. Any such statement may be relied upon by a purchaser, assignee or lender. Tenant's failure to execute and deliver such statement within the time required shall at Landlord's election be a default under this Lease and shall also be conclusive upon Tenant that: (1) this Lease is in full force and effect and has not been modified except as represented by Landlord; (2) there are no uncured defaults in Landlord's performance and that Tenant has no right of offset, counterclaim or deduction against Rent; and (3) not more than one month's Rent has been paid in advance. 26. TRANSFER OF LANDLORD'S INTEREST. In the event of any sale or transfer by Landlord of the Premises, Building or Project, and assignment of this Lease by Landlord, Landlord shall be and is hereby entirely freed and relieved of any and all liability and obligations contained in or derived from this Lease arising out of any, act, occurrence or omission relating to the Premises, Building, Project or Lease occurring after the consummation of such sale or transfer, providing the purchaser shall expressly assume all of the covenants and obligations of Landlord under this Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord may transfer the security deposit or prepaid Rent to Landlord's successor and upon such transfer, Landlord shall be relieved of any and all further liability with respect thereto. 27. DEFAULT. 27.1. Tenant's Default. The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant: a. If Tenant abandons or vacates the Premises; or b. If Tenant fails to pay any Rent or any other charges required to be paid by Tenant under this Lease and such failure continues for (5) days after such payment is due and payable; or c. If Tenant fails to promptly and fully perform any other covenant, condition or agreement contained in this Lease and such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; or d. If a writ of attachment or execution is levied on this Lease or on any of Tenant's Property: or e. If Tenant makes a general assignment for the benefit of creditors, or provides for an arrangement, composition, extension or adjustment with its creditors; or f. If Tenant files a voluntary petition for relief or if a petition against Tenant in a proceeding under the federal bankruptcy laws or other insolvency laws is filed and not withdrawn or dismissed within forty-five (45) days thereafter, of if under the provisions of any law providing for reorganization or winding up of corporations, any court of competent jurisdiction assumes jurisdiction, custody or control Or Tenant or any substantial part of its property and such jurisdiction, custody or control remains in force unrelinquished, unstayed or unterminated for a period of forty-five (45) days; or g. If in any proceeding or action in which Tenant is a party, a trustee, receiver, agent or custodian is appointed to take charge of the Premises or Tenant's Property (or has the authority to do so) for the purpose of enforcing a lien against the Premises or Tenant's Property; or h. If Tenant is a partnership or consists of more than one (1) person or entity, if any partner of the partnership or other person or entity is involved in any of the acts or event. described in subparagraphs d through g above. 27.2. Remedies. In the event of Tenant's default hereunder, then in addition to any other rights or remedies Landlord may have under the law, Landlord shall have the right , at Landlords option, without further notice or demand of any kind to do the following: a. Terminate this Lease ans Tenant's right to possession of the Premises and take possession thereof, and Tenant shall have no further claim to the Premises or under this Lease: or b. Continue this Lease in effect, reenter and occupy the Premises for the account of Tenant, and collect any unpaid Rent or other charges which have or thereafter become due and payable; or c. Reenter the Premises under the provisions of subparagraph b, and thereafter elect to terminate this Lease and Tenant's right to possession of the Premises. If Landlord reenters the Premises under the provisions of subparagraphs b or c above, Landlord shall not be deemed to have terminated this Lease or the obligation of Tenant to pay any Rent or other charges thereafter accruing, unless Landlord notifies Tenant in writing of Landlord's election to terminate this Lease. In the event of any reentry or retaking of possession by Landlord, Landlord shall have the right, but not the obligation, to remove all or any part of Tenant's Property in the Premises and to place such property in storage at a public warehouse at the expense and risk of Tenant. If Landlord elects to relet the Premises for the account of Tenant, the rent received by Landlord from such reletting shall be applied as follows: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs 'of such reletting; third, to the payment of the cost of any alterations or repairs to the Premises: fourth to the payment of Rent due and unpaid hereunder; and the balance, If any, shall be held by Landlord and applied in payment of future Rent as it becomes due. If that portion of rent received from the reletting which is applied against the Rent due hereunder is less than the amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly upon demand by Landlord. Such deficiency shall be calculated and paid monthly Tenant shall also pay to Landlord, as soon as determined, any costs and expenses incurred by Landlord in connection with such reletting or in making alterations and repairs to the Premises, which are not covered by the rent received from the reletting. Should Landlord elect to terminate this Lease under the provisions of subparagraph a or c above, Landlord may recover as damages from Tenant the following: 1. Past Rent. The worth at the time of the award of any unpaid Rent which had been earned at the time of termination: plus 2.Rent Prior to Award: The worth at the time of the award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus 3. Rent After Award. The worth at the time of the award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of the rental loss that Tenant proves could be reasonably avoided; plus 4. Proximately Caused Damages. Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses (including attorneys' fees). incurred by Landlord in (a) retaking possession of the Premises, (b) maintaining the Premises after Tenant's default, (c) preparing the Premises for reletting to a new tenant, including any repairs or alterations, and (d) reletting the Premises, including broker's commissions. "The worth at the time of the award" as used in subparagraphs 1 and 2 above, is to be computed by allowing interest at the rate of ten percent (10%) per annum "The "worth at the time of the award" as used in subparagraph 3 above, is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank situated nearest to the Premises at the time of the award plus one percent (1%). The waiver by Landlord of any breach of any term, covenant or condition of this Lease shall not be deemed a waiver of such term. covenant or condition or of any subsequent breach of the same or any other term, covenant or condition. Acceptance of Rent by Landlord subsequent to any, breach hereof shall not be deemed a waiver of any preceding breach other than the failure to pay the particular Rent so accepted, regardless of Landlord's knowledge of any breach at the time of such acceptance of Rent. Landlord shall not be deemed to have waived any term, covenant or condition unless Landlord gives Tenant written notice of such waiver. 27.3 Landlord's Default. If Landlord fails to perform any covenant, condition or agreement contained in this Lease within thirty (30) days after receipt of written notice from Tenant specifying such default, or if such default cannot reasonably be cured within thirty (30) days, if Landlord fails to commence to cure within that thirty (30) day period, then Landlord shall be liable to Tenant for any damages sustained by Tenant as a result of Landlord's breach; provided, however, it is expressly understood and agreed that if Tenant obtains a money judgment against Landlord resulting from any default or other claim arising under this Lease, that judgment shall be satisfied only out of the rents, issues, profits, and other income actually received on account of Landlord's right, title and interest In the Premises, Building or Project, and no other real, personal or mixed property of Landlord (or of any of the partners which comprise Landlord, if any) wherever Situated, shall be subject 10 levy to satisfy such judgment. If, after notice to Landlord of default, Landlord (or any first mortgagee or first deed of trust beneficiary of Landlord) fails to cure the default as provided herein, then Tenant shall have the right to cure that default at Landlord's expense. Tenant shall not have the right to terminate this Lease or to withhold, reduce or offset any amount against any payments of Rent or any other charges due and payable under this Lease except as otherwise specifically provided herein. 28. BROKERAGE FEES. Tenant warrants and represents that it has not dealt with any real estate broker or agent in connection with this Lease or its negotiation except Broker and Sales Agent. Tenant shall indemnify and hold Landlord harmless from any cost, expense or liability (including costs of suit and reasonable attorneys' fees) for any compensation, commission or fees claimed by any other real estate broker or agent in connection with this Lease or its negotiation by reason of any act of Tenant. 29. NOTICES. All notices, approvals and demands permitted or required to be given under this Lease shall be in writing and deemed duly served or given if personally delivered or sent by certified or registered U.S. mail, postage prepaid, and addressed as follows: (a) if to Landlord, to Landlord's Mailing Address and to the Building manager, and (b) if to Tenant, to Tenant's Mailing Address; provided, however, notices to Tenant shall be deemed duly served or given If delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time to time by notice to the other designate another place for receipt of future notices. 30. GOVERNMENT ENERGY OR UTILITY CONTROLS. In the event of imposition of federal, state or local government controls, rules, regulations, or restrictions on the use or consumption of energy or other utilities during the Term, both Landlord and Tenant shall be bound thereby. In the event of a difference In interpretation by Landlord and Tenant of any such controls, the interpretation of Landlord shall prevail, and Landlord shall have the right to enforce compliance therewith, including the right of entry into the Premises to effect compliance. 31. RELOCATION OF PREMISES. Landlord shall have the right to relocate the Premises to another part of the Building in accordance with the following: a. The new premises shall be substantially the same in size, dimensions, configuration, decor and nature as the Premises described in this Lease, and if the relocation occurs after the Commencement Date, shall be placed in that condition by Landlord at its cost. b. Landlord shall give Tenant at least thirty (30) days written notice of Landlord's intention to relocate the Premise. c. As nearly as practicable, the physical relocation of the Premises shalt take place on a weekend and shall be completed before the following Monday. If the physical relocation has not been completed in that time, Base Rent shall abate in full from the time the physical relocation commences to the time it is completed. Upon completion of such relocation, the new premises shall become the "Premises" under this Lease. d. All reasonable costs incurred by Tenant as a result of the relocation shall be paid by Landlord. e. If the new premises are smaller than the Premises as it existed before the relocation, Base Rent shall be reduced proportionately. f. The parties hereto shall immediately execute an amendment to this Lease setting forth the relocation of the Premises and the reduction of Base Rent, if any. 32. QUIET ENJOYMENT. Tenant, upon paying the Rent and performing all of its obligations under this Lease. shall peaceably and quietly enjoy the Premises, subject to the terms of this Lease and to any mortgage, lease, or other agreement to which this Lease may be subordinate 33. OBSERVANCE OF LAW. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant's improvements or acts. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord is a party thereto or not, that Tenant has violated any law, ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact as between Landlord and Tenant. 34. FORCE MAJEURE. Any prevention, delay or stoppage of work to be performed by Landlord or Tenant which is due to strikes, labor disputes, inability to obtain labor; materials, equipment or reasonable substitutes therefor, acts of God, governmental restrictions or regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform hereunder, shall excuse performance of the work by that party for a period equal to the duration of that prevention, delay or stoppage. Nothing in this Article 34 shall excuse or delay Tenant's obligation to pay Rent or other charges under this Lease. 35. CURING TENANT'S DEFAULTS. If Tenant defaults In the performance of any of its obligations under this Lease, Landlord may (but shall not be obligated to) without waiving such default, perform the same for the account at the expense of Tenant. Tenant shall pay Landlord all costs of such performance promptly upon receipt of a bill therefor. 36. SIGN CONTROL. Tenant shall not affix, paint, erect or inscribe any sign, projection, awning, signal or advertisement of any kind to any part of the Premises, Building or Project, including without limitation, the inside or outside of windows or doors, without the written consent of Landlord. Landlord shall have the right to remove any signs or other matter, installed without Landlord's permission, without being liable to Tenant by reason of such removal and to charge the cost of removal to Tenant as additional rent hereunder, payable within ten (10) days of written demand by Landlord. 37. MISCELLANEOUS. a. Accord & Satisfaction; Allocation of Payments. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent provided for In this Lease shall be deemed to be other than on account of the earliest due Rent, nor shall any endorsement or statement on any check or letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of the Rent or pursue any other remedy provided for In this Lease. In connection with the foregoing, Landlord shall have the absolute right in its sole discretion to apply any payment received from Tenant to any account or other payment of Tenant then not current and due or delinquent b. Addenda. If any provision contained in an addendum to this Lease is Inconsistent with any other provision herein, the provision contained In the addendum shall control, unless otherwise provided in the addendum. c. Attorney's fees. If any action or proceeding is brought by either party against the other pertaining to or arising out of this Lease, the finally prevailing party shall be entitled to recover all costs and expenses, including reasonable attorneys' fees, incurred on account of such action or proceeding, d. Captions Articles and Section Numbers. The captions appearing within the body of this Lease have been inserted as a matter of convenience end for reference only and In no way define, limit or enlarge the scope or meaning of this Lease. All references to Article and Section numbers refer to Articles and Sections in this Lease. e. Changes Requested by Lender. Neither landlord nor lender shall unreasonably withhold its consent to changes or amendments to this Lease requested by the lender on Landlord's interest, so long as these changes do not alter the basic business terms of this Lease or otherwise materially diminish any rights or materially increase any obligations of the party from whom consent to such charge or amendment is requested. f. Choice Of Law This Lease shall be construed and enforced in accordance with the laws of the State. g. Consent. Notwithstanding anything contained in this Lease to the contrary, Tenant shall have no claim, and hereby waives the right to any claim against Landlord for money damages by reason of any refusal, withholding or delaying by Landlord of any consent, approval or statement of satisfaction, and in such event, Tenant's only remedies therefor shall be an action for specific performance, injunction or declaratory judgment to enforce any right to such consent, etc. h. Corporate Authority. If Tenant is a corporation, each individual signing this Lease on behalf of Tenan: represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of the corporation, and that this Lease is binding on Tenant in accordance with its terms. Tenant shall, at Landlord's request, deliver a certified copy of a resolution of its board of directors authorizing such execution. i. Counterparts. This Lease may be executed in multiple counterparts, all of which shall constitute one and the same Lease. j. Execution of Lease; No Option. The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of or option for Tenant to lease, or otherwise create any interest of Tenant in the Premises or any other premises within the Building or Project. Execution of this Lease by Tenant and its return to Landlord shall not be binding on Landlord notwithstanding any time interval, until Landlord has in fact signed and delivered this Lease to Tenant. k. Furnishing of Financial Statements; Tenant's Representations. In order to induce Landlord to enter into This Lease Tenant agrees that it shall promptly furnish Landlord, from time to time, upon Landlord's written request, with financial statements reflecting Tenant's current financial condition. Tenant represents and warrants that all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete in all respects. l. Further Assurances. The parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Lease. m. Mortgagee Protection. Tenant agrees to send by certified or registered mail to any first mortgagee or first deed of trust beneficiary of Landlord whose address has been furnished to Tenant, a copy of any notice of default served by Tenant on Landlord. If Landlord fails to cure such default within the time provided for in this Lease, such mortgagee or beneficiary shall have an additional thirty (30) days to cure such default; provided that if such default cannot reasonably be cured within that thirty (30) day period, then such mortgagee or beneficiary shall have such additional time to cure the default as is reasonably necessary under the circumstances. n. Prior Agreements; Amendments. This Lease contains all of the agreements of the parties with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Lease may be amended or added to except by an agreement in writing signed by the parties or their respective successors in interest. o. Recording. Tenant shall not record this Lease without the prior written consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a "short form" memorandum of this Lease for recording purposes. p. Severability. A final determination by a court of competent jurisdiction that any provision of this Lease is invalid shall not affect the validity of any other provision, and any provision so determined to be invalid shall, to the extent possible, be construed to accomplish its intended effect. q. Successors and Assigns. This Lease shall apply to and bind the heirs, personal representatives, and permitted successors and assigns of the parties. r. Time of the Essence. Time is of the essence of this Lease. s. Waiver. No delay or omission in the exercise of any right or remedy of Landlord upon any default by Tenant shall impair such right or remedy or be construed as a waiver of such default The receipt and acceptance by Landlord of delinquent Rent shall not constitute a waiver of any other default; it shall constitute only a waiver of timely payment for the particular Rent payment involved. No act or conduct of Landlord, including, without limitation, the acceptance of keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only a written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish a termination of the Lease. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of the Lease. The parties hereto have executed this Lease as of the dates set forth below. Date: May 30, 1996 Date: Landlord: Duffel Financial & Construction Co. Tenant: Newgold, Inc. By: /s/ Ralph W. Riggins By: /s/ Arthur Scott Dockter Title: Vice President Title: President By:_________________________________ By:____________________ Title:________________________________ Title:___________________ EX-23 7 EXHIBIT 23 INDEPENDANT AUDITOR'S REPORT We consent to the incorporation, by reference in the Annual Report on Form 10-KSB, of the financial statements of Warehouse Auto Centers, Inc. for each of the two fiscal years ended January 31, 1996 and 1995. Ciaccia & Catarisano, LLP Certified Public Accountants Rochester, New York January 20, 1997 -----END PRIVACY-ENHANCED MESSAGE-----