-----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, D4RdEVw13HK2YOd/yyUYF7qllNpIxfqxXnzf6Ios1iktyVeGUa1Nj5X9GbaqgcsM /EMb0WJoDatpBwBNRbTYAg== 0001005444-98-000012.txt : 19980218 0001005444-98-000012.hdr.sgml : 19980218 ACCESSION NUMBER: 0001005444-98-000012 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMA METALS CORP /NV/ CENTRAL INDEX KEY: 0000927578 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 880315984 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: SEC FILE NUMBER: 333-46269 FILM NUMBER: 98537865 BUSINESS ADDRESS: STREET 1: 28281 CROWN VALLEY PKWY STREET 2: STE 225 CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677-1461 BUSINESS PHONE: 7143489749 MAIL ADDRESS: STREET 1: 28281 CROWN VALLEY PKWY STREET 2: SUITE 225 CITY: LAGUNA STATE: CA ZIP: 92677-1461 SB-2 1 INFORMATION STATEMENT As filed with the Securities and Exchange Commission on January , 1998 SEC Registration No. SECURITIES AND EXCHANGE COMMISSION FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SUMMA METALS CORP. ------------------ (Exact Name of Registrant as Specified in its Charter) Nevada 1041 88-0315984 - ---------------------------- ------------------------- ------------ (State or other Jurisdiction Primary Standard IRS Employer of incorporation) Industrial Classification I.D. No. 28281 Crown Valley Parkway, Ste 225, Laguna Niguel, Ca, 92677-1461 (714) 348-9749 - -------------------------------------------------------------------------------- (Address and Telephone Number of Registrant's Principal Executive Offices and Principal Place Of Business) Michael M. Chaffee 28281 Crown Valley Parkway, Ste 225, Laguna Niguel, Ca, 92677-1461 (714) 348-9749 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Agent for Service) Copies to: Steven L. Siskind, Esq. 645 Fifth Avenue, Suite 403 New York, New York 10022 (212) 750-2002 - -------------------------------------------------------------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE ===================================================================================================== Title of Amount of Proposed Proposed Aggregate Amount of each Class Securities Maximum Maximum Underwrit- Registration of to be Offering Aggregate ers Fee Securities Registered Price Per Offering Commission to be Unit (1) Price (1) (2) Registered - ----------------------------------------------------------------------------------------------------- Common $927.27 Stock - ----------------------------------------------------------------------------------------------------- Minimum 130,000 $6.00 $ 780,000 $ 78,000 - ----------------------------------------------------------------------------------------------------- Maximum 510,000 $6.00 $3,060,000 $306,000 =====================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee Pursuant to Rule 457. (2) The Company has entered into a "best efforts" Underwriting Agreement to sell the Units offered hereby and is, therefore, assuming net proceeds after a commission would be paid. (See "Underwriting.") This amount does not include a non-accountable expense allowance in an amount equal to 3% and Warrants equal to 10% of the shares sold by the underwriter in the public offering. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. i SUMMA METALS CORP. ------------------ Cross-Reference Sheet pursuant to Item 501(b) of Regulation S-K between Registration Statement (Form SB-2) and Form of Prospectus. Item Number and Caption Caption in Prospectus - --------------------------------------- -------------------------------- 1. Front of Registration Statement Cover Page-Inside Front and Outside Front Cover Page Cover page-Back Cover of Prospectus 2. Inside Front and Outside Back Inside Front Cover Page Cover Pages of Prospectus Back Cover page 2. Summary Information and Risk Summary of Prospectus Factors Risk Factors 4. Use of Proceeds Use of Proceeds 5. Determination of Offering Price Cover Page;Description of Shares 6. Dilution Dilution 7. Selling Security Holders Not Applicable 8. Plan of Distribution Cover Page; Inside Cover Page; Offering 9. Legal Proceedings Litigation 10. Directors, Executive Officers Management Promoters and Control Persons 11. Security Ownership of Certain Principal Shareholders Beneficial Owners and Management 12. Description of Securities Offering; Description of Shares 13. Interest of Named Experts and Legal Matters Counsel 14. Disclosure of Commission Position Indemnification on Indemnification for Securities Act 15. Organization Within Last Five Certain Transactions Years 16. Description of Business Business of the Company 17. Management's Discussion and Business of the Company Analysis of Plan of Operation ii 18. Description of Property Business of the Company 19. Certain Relationships and Certain Transactions Related Transactions 20. Market for Common Equity and Risk Factors Related Stockholder Matters 21. Executive Compensation Management-Remuneration 22. Financial Statements Financial Statements 23. Changes in and Disagreements Not Applicable With Accountants on Accounting and Financial Disclosures iii SUMMA METALS CORP. (A Nevada Corporation) Minimum 130,000 Units Maximum 510,000 Units --------------------- Offering Price $6.00 Per Unit ----------------------------- Summa Metals Corp. (the "Company") hereby offers a minimum of 130,000 and a maximum of 510,000 Units ("Units") each Unit consisting of one share of the Company's common stock (the "Common Stock" or "Shares") and two redeemable common stock purchase warrants ("Warrants"), designated "A Warrants" and "B Warrants". Each of the A Warrants entitles the registered holder hereof to purchase one share of the Common Stock at a price of $8.00, subject to adjustment in certain circumstances at any time after the Warrants become separately tradeable, until 12 months from the date of this Prospectus. Each of the B Warrants entitles the registered holder therof to purchase one share of the Common Stock at a price of $7.00, subject to adjustment in certain circumstances, at any time after the exercise of the A Warrant related to the Units until 24 months from the date of this Prospectus. The Common Stock and the Warrants included in the Units will not be separately transferable until 90 days after the date of this Prospectus or such earlier date as the Company may determine. See "Description of Securities". THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION TO THE POTENTIAL INVESTORS AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. (SEE "RISK FACTORS" AND "DILUTION.") PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE SHARES OF THE COMPANY, AND THERE CAN BE NO ASSURANCE THAT A PUBLIC MARKET WILL RESULT FOLLOWING THE SALE OF THE SHARES OFFERED HEREBY OR THAT THE SHARES CAN BE SOLD AT OR NEAR THE OFFERING PRICE, OR AT ALL. THE INITIAL PUBLIC OFFERING PRICE HAS BEEN ARBITRARILY DETERMINED BY THE COMPANY BASED UPON WHAT IT BELIEVES PURCHASERS OF SUCH SPECULATIVE ISSUES WOULD BE WILLING TO PAY FOR THE SECURITIES OF THE COMPANY AND BEARS NO RELATIONSHIP WHATSOEVER TO ASSETS, EARNINGS, BOOK VALUE OR ANY OTHER ESTABLISHED CRITERIA OF VALUE. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES DIVISION OF ANY STATE, NOR HAS THE COMMISSION OR ANY STATE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES AND WARRANTS ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE, ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY AND APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL TO THE COMPANY. OFFEREES AND SUBSCRIBERS ARE URGED TO READ THIS PROSPECTUS CAREFULLY AND THOROUGHLY. Underwriter Proceeds to the Price (1) Commissions Company (2)(3) ---------- --------- ---------- Price Per Unit $ 6.00 $ .60 $ 5.40 Aggregate Subscription: (130,000 Units Minimum) $ 780,000 $ 78,000 $ 702,000 (510,000 Units Maximum) $3,060,000 $ 306,000 $2,754,000 The date of this Prospectus is January , 1998. iv 1. The offering price of $6.00 per Unit has been arbitrarily determined by the Company. The price per Unit was selected because the Company believes it can sell the Units at that price. The price has no relation to the value of the Company or its assets, or any other established criteria of value. The Units are offered for cash or check only and must be accompanied by a properly completed and executed subscription agreement. (See "OFFERING.") A minimum of 130,000 Units are being offered on a "best efforts, all-or-none" basis and an additional 380,000 Units are being offered on a "best-efforts" basis by the Company on the terms described herein under the caption "Offering". There is no assurance that any or all of the Units will be sold. The Offering will commence on the effective date of this Prospectus and continue for a period of 90 days, unless extended by the Company for an additional 90 days, or until completion of the Offering, whichever occurs sooner. All funds received in this Offering will be held in escrow by Steven L. Siskind, counsel for the Company at First National Bank of Long Island, 253 New York Avenue, Huntington, New York until a minimum of $780,000 has been received, at which time such sum will be paid to the Company. Thereafter, all funds received by the escrow agent will be immediately paid to the Company until a maximum of $3,060,000 has been received or the Offering period expires, whichever first occurs. If a minimum of $780,000 is not received by the expiration of the offering period, all funds will be returned to subscribers without interest or deduction. (See "OFFERING" and "UNDERWRITING.") 2. The Company has engaged the services of Boe & Company, 3668 So. Jasper St., Aurora, CO 80013, an Underwriter who is a member of the National Association of Securities Dealers, Inc. (NASD) as its agent to sell the Units to the public, and will agree to pay sales commissions equal to 10% of the gross sales price of the Units to said broker-dealer for any Units they may sell. No sales commissions will be paid unless a minimum of 130,000 Units have been subscribed and paid for. For purposes of estimating net proceeds, it is assumed the full 10% commission will be paid on all 510,000 Units. In addition, Messrs. Michael M. Chaffee, Raymond Baptista, and Eric Popkoff, the officers and directors of the Company, will also act as sales agents for the Company, but will receive no commission from their sale of any Units offered hereby. Messrs. Chaffee, Baptista, and Popkoff, will not register as broker-dealers pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, in reliance upon Rule 3a4-1, which sets forth those conditions under which a person associated with an Issuer may participate in the Offering of the Issuer's securities and not be deemed to be a broker-dealer: (a) None of such persons are subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation; and, (b) None of such persons are compensated in connection with his or her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and v (c) None of such persons are, at the time of his participation, an associated person of a broker-dealer; and (d) All of such persons meet the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or are intended primarily to perform at the end of the Offering, substantial duties for or on behalf of the Issuer otherwise than in connection with transactions in securities; and (B) are not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve (12) months; and (C) do not participate in selling and offering of securities for any Issuer more than once every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii). 3. Before deduction for filing, printing and miscellaneous expenses relating to this Offering, estimated at $5,000.00; legal and accounting fees, estimated at $35,000.00; a possible nonaccountable expense allowance, payable to the Underwriter in an amount equal to 3% of the sales price per Unit, or an aggregate total of $131,800.00, to be paid by the Company out of the proceeds of this Offering. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO SELL ANY SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE COMPANY HAS THE RIGHT, IN ITS SOLE DISCRETION TO ACCEPT OR REJECT SUBSCRIPTIONS IN WHOLE OR IN PART, FOR ANY REASON OR FOR NO REASON. THE COMPANY HAS TAKEN NO STEPS TO CREATE AN AFTERMARKET FOR THE COMMON STOCK OFFERED HEREBY AND HAS MADE NO ARRANGEMENTS WITH BROKERS OR OTHERS TO TRADE OR MAKE A MARKET IN THE COMMON STOCK. AT SOME TIME IN THE FUTURE, THE COMPANY MAY ATTEMPT TO ARRANGE FOR INTERESTED BROKERS TO TRADE OR MAKE A MARKET IN THE COMMON STOCK AND TO QUOTE THE COMMON STOCK IN A PUBLISHED QUOTATION MEDIUM. HOWEVER, NO SUCH ARRANGEMENTS HAVE BEEN COMMENCED AND THERE IS NO ASSURANCE THAT ANY BROKERS WILL EVER HAVE SUCH AN INTEREST IN THE COMMON STOCK OR THAT THERE EVER WILL BE A MARKET THEREFOR. THE COMPANY WILL PROVIDE AUDITED FINANCIAL STATEMENTS TO ITS SHAREHOLDERS ON AN ANNUAL BASIS AND MAY, IN ITS DISCRETION, PROVIDE UNAUDITED FINANCIAL STATEMENTS ON A QUARTERLY BASIS. UNTIL_____________________, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. vi SUBSEQUENT TO THE COMPLETION OF THIS OFFERING, THE COMPANY WILL BECOME SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AND IN ACCORDANCE THEREWITH, WILL BE REQUIRED TO FILE REPORTS AND OTHER INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH REPORTS AND INFORMATION CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549 AND COPIES OF SUCH MATERIAL CAN BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION, 450 FIFTH STREET, N.W. WASHINGTON, D.C. 20549 AT PRESCRIBED RATES. THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS AND WITH ADDITIONAL INFORMATION CONCERNING THE BUSINESS AFFAIRS OF THE COMPANY WHEREVER DEEMED APPROPRIATE BY ITS BOARD OF DIRECTORS. vii TABLE OF CONTENTS ----------------- PAGE NO. SUMMARY OF PROSPECTUS 1 The Company 1 The Offering 1 RISK FACTORS 2 Start-up Company 2 No Known Ore Reserves and Uncertainty in Attaining Successful Exploration Results in the Company's Properties 2 Uncertainty in Attaining Environmental Permits 2 Speculative Nature of the Mineral Exploration Industry 3 High Risk 3 Reliance On Outside Financing 3 Dependence on Additional Financing; Risk of Unavailability 3 Reliance Upon Officers and Directors 4 Dependence on Key Employees 4 Conflicts of Interest 4 Certain Transactions 4 Control of the Company 4 Benefit to Present Shareholders 5 Dilution; Excessive Burden of Risk 5 Sale of Shares at Substantial Discount 5 Possible Rule 144 Sales 5 Markets Uncertain 6 Industry Conditions 6 Sensitivity to Economic Conditions 6 Competition 6 Supply Factors 7 Insurance; Indemnification 7 No Cash Dividends Paid 7 Arbitrary Determination of Offering Price 7 No Present Market for Securities 7 Compliance with "Penny Stock" Rules 8 Issuance of Additional Shares 8 No Commitments to Purchase Shares 9 Government Regulations 9 MANAGEMENT OVERVIEW 9 USE OF PROCEEDS 10 DILUTION 12 CAPITALIZATION 14 SUMMARY FINANCIAL INFORMATION 14 OFFERING 14 Engagement of the Services of an Underwriter: Shares to be Sold by Officers and Directors 14 Offering Period and Expiration Date 16 Procedures for Subscribing 16 Determination of Offering Price 16 Escrow 16 Right to Reject 17 viii TABLE OF CONTENTS, Continued ---------------------------- PAGE NO. UNDERWRITING 17 Proposed Underwriting Agreement 17 Proposed Underwriter Compensation 17 BUSINESS OF THE COMPANY 18 General 18 Environmental Regulations and Cyclical Metal Prices 18 The Exploration Stage 19 Description of Properties 20 Government Regulations 25 Employees 26 Management's Discussion and Analysis of Financial Condition and Results of Operations 26 MANAGEMENT 26 Officers and Directors 26 Background Information 27 Executive Compensation 28 Indemnification 29 Office Facilities 29 PRINCIPAL SHAREHOLDERS 29 Future Sales by Present Shareholders 30 DESCRIPTION OF SECURITIES 30 Common Stock 30 Units 31 Non-Cumulative Voting 32 Dividends 32 Reports to Shareholders 33 Transfer Agent 33 CERTAIN TRANSACTIONS 33 CONFLICTS OF INTEREST 34 LITIGATION 34 ADDITIONAL INFORMATION 34 EXPERTS 35 LEGAL MATTERS 35 FINANCIAL STATEMENTS F-1 ix SUMMARY OF PROSPECTUS THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS, ALL OF WHICH SHOULD BE READ CAREFULLY AND THOROUGHLY. The Company Summa Metals Corp., a Nevada corporation, (the "Company") was formed on March 8, 1994. The Company currently maintains its principal offices at 28281 Crown Valley Parkway, Ste. 225, Laguna Niguel, CA, 92677-1461, and its registered agent's office at 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509. The Company is engaged in the business of mineral processing, exploration and mining. (See "BUSINESS OF THE COMPANY.") The Company has a limited operating history. There is no assurance that the Company will be successful in raising the capital or in developing the properties. (See "MANAGEMENT" and "BUSINESS OF THE COMPANY"). The proceeds from the sale of Shares offered hereby will enable the Company to continue its current drilling and exploration on the properties, assess and acquire new properties, and generally develop and expand its business. (See "BUSINESS OF THE COMPANY", "CERTAIN TRANSACTIONS", "RISK FACTORS" and "USE OF PROCEEDS.") Messrs. Chaffee, Baptista and Popkoff, the Company's current officers, directors and principal shareholders, may be deemed to be "parents" and "promoters" of the Company. (See "MANAGEMENT" and "PRINCIPAL SHAREHOLDERS.") The Offering Securities Offered: A minimum of 130,000 and a maximum of 510,000 Units of Common Stock, par value $.001. (See "OFFERING.") Offering Price per Unit: $6.00 (See "OFFERING.") Offering: The Units are being offered for a period not to exceed 90 days. Such period may be extended by the Board of Directors for an additional 90 days. (See "OFFERING.") Net Proceeds: Approximately $638,000 (Minimum) $2,622,000 (Maximum) (See "USE OF PROCEEDS.") Use of Proceeds: To be used for offering expenses, exploration, drilling and working capital. (See "USE OF PROCEEDS.") Number of Shares: Outstanding Before the Offering: 4,555,000 After the Offering: 4,685,000 (Minimum) 5,065,000 (Maximum) (See "OFFERING" and "DESCRIPTION OF SHARES.") 1 RISK FACTORS ------------ AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES AN EXCEPTIONALLY HIGH DEGREE OF RISK AND IS EXTREMELY SPECULATIVE IN NATURE. IN ADDITION TO THE OTHER INFORMATION REGARDING THE COMPANY CONTAINED IN THIS PROSPECTUS, INVESTORS SHOULD CONSIDER MANY IMPORTANT FACTORS IN DETERMINING WHETHER TO PURCHASE THE SECURITIES OFFERED HEREBY. THE FOLLOWING RISK FACTORS ARE NOT EXHAUSTIVE, BUT ARE MERELY ILLUSTRATIVE, OF THE SUBSTANTIAL RISKS INVOLVED IN AN INVESTMENT OF THIS NATURE. 1. Start-up Company. The Company has only been in business for a short period of time and has engaged in limited business since its inception. While the Company believes it will be able to acquire the funds necessary to develop the properties through this Offering, there is no assurance that it will be successful in raising the funds or, if raised, that the properties will be developed and/or profitable if and when developed. The Company anticipates being able to sustain operations for a period of at least twelve months after receipt of the minimum proceeds ( and twenty-four months after receipt of the maximum proceeds) of this Offering, without being forced to seek additional funds for exploration and development of its current properties. (See "MANAGEMENT", "CERTAIN TRANSACTIONS" and "BUSINESS OF THE COMPANY"). 2. No Known Ore Reserves and Uncertainty in Attaining Successful Exploration Results in the Company's Properties. A portion of the proceeds of this Offering will be used to explore the properties held by the Company. Although Management believes there is a sufficient basis to engage in exploration, there is absolutely no assurance that such exploration will result in the discovery of known ore reserves. The Company does not claim that known ore reserves exist on any of its properties. Further, there can be no assurance that, in the event the Company is able to prove such reserves in the future, it will have the financial resources to extract, concentrate, or deliver for sale, any significant amounts of gold, silver, copper, or any other commercially viable resource. The shares offered herein have a real value only in the event significant bodies of commercial ore are proven. (See "BUSINESS OF THE COMPANY".) 3. Uncertainty in Obtaining Environmental Permits. The Company does not currently have any permits that may be required by the various federal, state and local mining and environmental agencies to begin work on any of its properties. While the Company has had preliminary conversations with certain controlling agencies, and has been given general support for its concepts in developing the properties, there can be no assurance that the Company will be successful in obtaining such permits. (See "BUSINESS OF THE COMPANY".) 2 4. Speculative Nature of the Mineral Exploration Industry. Gold, silver and strategic metals exploration is highly speculative in nature, involving many risks which even a combination of scientific knowledge and experience frequently cannot overcome, often resulting in unproductive efforts. Further, the market price of gold, silver and strategic metals is quite volatile and beyond the control of the Company. If the price of any of these precious metals drops dramatically, the Company's exploration efforts, which have been limited and have not, to date, been profitable, could be further reduced or continue to be rendered uneconomical. The degree of speculation is further magnified when a company is in the exploration stages and is operating at a loss, as has been the case with the Company. While Management believes the funds from this Offering will be sufficient to reach its exploration and development objectives, there can be no assurance that it will be successful, that any production will be obtained, or that production, if obtained, will be profitable. In any such event, any investment in the Shares of this Offering would be extremely risky and, where, as here, the mining exploration is poorly financed, the risks become even higher and the most common result would be a loss of the shareholder's entire investment. (See "BUSINESS OF THE COMPANY", "MANAGEMENT" and "FINANCIAL STATEMENTS".) 5. High Risk. An investment in the shares offered hereunder involves an extremely high degree of risk. A prospective investor should, therefore, be aware that in the event the Company's exploration and development program is not successful, any investment in the Company's Common Stock may be entirely lost and the Company may be faced with the possibility of liquidation. In the event of liquidation, the existing shareholders would, to the extent that assets would be available for distribution, receive a disproportionately greater share of the assets in relation to their cash investment in the Company than would the public shareholders, in that holders of Common Stock are entitled to share on a pro rata basis in the assets, if any, of the Company that would be available for distribution. (See "BUSINESS OF THE COMPANY", "DILUTION" and "PRINCIPAL SHAREHOLDERS".) 6. Reliance on Outside Financing. The Company believes that the minimum proceeds of this Offering will provide sufficient cash to fund its operations and current obligations for the next twelve months. Should the Company expand its operations and/or make acquisitions that would require funds in addition to the funds received in this Offering, it may have to seek additional debt or equity financing. There can be no assurance that such financing would be available on terms acceptable to the Company, as and when needed. Since its inception, the Company's operations have been financed, in part, through private sales of the Company's securities, and the balance of financing was obtained through a loan. (See "CERTAIN TRANSACTIONS".) 7. Dependence On Additional Financing/Risk of Unavailability. The continued operation of the Company will be dependent upon its ability to generate revenues from its current operations/properties and/or obtain further financing, if and when needed, through borrowing from banks or other lenders or equity funding. There is no assurance that sufficientrevenues can be generated or that additional financing will be available, if and when required, or on terms favorable to the Company. (See "USE OF PROCEEDS.") 3 8. Reliance Upon Officers and Directors. The Company is wholly dependent, at present, upon the personal efforts and abilities of its officers and directors. While the Company will solicit business through its officers and directors, there can be no assurance as to the volume of business, if any, which the Company may obtain, or that its operations will prove to be profitable. Of the three officers and directors of the Company, Mr. Chaffee and Mr. Baptista will devote full time to the Company's business. (See "MANAGEMENT" and "CERTAIN TRANSACTIONS.") 9. Dependence on Key Employees. The success of the Company is dependent, in large part, on the active participation of Messrs. Chaffee and Baptista, its officers and directors, who are also its key employees. The loss of their services would materially adversely affect the Company's business and future success. The Company does not have any key-man life insurance in effect at the present time; however, it is seeking information and quotations regarding the same and may obtain such coverage, if the cost thereof is reasonable. (See "MANAGEMENT.") 10. Conflicts of Interest. The Company anticipates obtaining certain of its products and services from companies of which a former officer, director and principal shareholder is an officer, director and/or principal shareholder. All such products and services will be obtained by the Company at rates and on conditions competitive in the marketplace and favorable to the Company. (See "CERTAIN TRANSACTIONS.") 11. Certain Transactions. The Company has previously engaged, and will continue to engage in certain transactions with a former officer, director and principal shareholder, and will endeavor to insure that such transactions will be as favorable to the Company as comparable arm's-length transactions would be. (See PRINCIPAL SHAREHOLDERS" and "CERTAIN TRANSACTIONS".) 12. Control of the Company. Upon the sale of all the Shares offered hereby, the present shareholders of the Company will continue to control the Company and will be able to elect a majority of the Board of Directors and, thereby, control the business operations and policies of the Company. (See "PRINCIPAL SHAREHOLDERS" and "DILUTION.") 4 13. Benefit to Present Shareholders. Following the successful completion of this Offering, the present shareholders of the Company will own approximately 97% (minimum) or 90% (maximum) of the outstanding Common Stock. The majority of the present shareholders purchased their shares at prices substantially below the price at which Shares are offered hereunder. Therefore, the present shareholders will experience an immediate increase in the net tangible book value of their securities, while the purchasers of Shares in this Offering will experience an immediate dilution in the value of their securities. (See "PRINCIPAL SHAREHOLDERS" and "DILUTION.") 14. Dilution: Excessive Burden of Risk. The present shareholders of the Company acquired their shares at a cost less than that which the purchasers hereunder will pay for their Shares. Accordingly, an investment in the Common Stock of the Company by the Subscribers will result in the immediate dilution of the net tangible book value of their Shares. Subscribers purchasing Shares hereunder will bear a risk of loss, while control of the Company will effectively remain in the hands of the present shareholders. (See "DILUTION" and "PRINCIPAL SHAREHOLDERS.") 15. Sale of Shares at Substantial Discount. Based on the serious financial condition of the Company and its compelling need to raise money to continue its business operations and remain viable until approval of this Registration Statement and sale of the Units being sold herein, the Company was compelled to sell a large number of its shares of restricted Common Stock for a small amount of money in order to continue its existence. (See "PRINCIPAL SHAREHOLDERS", "DILUTION" and "CERTAIN TRANSACTIONS.") 16. Possible Rule 144 Sales. A total of 4,555,000 shares of the Company's Common Stock have been issued by the Company prior to this Offering and 1,260,000 of those shares are held by persons who are, or were, officers, directors and control persons, who hold such shares as "restricted securities", as that term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act"). These securities may only be sold in compliance with Rule 144, which provides, in essence, that a person (or persons whose shares are aggregated) beneficially owning restricted securities for a period of two years may sell, every three months, in brokerage transactions, a number of shares equal to the greater of one percent of the total number of the Company's then outstanding shares of Common Stock or the average weekly trading volume in the Company's Common Stock during the preceding four calendar weeks. 2,275,000 of the shares presently outstanding were issued between March and June, 1994; 2,280,000 of the shares presently outstanding were issued in March, 1995. The possible sale of these restricted shares under Rule 144, may, in the future, have a depressive effect on the price of the Company's Common Stock in the over-the-counter market, 5 assuming there is such a market, of which there can be no assurance. Furthermore, persons holding restricted securities for three years who are not "affiliates" of the Company, as that term is defined in Rule 144, may sell their securities pursuant to Rule 144 without any limitations on the number of shares sold. (See "PRINCIPAL SHAREHOLDERS -FUTURE SALES BY PRESENT SHAREHOLDERS" and "DILUTION - RESTRICTED SHARES ELIGIBLE FOR FUTURE SALE.") 17. Markets Uncertain. Despite the business experience of the officers, directors and principal shareholders of the Company, there can be no assurance that the mining properties acquired by the Company will be productive and/or profitable, or that such production and/or profitability will be sufficient to permit the Company to be successful in the future or to expand or continue to operate. The mineral exploration and development business is directly linked to the price of and market for precious metals and, if there were a drastic reduction in such prices and/or market, the Company's business could be significantly impacted. (See "MANAGEMENT" and " BUSINESS OF THE COMPANY.") 18. Industry Conditions. The mineral exploration, processing and mining industry is directly linked to the price and sale of precious metals and is, therefore, highly subject to change. Assuming there were a drastic reduction or increase in the price and or sale of precious metals, the Company's business could be significantly impacted. There can be no assurance that the volume of production and/or sales that the Company projects will be established, continue or grow in the future. The Company's limited operating history and limited financial resources could result in its being unable to respond quickly to market changes which may have an adverse effect on the Company's revenues and earnings. (See "BUSINESS OF THE COMPANY.") 19. Sensitivity to Economic Conditions. The continued existence of the Company is highly dependent upon the condition of the mineral exploration and development industry. The economic viability of that market, in turn, is highly dependent on, among many other factors, including political issues and general economic conditions. During periods of economic downturn or slow economic growth, coupled with eroding consumer confidence or rising inflation, the price and/or sale of precious metals could be severely impacted. Such factors would likely have an immediate effect on the Company's operations. (See "BUSINESS OF THE COMPANY.") 20. Competition. There is intense competition in the mineral exploration and development industry in which the Company operates. Many of the Company's competitors have greater financial and other resources, better distribution networks or greater name recognition than the Company. There can be no assurance that the Company will be able to successfully compete in this industry. (See "BUSINESS OF THE COMPANY.") 6 21. Supply Factors. Competition and unforeseen limited sources of supplies in the industry could result in occasional spot shortages of supplies of certain products which the Company may use in its operations. There can be no assurance the Company will be able to obtain certain products and materials which it requires, without interruption, or on terms favorable to the Company. (See "BUSINESS OF THE COMPANY.") 22. Insurance; Indemnification. The Company has limited capital and, therefore, does not currently have a policy of insurance against liabilities arising out of the negligence of its officers and directors and/or deficiencies in any of its business operations. Even assuming it obtained insurance, there is no assurance that such insurance coverage would be adequate to satisfy any potential claims made against the Company, its officers and directors, or its business operations or products. Any such liability which might arise could be substantial and may exceed the assets of the Company. However, the Articles of Incorporation and By-Laws of the Company provide for indemnification of officers and directors to the fullest extent permitted under Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons, it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy, as expressed in the Act, and is therefore, unenforceable. (See "FINANCIAL STATEMENTS" and "BUSINESS OF THE COMPANY.") 23. No Cash Dividends Paid. No cash dividends have been paid on the shares of the Company to date, nor is it anticipated that any such dividends will be paid to shareholders in the foreseeable future. Any income received from operations will be reinvested and devoted to the Company's future operations and/or to expansion. (See "DESCRIPTION OF SECURITIES.") 24. Arbitrary Determination of Offering Price. The offering price of the Units being offered hereunder was determined arbitrarily by the Company. Such offering price should not be considered an indication of, nor was it based upon, the actual value of the Company and the offering price may bear no direct relationship to the book value, assets or earnings of the Company, or any other recognized criteria of value. (See "OFFERING.") 25. No Present Market for Securities. There is presently no market for the Company's securities and there can be no assurance that any such market will develop. In the event a public trading market does develop, there is no assurance it will continue. Therefore, any investment in the Company's Common Stock may be highly iliquid and without a market value. (See "OFFERING.") 7 26. Compliance with "Penny Stock" Rules. Rule 3a51-1 of the Exchange Act defines a "penny stock" as an equity security that is not, among other things: a) a reported security (i.e., listed on certain national securities exchanges); b) a security registered or approved for registration and traded on a national securities exchange that meets certain guidelines, where the trade is effected through the facilities of that national exchange; c) a security listed on NASDAQ; d) a security of an issuer that meets certain minimum financial requirements, i.e., "net tangible assets" in excess of $2,000,000 (if the issuer has been continuously operating for less than three years) or $5,000,000 (if the issuer has been continuously operating for more than three years), or "average revenue" of at least $6,000,000 for the last three years); or e) a security with a price of at least $5.00 per share for the transaction in question or that has a bid quotation (as defined in the Rule) of at least $5.00 per share. Under Rule 3a51-1, if the Company's Common Stock sells below $5.00 per share, the Company's Common Stock will fall within the definition of "penny stock." If the Company's Common Stock is deemed to be a penny stock, trading therein will be subject to the requirements of Rule 15g-9 and Section 15(g) under the Exchange Act. Rule 15g-9 imposes additional sales practice requirements on broker-dealers who sell non-exempt securities to persons other than established customers. For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Pursuant to Section 15(g) and related Rules, brokers and/or dealers, prior to effecting a transaction in penny stock, will be required to provide investors with written disclosure documents containing information concerning various aspects involved in the market for penny stocks as well as specific information about the penny stock and the transaction involving the purchase and sale of that stock, e.g., price quotes and broker-dealer and associated person compensation. Subsequent to the transaction, the broker will be required to deliver monthly or quarterly statements containing specific information about the penny stock. The foregoing requirements will most likely negatively affect the ability of purchasers herein to sell their shares in the secondary market. 27. Issuance of Additional Shares. Assuming sale of all Units offered hereby, there will still be 19,945,000 shares (assuming a minimum subscription) or 19,445,000 shares (assuming a maximum subscription) of Common Stock which the Board of Directors will have authority to issue. The issuance of any such shares to persons other than the public investors herein will reduce the amount of control held by the public investors following this Offering and may result in a dilution of the book value per share. There are presently no commitments, contracts or intentions to issue any additional shares to any persons other than as set forth herein. (See "DILUTION.") 8 28. No Commitments to Purchase Units. There is no commitment of any kind on the part of anyone to purchase all or any part of the 510,000 Units being offered hereby; consequently, the Company can give no assurance that all or any part of the Units will be sold. However, the escrow arrangements provide that unless 130,000 Units are sold and $780,000 is raised within 90 days from the date of this Prospectus, unless extended at the discretion of the Company for an additional 90 days, the proceeds will be returned in full to the subscribers, without any interest thereon or deductions therefrom. Thus, an investor could invest money in the Company for as long as 180 days, through the subscription for Units hereunder, and have the money returned without interest. 29. Government Regulations. The Company will be subject to all governmental rules, laws and regulations relating to the mining industry, both in the U.S. and Mexico, where its current properties are located, and fully intends to comply therewith. However, there is no assurance the governmental agencies having jurisdiction over the Company, its operations and properties, may not enact laws, rules and/or regulations in the future which may have an adverse impact on the Company. (See "BUSINESS OF THE COMPANY.") MANAGEMENT OVERVIEW ------------------- All of the Company's properties are currently in the exploration stage and, therefore, the Company has yet to determine the presence of any economically viable resources. The first business operations of the Company will consist of performing a preliminary evaluation on each property to provide the Company with sufficient information to determine the merits, if any, of each property. This first phase of evaluation will consist of gathering information relative to the perceived economic value of each property, the anticipated costs to develop the property (including permitting and environmental costs), and the estimated amount of time which will be needed to reach a positive cash flow status for each property. In the event any of the properties appear to warrant further consideration, the Company must then prioritize each proposed site development plan (Plan of Operations) and allocate the funds necessary to execute the same, including a substantial contingency reserve. The Company must then submit the Plan of Operations to the appropriate environmental agencies for approval, of which there can be no assurance ( See "RISK FACTORS-Uncertainty in Attaining Environmental Permits", "RISK FACTORS- Government Regulations" and "BUSINESS OF THE COMPANY".) The first project the Company intends to develop will be the Deep Gold Mine assuming, of course, that viable resources are identified during the exploration process on the property and that the Company is able to meet federal, state and local mining and environmental requirements for the property, of which there can be no assurance. (See RISK FACTORS-Uncertainty in Attaining Environmental Permits", "RISK FACTORS-Government Regulations" and "BUSINESS OF THE COMPANY".) The Company has determined that, if a viable resource is identified at the Deep Gold Mine, and assuming favorable regulatory reviews, the materials would be easy to access and process using existing technology and equipment. Depending on 9 the results of the exploration process at the Deep Gold Mine, the Company may, at that time, postpone the exploration and development of its other properties to insure sufficient financial resources are available to complete development of the Deep Gold Mine. USE OF PROCEEDS --------------- As set forth below, the Company estimates the net proceeds from this Offering will be approximately $638,600, assuming a minimum subscription, or $2,622,000, assuming a maximum subscription, after deducting $78,000, assuming a minimum subscription, or $306,000, assuming a maximum subscription, for sales commissions and $40,000 for estimated offering expenses, including legal and accounting fees. The proceeds from this Offering are expected to be disbursed, in the priority set forth below, during the first 12 months after successful completion of this Offering; however, not having completed the Phase I property evaluations on any of its properties, the Company reserves the right to amend, in its discretion, the proposed Use of Proceeds pending the results of such evaluations. The following projections assume that a viable resource will be located on each property, that it will be economically feasible to process the materials, and that the mineralization is of the type that will lend itself to the Company's proposed extraction techniques. None of these assumptions have been proven, however, and there can be no assurance that they will be proven on each property until the Phase I property evaluations have been completed. Minimum Maximum Description Subscription Subscription - --------------------------- ------------ ------------ Total Proceeds $780,000 $3,060,000 Offering Expenses: Sales Commissions (1) 78,000 306,000 Non-Accountable Expense Allowance (2) 23,400 91,800 Legal and Accounting Fees and Offering Expenses (3) 40,000 40,000 -------- --------- Net Proceeds $638,600 $2,622,200 Exploration and Development $ 50,000 $ 360,000 Administrative and Salaries 114,700 250,000 Subcontractors: Deep Gold 10,000 15,000 Gold Spur 10,000 50,000 Promontorio 35,000 Equipment (4): Deep Gold 120,000 120,000 Gold Spur 430,000 Promontorio 250,000 Indirect Expenses: Insurance 14,000 28,000 Bonding 10,000 20,000 Repay Loans (5) 90,000 90,000 Working Capital 219,900 974,000 - --------------- -------- --------- Total Net Proceeds $638,600 $2,622,200 10 (1) Assumes that, if the services of an underwriter are engaged, an underwriters' commission of 10% will be paid on all Shares sold. No underwriters' commissions will be paid for Shares sold by management of the Company (See "UNDERWRITING" and "OFFERING.") (2) Assumes that a non-accountable expense allowance may be paid to the underwriter equal to 3% of the Units sold. (3) The organizational and offering expenses, including accounting, legal, printing, clerical and other expenses, and registration and filing fees, are estimated to total $40,000. (4) Similar equipment will be required to expand the exploratory stages of the Deep Gold, Promontorio and the Gold Spur. This equipment will consist mainly of material handling and crushing machines, pumps, tanks and piping for use in a leach process, portable power generators, and material separation devices. It is the intent of the Company to use second-hand equipment for the largest segment of the work, however, because of the exploratory nature of each of the projects, the exact equipment specifications have not yet been determined. Management has been able to generally identify the size, type and cost of the equipment which will be needed and is confident that standard equipment currently available in the Western U.S. will adequately meet the needs of the individual project requirements. There can be no absolute assurance that this will be the case and, in the event said equipment is not easily located, it could have a negative impact on both the Company's ability to begin materials processing and the use of the proceeds of this Offering. (See "MANAGEMENT OVERVIEW" and "BUSINESS OF THE COMPANY-The Exploration Stage".) (5) On March 7, 1995, the Company entered into a Loan Agreement with C.W. and Neva B. Lewis, unrelated third parties, wherein the Lewis' advanced $20,000 in cash to the Company. In consideration for the loan, the Company agreed to pay the Lewis' $50,000 from the proceeds of this Offering and issue them 30,000 shares of restricted Common Stock of the Company. The $20,000 loan was used as partial payment for acquisition of the Big Mike property. (See "CERTAIN TRANSACTIONS.") On April 8, 1994, the Company entered into a promissory note in the amount $100,000 with Amyn Dahya, an officer, director and principal shareholder of Casmyn Corp. The Note was due and payable on March 29, 1995, but was extended by the parties to September 30, 1998. It was also agreed between the parties that no portion of the Note would be repaid from the proceeds of this Offering, but rather, the Note will be repaid from revenues generated by the Company from its mining operations. The $100,000 loan was used for operating expenses and salaries. (See "CERTAIN TRANSACTIONS", "BUSINESS OF THE COMPANY" and "MANAGEMENT".) While the Company currently intends to utilize the proceeds of this Offering substantially in the manner set forth above, the Company reserves the right to reassess and reassign such use if, in the judgement of the Board of Directors, such changes are necessary or advisable in the circumstances. At present, no material changes are contemplated, however, working capital could be used to acquire other mining properties or interests therein. The Company does not know of any such properties nor is there any assurance that any such 11 properties could be acquired with the limited funds in working capital it will have available. Should there be any material changes in the Company's use of proceeds in connection with this Offering, it will issue an amended Prospectus reflecting such change. Until used, the working capital proceeds will be invested in certificates of deposit or U.S. Treasury Notes. DILUTION -------- "Dilution" represents the difference between the offering price and the net tangible book value per share immediately after the completion of this Offering. "Net tangible book value" is the amount that results from subtracting the total liabilities and intangible assets from the Company's total assets. Dilution arises mainly from the arbitrary decision by the Company to establish the offering price of the Shares offered hereunder based on market factors rather than book value considerations. In addition, it is important to note that the present shareholders of the Company's Common Stock acquired their shares at a price substantially lower than the Offering price due to the Company's need to acquire working capital during the past two years. The present shareholders, therefore, will incur an immediate substantial increase in the price which they paid for their shares and the purchasers of shares in the Offering will incur an immediate substantial dilution in the price which they pay for their shares. As of October 31, 1997, the net tangible book value of the shares of the Company (total assets, excluding intangible assets, less total liabilities, excluding contingent liabilities) was ($180,642) or ($.04) per share based upon 4,555,000 shares outstanding at that time. Upon completion of this Offering, but without taking into account any change in such net tangible book value after completion of this Offering, other than that resulting from the sale of the Shares offered hereby, the net tangible book value of the 4,685,000 shares, based upon a minimum subscription (or 5,065,000 shares, based upon a maximum subscription) to be outstanding will be approximately $599,358, based upon a minimum subscription (or $2,879,358, based upon a maximum subscription), or approximately $.13 per Share, based upon a minimum subscription (or $.57 per Share, based upon a maximum subscription). Accordingly, the net tangible book value of the Shares held by the present shareholders of the Company (i.e., 4,555,000 Shares) will be increased by $.17 per Share, based upon a minimum subscription (or increased by $.61 per Share, based upon a maximum subscription), without any additional investment on their part and the purchasers of the Shares offered hereby will incur immediate dilution (a reduction in net tangible book value per Share from the offering price of $6.00 per Unit) of approximately $5.83 per Share, based upon a minimum subscription (or $5.43 per Share, based upon a maximum subscription). After completion of this Offering, the purchasers of the Shares offered hereby will own approximately 3% (10%) of the total number of shares then outstanding, for which they will have made a cash investment of $780,000, based upon a minimum subscription (or $3,060,000, based upon a maximum subscription), or $6.00 per share. The current shareholders of the Company will own approximately 97% (90%) of the total number of shares then outstanding, for which they have made actual cash contributions of $4,555, or $.001 per share. 12 The following table sets forth a comparison of the respective investments of the current shareholders and the public investors, assuming both a minimum and maximum subscription. PRESENT SHAREHOLDERS -------------------- Minimum Subscription Maximum Subscription -------------------- -------------------- Price Per Share $ .001 $ .001 Net Tangible Book Value per Share $ (.04) $ (.04) before Offering Net Tangible Book value per Share $ .13 $ .57 after Offering Increase to present Shareholders in net tangible book value per share due to Offering $ .17 $ .61 Capital contributions $ 4,555 $ 4,555 Number of Shares outstanding before Offering 4,555,000 4,555,000 Number of Shares outstanding After Offering 4,555,000 4,555,000 Percentage of ownership after the Offering 97% 10% PUBLIC INVESTORS ---------------- Minimum Subscription Maximum Subscription -------------------- -------------------- Price per Share $ 6.00 $ 6.00 Dilution per Share $ 5.87 $ 5.43 Capital contributions $ 780,000 $ 3,060,000 Number of Shares after the Offering held by the Public Investors 130,000 510,000 Percentage of ownership after the Offering 3% 10% 13 All 4,555,000 of the Company's currently outstanding shares of Common Stock are "restricted securities" which, in the future, may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended, if available. Rule 144 currently provides, in essence, that persons holding restricted securities for a period of one year may each sell, every three months, in brokerage transactions, a number of shares equal to one percent of the aggregate number of the Company's outstanding shares, and after two years, persons other than "affiliates" of the Company, may sell shares without any volume restrictions. Sales of shares (a) held by present shareholders, after applicable restrictions expire; and (b) offered in this Offering, which would be immediately resalable, may have a depressing effect on the price of the Company's shares in any market that may develop. (See "DILUTION.") CAPITALIZATION -------------- The following table sets forth the capitalization of the Company as of October 31, 1997, and as adjusted to reflect the sale of the minimum (maximum) Shares offered hereby and the application of the net proceeds therefrom. (See "FINANCIAL STATEMENTS.") Present As Adjusted ------- ----------- (Minimum) (Maximum) Common Stock: 25,000,000 Shares authorized, par value $.001, issued and outstanding 4,555,000 4,685,000 5,065,000 Shareholders' Equity: ($ 180,642) $ 599,358 $2,879,358 SUMMARY FINANCIAL INFORMATION BALANCE SHEET DATA: October 31, 1997 Current Assets.......................................$ 30 Current Liabilities..................................$ 239,795 Total Assets.........................................$ 59,153 Shareholders' Equity.................................$(180,642) (See "FINANCIAL STATEMENTS) OFFERING -------- Engagement of the Services of an Underwriter: Shares to be sold by Officers and - -------------------------------------------------------------------------------- Directors: - ---------- The Company has engaged the services of an underwriter who is a member of the National Association of Securities Dealers, Inc. ("NASD") to offer its Units directly to prospective investors on a "best-efforts, all-or none" basis as to a minimum of 130,000 Units and on a "best-efforts" basis as to an additional 380,000 Units. 14 The Company has agreed to pay a sales commissions equal to 10% of the gross sales price of the Units to such underwriter for any Units it may sell, plus a nonaccountable expense allowance of 3% of the gross proceeds and Warrants equal to 10% of the shares sold to the public. However, no sales commissions or expense allowance will be paid unless a total of 130,000 Units have been subscribed and paid for. In addition, the Company also intends to sell the Units offered hereunder through its officers and directors, Messrs. Michael M. Chaffee, Raymond C. Baptista and Eric Popkoff who will receive no commission from their sale of any Units offered hereby. It is assumed that a full 10% underwriters' commission may be paid on the maximum of 510,000 Units. (See "UNDERWRITING.") Messrs. Chaffee, Baptista and Popkoff will not register as broker-dealers pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, in reliance upon Rule 3a4-1, which sets forth those conditions under which a person associated with an Issuer may participate in the Offering of the Issuer's securities and not be deemed to be a broker-dealer: 1. None of such persons are subject to a statutory disqualification, as that term is defined in Section 3(a)(39) of the Act, at the time of his participation; and, 2. None of such persons are compensated in connection with his or her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities; and 3. None of such persons are, at the time of his participation, an associated person of a broker-dealer; and 4. All of such persons meet the conditions of Paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that they (A) primarily perform, or are intended primarily to perform at the end of the Offering, substantial duties for or on behalf of the Issuer otherwise than in connection with transactions in securities; and (B) are not a broker or dealer, or an associated person of a broker or dealer, within the preceding twelve (12) months; and (C) do not participate in selling and offering of securities for any Issuer more than once every twelve (12) months other than in reliance on Paragraphs (a)(4)(i) or (a)(4)(iii). The officers and directors intend to advertise and hold investment meetings in various states where the Offering will be registered. The officers and directors will distribute the Prospectus to prospective investors at the meetings and to friends and relatives interested in the Offering. The Units will be offered by the Company subject to prior sale and subject to approval of certain legal matters by the Company's legal counsel. The Company reserves the right to reject any subscription in whole or in part, for any reason or for no reason. A total of 2,050,000 shares of the Company's Common Stock were issued to two persons who were officers, directors and control persons of the Company, 15 in April, 1994 and a total of 2,505,000 shares were issued to unrelated third parties in March, 1994 and March, 1995. Such shares are all "restricted securities" as that term is defined in Rule 144, promulgated under the Securities Act of 1933, as amended, and under such Rule, may not be sold for a period of at least two years from acquisition thereof. (See "CERTAIN TRANSACTIONS.") Prior to this Offering, there has been no market for the Company's Shares. Consequently, the offering price has been determined arbitrarily by the Company and should not be considered an indication of the actual value of the Company's Shares. There can be no assurance that the Common Stock offered hereby can be resold at the offering price, or at all. Nor can there be any assurance that any public market for the Company's Common Stock will develop. It is anticipated that the Shares will trade in the over-the counter market. Offering Period and Expiration Date This Offering will commence on the date of this Prospectus and continue for a period of ninety (90) days, unless extended, by the Company for an additional ninety (90) days, or unless this Offering is completed or otherwise terminated by the Company (the "Expiration Date"). Procedures for Subscribing Each investor subscribing for any of the Shares offered hereby will be required to execute a Subscription Agreement and tender it, to the Company, together with a check or certified funds payable to the Escrow Agent, for acceptance or rejection of their subscription. Determination of Offering Price The public offering price of the Shares has been determined arbitrarily by the Company. The price does not bear any relationship to the Company's assets, book value, earnings, or other established criteria for valuing a privately held company. In determining the number of Shares of Common Stock to be offered and the offering price, the Company's capital structure, financial condition, prospects for the Company and the industry in general, and the general condition of the securities market were considered by the Company. Accordingly, the offering price should not be considered an indication of the actual value of the Company's securities. Escrow Proceeds from the subscription for Units will be transmitted by noon of the next business day after receipt by the Company to be deposited in a special account at First National Bank of Long Island, 253 New York Avenue, Huntington, New York, 11743 until a minimum of 130,000 Units have been sold, at which time the proceeds will be paid to the Company. Thereafter, proceeds will be paid directly to the Company until a maximum of 510,000 Units have been sold or the offering period expires, whichever first occurs. If 130,000 Units are not sold by the Expiration Date, or any extension thereof, or if this Offering is terminated sooner, all funds which have been received willbe promptly returned to the subscribers without interest or deduction. All checks for subscriptions should be made payable to Steven L. Siskind, Attorney Escrow Account for the benefit of Summa Metals Corp. 16 Right to Reject The Company shall have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. All monies from rejected subscriptions shall be returned immediately to the investors without interest or deduction. Subscriptions for securities shall be accepted or rejected within 48 hours after receipt thereof by the Company. UNDERWRITING ------------ Proposed Underwriting Agreement The Company has entered into an Underwriting Agreement (the "Underwriting Agreement") with Boe & Company, a member of the National Association of Securities Dealers ("NASD") as its agent to publicly offer and sell a minimum of 130,000 Units on a "best-efforts, all-or-none basis" up to a maximum of 510,000 Units on a "best-efforts basis" at a public offering price of $6.00 per Unit, for a total maximum offering of $3,060,000. If a total of 130,000 Units is not sold within 90 days from the commencement of the Offering, which period may be extended for an additional period of up to 90 days upon the mutual consent of the Company and the Underwriter, all proceeds received would be promptly refunded to subscribers in full, without interest or deductions for commissions or expenses. All proceeds from the sale of the Units will be payable to Steven L. Siskind, Attorney Escrow Account for the benefit of Summa Metals Corp., and will be deposited in an escrow account maintained at First National Bank of Long Island, by Steven L. Siskind, counsel for the Company as Escrow Agent (the "Escrow Agent"), pursuant to an Escrow Agreement among the Company, the Underwriter and the Escrow Agent. Proposed Underwriter Compensation The Underwriting Agreement further provides that, subject to the sale of a minimum of 130,000 up to a maximum of 510,000 Units offered hereby, the Underwriter will receive (a) a cash commission of 10% of the gross price of each Unit it sells (i.e. $.60 per Unit, or a total of $78,000.00, assuming a minimum subscription, or $306,000.00, assuming a maximum subscription) and (b) a non-accountable expense allowance of 3%, and warrants to purchase additional shares in the amount of 10% of the number of Units sold to the Public. (SEE "UNDERWRITERS AGREEMENT") Any unexpended portion of the non-accountable expense allowance may be retained by the underwriter and may be deemed additional underwriting compensation for the purposes of the Securities Act of 1933, as amended. The foregoing is a summary of the principal terms of the Underwriting Agreement and does not purport to be complete. Reference is made to the copy of said proposed Underwriting Agreement which is on file as Exhibit 28(c) to the Registration Statement of which this Prospectus is a part. 17 BUSINESS OF THE COMPANY Summa Metals Corp., a Nevada corporation, was incorporated on March 8, 1994. The Company maintains its statutory registered agent's office at 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509. The Company presently maintains its business offices at 28281 Crown Valley Parkway, Ste. 225, Laguna Niguel, CA, 92677-1461. (See "OFFICE FACILITIES" in this section.) General The Company is a mineral processing and mining company engaged in the acquisition, and exploration of properties with an uncertain mineral potential. The Company acquired certain mining and tailing properties from Mr. Chaffee, an officer, director and principal shareholder and from Dr. Pray, a former officer, director and principal shareholder, in exchange for the issuance of an aggregate of 2,050,000 shares of the Company's restricted Common Stock (See "CERTAIN TRANSACTIONS"), and is attempting to raise the capital required for exploration and development of the properties. There is no assurance, however, that the Company will be successful in raising the capital or in developing the properties. (See "MANAGEMENT" and "BUSINESS OF THE COMPANY"). Environmental Regulations and Cyclical Metal Prices Environmental laws and regulations relating to federal lands are expected to be tightly enforced by the U.S. Bureau of Land Management and U.S. Forest Service. The Company, however, feels that as long as Forest Service regulations are fully complied with, there should be no serious economic problems encountered because of wilderness laws or any other federal, state or local environmental protection laws. The Company anticipates no discharge of water into any active stream, creek, river, lake or any other body of water regulated by environmental laws or regulations and that no significant endangered specie will be disturbed by its operations. Recontouring and revegitation of disturbed surface areas will be completed pursuant to federal, state and local requirements. Any portals, adits or shafts will be sealed upon abandonment of a property. It is difficult to estimate the cost effects of compliance with environmental laws inasmuch as the methods and procedures of exploration within federal lands or U.S. Bureau of Land Management and Forest Service lands are similar to those methods and procedures adopted by the Company as a matter of Company policy and procedure. The Company intends to operate its properties in strict compliance with all environmental regulations applicable to the mineral processing and mining industry. While the Company considers itself to be pro-active with respect to environmental considerations and has a history of working with the federal, state and local agencies in the mining industry, there can be no assurance that the Company will be able to procure the necessary permits to operate any of its properties. In addition, it is possible that certain regulatory agencies could, in fact, make it impossible for the Company to even explore its properties and/or prohibit the Company from performing the work necessary for the Company to complete its "economic" evaluations. (See "BUSINESS OF THE COMPANY-The Exploration Stage" and "MANAGEMENT".) 18 Prior to the Company being able to perform any work on any of the properties, including certain pilot plant operations, the Company will be required to submit, and have approved, a Plan of Operations specific to each particular property with each appropriate regulatory agency. This approval process is often time consuming and expensive and the outcome is always uncertain. Even assuming the Company is successful in obtaining a permit to explore or operate its properties, the financial responsibilities placed upon the Company as a condition for the issuance of such approvals may render some or all of its properties uneconomic to develop and the Plans of Operation may, at that time, be abandoned. Other factors which could have a material impact upon the Company's future financial performance include such considerations as the cyclical nature of the mining industry, which may have an effect on the Company's potential profitability. However, it is difficult to determine whether the cyclical price of precious metals and other minerals explored for by the Company will increase or decrease. Thus, management feels that the inherent risk of a decrease in the price of minerals is balanced by the possibility of an increase in the price of minerals. In general, the costs of mining today are much greater than in previous years due to both inflation and the added costs of complying with the variety of environmental laws and safety regulations which govern the mining industry. The Exploration Stage All of the Company's properties are in the exploration stages. In general, the exploration work has included research of historical data, geologic mapping, geochemical sampling, geophysical surveys and minor excavation and repairs. During the exploration stage, the Company will seek to determine if any mineral resources do, in fact, exist and then will further determine if the Company can economically develop the same. No ore bodies have yet been located and/or identified on any of the Company's properties and there can be no assurance that they exist. At the completion of the exploration stage, and assuming that an economically viable resource does exist, the Company will then prioritize the development of each of its properties based upon the financial resources available at that time. The exploration process in general is divided into three (3) phases. Phase 1 begins with a thorough search of the available geologic literature, personal interviews with geologists, mining engineers and others familiar with the properties. This initial work is then augmented with geologic mapping, geophysical testing and geochemical testing. Phase I has been completed on all of the Company's properties. 19 The second phase of the exploration process involves an initial examination of the underground characteristics of the vein structure that was identified by Phase 1 of exploration. Phase 2 is aimed at identifying a deposit of potential economic importance. While the exact exploration process is site specific, the general methods of exploration may include trenching, advanced geophysical work and core drilling to aid in the determination of subsurface characteristics of the structure. The geophysical work is designed to give a general understanding of the location and extent of mineralization at depths that are unreachable by surface excavations, and provide a target for more extensive trenching and core drilling. After a thorough analysis of the data collected in Phase 2, a determination is made as to whether or not the property warrants a Phase 3 study. Phase 3 is aimed at precisely defining the depth, the width, the length, the tonnage and the value per ton of the mineral deposits so that it can be considered a proven ore body within stringent industry standards. This is accomplished through extensive surface trenching and extensive core drilling. A mineral deposit is not a proven ore body until it has been technically, economically and legally proven. A more detailed description of the proposed exploration process for each of the Company's properties is contained in the "Description of Properties" section which follows. Description of Properties The Company has acquired rights and interests in and to certain mining properties, as listed below. Most of these properties consist of unpatented mining claims. The validity of unpatented mining claims depends, to an extent, upon numerous circumstances and factual matters, many of which are discoverable of record or by other available means, and is subject to many uncertainties of existing law and its applications. One of the requirements of initiating a valid mining claim is that the claim must be staked on a mineralized area. Further exploration and mineral assessments will be performed during Phase l of the exploration process to determine if sufficient mineralization exists to develop the properties. The Company intends to continue to perform annual assessment work on all of its properties, as well as comply with state and federal regulations regarding the claims, until Phase 1 results can be assessed. (See "CERTAIN TRANSACTIONS" and "CONFLICTS OF INTEREST.") The Deep Gold Mine The Deep Gold Mine, consisting of one unpatented placer claim is located on approximately 80 acres. The claim was located amidst some old 1930's mining claims. Dr. Ralph E. Pray, a former officer, director and principal shareholder of the Company located one of the claims in 1981 and over the course of several years, acquired the other three (3) claims from their respective locators. In 1981, a new road was built into the property, a new headframe was placed over the 150-ft. deep shaft and the workings were cleaned out. The property is subleased to the Company for $100.00 per year in perpetuity. In addition, Dr. 20 Pray received shares of Common Stock of the Company as consideration for the sublease. During the term of the sublease, the Company will have all of Dr. Pray's right, title and interest in and to the property, and any revenues derived therefrom. During 1994, the Company maintained the required permits for the mine, reviewed geophysical data establishing a probable channel and mapped three drill sites for early exploration. The volume of placer material available on the Deep Gold claims has been estimated using the channel width and thickness values reported in the California Division of Mines Report XXXIV for Lewis and Iron Nugget claim groups, now included in the Deep Gold group. The average width of the channel is 57 feet and the average thickness is reported to be 6 feet. The Deep Gold Mine is not located in a Wilderness Study area and is not, therefore, subject to the federal rules and regulations regarding such an area. Assuming that the Phase 1 evaluation of the Gold Spur Mine is positive, the Company intends to mine the property in the following manner. The channel at the shaft elevation, near the north bank, will be delineated by reverse circulation hammer drilling. The compacted, lightly cemented sand and gravel will be drilled and blasted. Large rock fragments will be left behind in high, underground fence-wire enclosures. When removal of the material closest to Entry No. 2 has been completed, the treatment plant will be moved down slope to the collar of Entry No. 3 and material in the lower 500 feet of the drift will reach the surface through Entry No. 3. Broken sand/gravel placer materials from the channel will be dumped directly onto a heavy vibrating screen. Oversize will go to waste. Minus 1/2 inch will be screened at 20 mesh. Fine concentrate will be treated to remove magnetics and all concentrates, if any are found to exist, will be further processed, examined, weighed and prepared for shipment. The mine will have three drill roads cut from the main road to the geophysical anomalies found recently during a magnetometer survey by Dr. Pray. A contract driller will be employed to rotary drill three holes to depths of about 150 feet, where bedrock will be encountered. Once the channel has been located, if one is found to exist, it will be delineated by rapid drilling on 10 or 20 foot centers. A shallow decline will be driven to the channel, and the material will be processed on site to a heavy concentrate for delivery to the Monrovia laboratory. Allocation of Proceeds - Deep Gold Mine The Company has allocated $10,000, assuming receipt of the minimum proceeds of this Offering to complete its Phase 1 evaluation, and $135,000, assuming receipt of the maximum proceeds of this Offering, to the exploration and development of the Deep Gold Mine. The Company estimates that the evaluation process on this property will take approximately 30 days to complete. The balance of the funds allocated will be expended at the discretion of the Company 21 based upon the results of the Phase 1 exploration process and the status of the Company's financial commitments to other projects being explored and/or developed at the time. If only the minimum proceeds from this Offering are realized, and the results of the Phase 1 exploration process are positive, the Company believes that the amount allocated to the exploration and development will be sufficient to place into operation a small pilot plant to process any minerals which are found. However, additional funds would be required to expand the mining operations and no assurance can be given that the Company will have or will be able to obtain such funds if and when they are needed. The Gold Spur Mine The Gold Spur Mine, an underground gold mine located on nine lode claims and one mill site in Coyote Canyon County, on the southwest flank of the Panamints, in Inyo County, California, is located directly between mines operated by Canyon Resources and Keystone, a prolific gold producer during the 1980's. The Gold Spur Mine originally operated between 1907 and 1940 and consists of 11 Lode Claims and 1 mill site on approximately 80 acres. Dr. Ralph E. Pray, a former officer, director and principal shareholder of the Company, re-filed the claims in 1973 and again in 1979 as sole owner and subleases the property to the Company for the sum of $100.00 per year and a work clause guaranteeing Dr. Pray's involvement in the exploration and development thereof. As additional consideration, Dr. Pray received shares of Common Stock of the Company in exchange for the sublease. During the term of the sublease, the Company will have all of Dr. Pray's right, title and interest in and to the property and any revenues derived therefrom. In 1994, the Company performed extensive repairs on a two-mile mine road, using a rented 6-yard loader; rebuilt the aerial tramway mid-point cable tower; re-timbered the 50-ton main ore bin floor; repaired the stationary aerial tramway engine; and rebuilt the facilities operating the freshwater well on the property. About 3,000 lbs. of heavy timber was delivered to the mine, most of which was obtained from freeway repair crews following the Northridge, California earthquake. The total cost expended on this work by the Company was approximately $14,500.00. Approximately 200 tons of material was drilled and stockpiled by the Predecessor Company in 1991. This material lies in the mine awaiting transport to either a millsite established by the Company or to a nearby milling operation for extraction and treatment. The camp is at the base of the mountain, 600 feet below. A small mine and mill operation could be fabricated immediately, utilizing existing facilities. The property is already equipped with a fresh water well and tanks, basic housing facilities, an improved access road, septic system, buried utilities for gas and water, main ore bins, a cable-type ore delivery system from the main portal, structural timbers, a 225 CFM air compressor and security dates at the main access road. 22 The Gold Spur mine was at one time considered part of a Wilderness Study area, but was removed from the same in 1994 and is, therefore, no longer subject to the federal rules and regulations regarding such an area. The validity of unpatented mining claims, depends, to an extent upon numerous circumstances and factual matters, many of which are discoverable of record or by other available means, and is subject to many uncertainties of existing law and its applications. One of the requirements of initiating a valid mining claim is that the claim be staked on a mineralized area. The Gold Spur Mine was, in the opinion of the Company, mineralized to an extent sufficient to meet government requirements and common mining industry practice. However, further Company exploration and mineral assessments performed by government agencies may indicate that these claims are not sufficiently mineralized and may later be abandoned or determined to be invalid because of insufficient mineralization. The Company intends to perform the annual assessment work, as well as comply with state and federal regulations regarding this claim, until full exploration of potential mineralization can be assessed. Upon completion of this Offering, the Company intends to continue with its exploratory work in the upper workings of the mine using the newly repaired aerial tramway system. The Company also intends to start the repair of the surface mine rail system, utilizing the timbers delivered to the mine in 1994. Mine product, assuming any valuable minerals exist, will be stockpiled during the exploration of the present underground workings. The purpose of this exploratory effort will be to establish that there is a sufficient amount and grade of minerals to warrant placing the mine into production. The existing exposed veins will be explored, measured, tested and assayed during this exploration process. From the results of the exploration process, the Company intends to prepare a complete economic evaluation for presentation to the Company's Board of Directors who will make the final decision whether to expand mining activities on the property. There is no assurance the Company will be able to locate any valuable minerals at the Gold Spur Mine, or if any are found, that they will be able to be successfully removed and/or sold profitably, or at all. Allocation of Proceeds - Gold Spur In the event only the minimum received from the offering, the Company will delay expending funds for the production of the Gold Spur until such time as it has completed its evaluation of the other properties in its portfolio. The Company my seek a joint venture partner or develop the property from income from operations. The Company has allocated $480,000, assuming receipt of the maximum proceeds of this Offering, to the exploration and development of the Gold Spur Mine, subject to completion of the Phase 1 evaluation process. The Company estimates that the cost for the evaluation process on this property will be approximately $10,000 and should take approximately 30 days to complete. The balance of the funds allocated will be expended at the discretion of the Company based upon the results of the Phase 1 exploration process and the status of the Company's financial commitments to other projects being explored and/or developed at the time. 23 Promontorio The Promontorio property is designated as the "La Campana" and is located 35 miles northwest of the City of Durango in the municipality of El Oro, Mexico, at Latitude 25.13 North and Longitude 105.09 West. The actual property is 13 kilometers north of the mining city of Promontorio and consists of approximately 135 acres of mill tailings. On January 8, 1992, Dr. Ralph E. Pray, a former officer, director and principal shareholder of the Company, entered into an Agreement with Jose A. Echenique, an unrelated third party, whereby Dr. Pray acquired the rights to treat and/or remove the mill tailings at the Promontorio. Dr. Pray has no possessory rights to the property; merely the tailings on the property. The term of the Agreement is for a period of ten years and provides for a royalty payment to Mr. Echenique of 5% of any gross revenues derived from the tailings. Mr. Echenique retains full ownership in the land and improvements thereon, but the same is fully available to Dr. Pray during the term of the Agreement. The Company subleases the rights to the mill tailings from Dr. Pray for the sum of $100.00 U.S. per year. As additional consideration, Dr. Pray received shares of Common Stock of the Company in exchange for the sublease. During the term of the sublease, which extends from 1992 to 2002, the Company will have all of Dr. Pray's right, title and interest in and to the mill tailings and any revenues derived therefrom. The mill tailings lie behind the Promontorio Dam, built in 1890, and were washed in behind the dam by repeated rainfall across upstream Promontorio silver cyanide mill tailings. This fill material reaches within one foot of the stone structure top of the dam. In 1994, while under lease to Dr. Pray, a crew of six men removed 700 lbs. of samples from the 1880-1915 tailing deposit and delivered them to the Mineral Research Laboratory, owned by Dr. Pray since 1967. Tests were conducted at the lab to establish the feasibility of upgrading the material by gravity before chemical processing as previous efforts to extract the silver contained in the Promontorio tailings by unrelated third parties had proven not to be economically viable. It is the Company's opinion that the low recovery rates using standard cyanide extraction have been the result of a lack of understanding of the presence of manganese within the mineral structure. The manganese effectively blocks the action of the cyanide. The Company believes that the solution is to first separate the manganese and then use conventional cyanide techniques to extract the silver materials. Due to lack of finances, however, the Company has only performed laboratory tests to substantiate its theories relative to the presence and actions of the manganese. Although Dr. Pray has held the lease to the Promontorio since January 1992, and has performed extensive laboratory testing and sampling of the Promontorio, he has never attempted to fully explore or develop the property and extract any minerals due to a lack of funding. The proceeds from this Offering will afford the Company an opportunity to determine the economic potential of this property. 24 Upon the successful completion of this Offering, the Company intends to place a small pilot plant in operation to perform scale-up tests and make final adjustments to the extraction process. The tailings behind the massive stone dam and the tailings still retained on the original site will be chemically treated to first remove the manganese oxide masking the silver, followed by lime addition and agitation cyanide leaching to remove the silver. Access to the property is via an existing mining and logging 17 kilometer road from the village at the base of the mountain to the dam. While this access road is currently passable, some improvements will have to be made in order for the Company to be able to transport the equipment and machinery necessary to conduct its extraction operations. The Company has estimated the cost to improve the road for the pilot plant to be approximately $30,000.00. The Company is hopeful that some of these costs will be shared with the local logging companies; however, there is no assurance that this will be the case and the Company is, therefore, prepared to pay the entire amount. The Federal Government in Mexico has offered to supervise the repairs. Upon completion of the repairs to the access road, the Company intends to set up a pilot plant to run 24 hours per day at the Monrovia laboratory facility owned and operated by Dr. Pray to enable proper tank size determination, utilizing the 700 lbs. of samples remaining at the lab. The Company intends to utilize portable power generation equipment for its extraction operation at this site. The Company is also researching whether the extracted manganese may have commercial value as a byproduct of the proposed process and intends to fully explore such possibility as a means of generating additional revenues. Allocation of Proceeds - Promontorio In the event only the minimum proceeds are raised in this Offering, exploration and development of the Promontorio will be abandoned until further funds are generated by the Company, either by revenues from other properties, or from additional financing. In the event the maximum proceeds are received in this Offering, the Company has allocated $285,000 to the exploration and development of the Promontorio, subject to completion of the Phase 1 evaluation process. The Company estimates that the cost for the evaluation process on this property will be approximately $10,000 and should take approximately 30 days to complete. The balance of the funds allocated will be expended at the discretion of the Company based upon the results of the Phase 1 exploration process and the status of the Company's financial commitments to other projects being explored and/or developed at the time. Government Regulations Any mineral exploration program undertaken by the Company will be subject to extensive federal, state and local laws, rules and regulations both in existence now and future legislation. Such laws, rules and regulations could cause additional expenses, capital expenditures, restrictions and/or delays in the proposed exploration and/or the Company's properties. 25 Most of the Company's properties are under the jurisdiction of the Federal Bureau of Land Management (the "BLM"). The BLM presently requires that a plan of operation, which must include tailing disposal information and reclamation policies for a property, be filed and approved prior to the commencement of any mining or milling operations. In addition, in some instances, regulatory filings and approvals must be obtained from other agencies such as the State Mining Inspectors Office, the Federal Mining Inspectors Office, MSDHA and/or OSHA. The Company's properties outside the U.S. are no less sensitive to environmental compliance. The Company fully intends to comply with all laws, rules and regulations specific to any country, state and/or municipality in which it will conduct its mining and milling operations. Compliance with such regulations increases the costs of mining operations. The Company will also be subject to the U.S. Occupational Safety and Health Act and various California statutes dealing with working conditions at its mines and mill sites. The Company intends to fully comply with all such environmental, health and safety laws, rules, regulations and statutes. At this time, no specific environmental plans have been disclosed in the plans of operation filed and/or approved by the Company on any of its properties and, therefore, no specific environmental concerns have been addressed herein. Employees The Company intends to use the services of subcontractors for all drilling, exploration and site construction. The only direct employees of the Company will be its officers and directors. Management's Discussion and Analysis of Financial Condition and Results of Operation The Company has not yet commenced its mining operations and, therefore, has no income or expenses, except for start-up costs expended by its officers and directors and loans the Company secured to acquire the foregoing properties and for operating expenses. (See "FINANCIAL STATEMENTS" and "CERTAIN TRANSACTIONS.") No dividends have been paid out to date and the Company's directors, officers and management have received no remuneration for their services, except Mr. Chaffee, who has received $5,000.00 per month since March 8, 1994. MANAGEMENT ---------- Officers and Directors Each director of the Company is elected to a term of one year and serves until his/her successor is elected and qualified. Each officer of the Company 26 is elected by the Board of Directors to a term of one year and serves until his/her successor is duly elected and qualified or until he/she is removed. The Board of Directors has no nominating, auditing or compensation committees. The officers and directors of the Company, and further biographical information concerning them are as follows: Name and Address Age Position - ---------------- --- -------- Michael M. Chaffee 55 Chairman of the Board 1588 Sea Lancer Dr. Lake Havasu City, Arizona 86403 Raymond Baptista 56 Executive V.P. and Chief 5405 Miracopa Drive Financial Officer and Simi Valley, CA. 94671 Director Eric A. Popkoff 43 Vice President Investor 1750 East 23rd Street Relations and Director Brooklyn, NY 11229 Background Information Michael M. Chaffee - Mr. Chaffee has been the President and Chairman of the Board of Directors of the Company since inception. From January 1989 to April 1, 1994, Mr. Chaffee was the President and Chief Executive Officer of Summa Metals Corp., a Colorado corporation engaged in the extraction and processing of metals and other elements from previously discarded natural mineral deposits. He recently retired as President, Chief Executive Officer and Chairman of the Board of Applied Biomedical Sciences, a public company engaged in the business of developing proprietary products to improve wound care management and a variety of drug delivery systems. Prior to forming Applied Biomedical Sciences, he held senior positions as Executive Vice President and Chief Operating Officer of several large corporations. Mr. Chaffee graduated from the Northrop Institute of Technology in 1964 with a B.S. Degree in Electronic Engineering and completed additional graduate work at the University of Southern California in Business and Biomedical Engineering. He is devoting full time to the business of the Company. Raymond Baptista - Mr. Baptista has been the Chief Financial Officer and a Director of the Company since inception. He will be responsible for all finance, corporate strategies and business policies. From 1986 to 1994, Mr. Baptista was the Senior Vice President and Chief Financial Officer for Applied Biomedical Sciences, a public company engaged in the research and development of collagen-based biomedical products. Applied Biomedical Sciences was founded by Michael M. Chaffee, another officer, director and principal shareholder of the Company. Mr. Baptista has over 25 years experience in the banking industry, both nationally and internationally. He is a graduate of St. Stanislaus College, Georgetown, Guyana and the Graduate School of Banking, Pacific Coast Banking School, University of Washington, Seattle, Washington. He is devoting full time to the business of the Company. 27 Eric A. Popkoff - From 1989 to 1994 Mr. Popkoff was a teacher of social studies and accounting and business practices at various sites in the New York City Public School system. He is currently an adjunct lecturer in economics at Brooklyn College, City University of New York. Since 1994, he has been the President and Chief Executive Officer of Undiscovered Equities Research Corp., an information services company located in Brooklyn, New York, which provides research on request from securities brokers and broker dealers, and distributes from time to time a written review of selected securities. Since October 1996, he has been a vice president and director of Atlantis Aquafarm Inc. located in Brooklyn, New York. Mr. Popkoff holds an MBA in Management and an MBA in International Business from Baruch College, CUNY. Executive Compensation None of the officers and/or directors of the Company are party to any standard arrangements or contracts regarding compensation for their services. Michael M. Chaffee, President and Chairman of the Board, is the only officer and/or director receiving compensation for his services. Mr. Chaffee has received a salary of $5,000.00 per month since the Company's inception on March 8, 1994. There are presently no plans to provide any of the officers and/or directors of the Company with any pension plan, stock option, annuity, bonus, insurance, profit-sharing or similar benefit plans. Each of the officers and/or directors will, however, be reimbursed for any out-of-pocket expenses incurred on behalf of the Company. Upon completion of the minimum Offering the following salaries will be paid to the officers and directors of the Company: Name Capacities Served Annual Compensation ---- ----------------- ------------------- Michael M. Chaffee President and Chairman $ 80,000.00 of the Board Raymond Baptista Chief Financial Officer $ 70,000.00 and Director Eric A. Popkoff Vice-President-Corporate $ 70,000.00 Relations, Director These salaries will not be retroactive and will only commence upon completion of the minimum Offering. There are proposed employment contracts between the Company and Messrs. Chaffee, Baptista and Popkoff, effective upon the Closing of the minimum offering. There are no proposed terminations of employment or change-in-control arrangements between the Company and any of its officers and/or directors. 28 No Option/SAR Grants or long-term Incentive Plans-Awards have been granted or awarded to any officers or directors of the Company and there are presently no plans to implement any such benefits, except as provided in the employment contract of Mr. Popkoff, which grants him, upon commencement of his employment by the Company, the option to purchase up to 900,000 shares of the Company's restricted common stock at a price of $.001 per share. Indemnification Pursuant to the By-Laws of the corporation, the Company has agreed to indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his/her position, if he/she acted in good faith and in a manner he/she reasonably believed to be in the best interest of the corporation and, in certain cases, may advance expenses incurred in defending any such proceeding. To the extent that the officer or director is successful on the merits in any such proceeding as to which such person is to be indemnified, the Company must indemnify him/her against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to officers, directors or persons controlling the Company, pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in said Act and is therefore. unenforceable. Office Facilities The Company's principal offices are located at 28281 Crown Valley Pkwy, Ste 225 Laguna Niguel, California. on a rent-free basis. Upon successful completion of this Offering, the Company intends to remain on these premises. The fees to be charged to the Company for rent will be approximately $735 per month. The Company also maintains a small field office in Lake Havasu City, Arizona, on a month-to-month verbal lease and pays $180.00 per month and utilizes office space at the Mineral Research Laboratoy in Monrovia California on an "as needed" basis. PRINCIPAL SHAREHOLDERS ---------------------- The following table sets forth certain information regarding ownership of the Company's Common Stock as of the date of this Memorandum, and as adjusted to reflect the sale of the Shares offered hereby, by each officer and director, all officers and directors as a group, and by all other shareholders who own 5% or more of the Company's Common Stock. 29 No. Percent Ownership Percent Ownership of Before Offering After Offering Shares ----------------- Minimum Maximum ------ ------- ------- Michael M. Chaffee 1,050,000 23% 22.4% 20.7% Raymond C. Baptista 200,000 4.4 4.3 3.9 Anchor Holdings Corp. 727,500 16 15.5 14.4 Bruce Cooper 500,000 11 10.7 9.9 All Officers and Directors as a 1,250,000 27.4 26.7 24.7 Group (1)(2) Future Sales by Present Shareholders The aggregate of 4,555,000 shares of Common Stock held by the present shareholders are deemed "restricted securities, as that term is defined in Rule 144 of the Rules and Regulations of the SEC promulgated under the Act ("Rule 144"). Under Rule 144, such shares can be publicly sold, subject to volume restrictions and certain restrictions on the manner of sale, commencing two years after their acquisition. Sales of shares by "affiliates" are also subject to volume restrictions and certain other restrictions pertaining to the manner of sale, all pursuant to Rule 144. The 130,000 (510,000) Shares offered hereby are not "restricted securities" under Rule 144 and can be publicly sold without compliance with Rule 144, assuming there is a market therefor, of which there can be no assurance. DESCRIPTION OF SECURITIES ------------------------- Common Stock The authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, par value $.001 per share. The holders of Common Stock (i) have equal ratable rights to dividends from funds legally available therefor, when, as and if declared by the Board of Directors, of the Company; (ii) are entitled to share ratably all of the assets of the Company available for distribution to holders of Common Stock upon liquidation, dissolution or winding up of the affairs of the Company; (iii) do not have preemptive, subscription or conversion - ----------------------------------- (1) Does not include 900,000 shares which Eric A. Popkoff has an option to purchase upon commencement of his employment. (2) Assumes that all of the Units offered hereby are sold, of which there can be no assurance, and that the present shareholders do not purchase any Units in this Offering. In either of such events, their percentage ownership would increase accordingly. (See "RISK FACTORS-CONTROL OF THE COMPANY", "DILUTION" and "OFFERING.") 30 rights and there are no redemption or sinking fund provisions or rights applicable thereto; and (iv) are entitled to one non-cumulative vote per share on all matters on which stockholders may vote. All shares of Common Stock now outstanding are fully paid for and non-assessable and all shares of Common Stock which are the subject of this Offering, when issued, will be fully paid for and nonassessable. The Board of Directors is authorized to issue additional Common Stock within the limits authorized by the Company's Articles of Incorporation and Bylaws. The foregoing description concerning the Common Stock of the Company does not purport to be complete. Reference is made to the Company's Articles of Incorporation and Bylaws, as well as the applicable statutes of the State of Nevada, for a more complete description of the rights and liabilities of shareholders. Units The Company is offering a minimum of 130,000 and a maximum of 510,000 Units of Common Stock, par value $.001, pursuant to this Prospectus, at a price of $6.00 per Unit. No fractional Units may be purchased. Each Unit consists of one Share of Common Stock (the "Common Stock" or "Shares") and two redeemable common stock purchase warrants ("Warrants"), designated "A Warrants" and "B Warrants". Each of the A Warrants entitles the registered holder hereof to purchase one share of the Common Stock at a price of $8.00, subject to adjustment in certain circumstances at any time after the Warrants become separately tradeable, until 12 months from the date of this Prospectus. Each of the B Warrants entitles the registered holder therof to purchase one share of the Common Stock at a price of $7.00, subject to adjustment in certain circumstances, at any time after the exercise of the A Warrant related to the Units until 24 months from the date of this Prospectus. The Common Stock and the Warrants included in the Units will not be separately transferable until 90 days after the date of this Prospectus or such earlier date as the Company may determine. Each of the 510,000 A Warrants sold in this offering will entitle the registered holders thereof to purchase one share of the Common Stock at an aggregate price of $8.00, subject to adjustment in certain circumstances, at any time after the Warrant becomes separately tradeable, until 12 months from the date of this Prospectus. Each of the 510,000 B Warrants will entitle the registered holders thereof to purchase one share of Common Stock at a price of $7.00, subject to adjustment in certain circumstances, at any time after exercising the A Warrant related to the Units, until 24 months from the date of this Prospectus or such earlier date as the Company may determine. The shares of Common Stock underlying the Warrants when issued upon the exercise thereof and payment of the purchase price, will be fully paid and nonassessable. The Warrants may be exercised upon the surrender of the Warrant Certificate on or prior to the expiration of the exercise period, with the form of election to purchase included on the Warrant Certificate properly complete and executed, 31 together with payment of the exercise price to the Warrant Agent. No fractional shares will be issued upon the exercise of the Warrants. The Warrants do not confer upon the holders thereof any voting rights or any other rights as shareholders of the Company. Upon notice to the Warrant holders, the Company has the right to reduce the exercise price or extend the expiration date of the Warrants. The exercise price and number of shares of Common Stock issuable upon the exercise of the Warrants are subject to adjustment upon the occurrence of certain events, including stock splits, combinations and reclassification. The exercise price of the Warrants is arbitrary and there can be no assurance that the value of the Common Stock will ever rise to a level where exercise of the Warrants would be of any economic benefit to the Warrant holder. In order for the holder to exercise the Warrants, there must be a current registration statement on file with the Securities and Exchange Commission and various state securities commissions to continue registration of the shares of Common Stock underlying the Warrants. The Company intends to file an amendment to this Registration Statement covering the Warrants at a time when the market price of the Common Stock is higher than the exercise price of the Warrants. The filing of an amendment to this Registration Statement could result in substantial expense to the Company, and there can be no assurance that the Company will be able to file an amendment to this Registration Statement. The Company will make reasonable efforts and believes that is will be able to qualify the shares of Common Stock underlying the Warrants for sale in those states where the Units are offered. The Warrants may be deprived of any value if a current prospectus covering the Shares issuable upon exercise thereof is not kept effective, if the underlying Shares are not qualified in states in which the Warrant holder resides, or if the holder is unable to sell the Warrants. Warrant holders who move to states in which the Warrants are not qualified for sale may not be able to exercise their Warrants. Non-Cumulative Voting The holders of shares of Common Stock of the Company do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of the Company's directors. After this Offering is completed, the present shareholders will own 97% (90%) of the outstanding shares. (See "PRINCIPAL SHAREHOLDERS.") Dividends As of the date of this Prospectus, the Company has not paid any cash dividends to shareholders nor does it anticipate payment of any such cash dividends in the foreseeable future. The declaration of any future cash dividends will be at the discretion of the Board of Directors and will depend 32 upon earnings, if any, capital requirements and the financial position of the Company, general economic conditions, and other pertinent actors. Reports to Shareholders The Company will furnish annual reports to shareholders containing audited financial statements of the Company, and may furnish unaudited quarterly financial statements. Transfer Agent The Company has appointed American Securities Transfer, Incorporated, Denver, Colorado, as the transfer agent for its Common Stock. CERTAIN TRANSACTIONS In April, 1994, the Company issued 1,050,000 shares of restricted Common Stock to Michael M. Chaffee, an officer, director and principal shareholder of the Company and 1,000,000 shares of restricted Common Stock to Dr. Ralph E. Pray, who at that time was an officer, director and principal shareholder, in exchange for assets (mining properties)owned by Messrs. Chaffee and Pray prior to becoming officers, directors and principal shareholders of the Company. (See "BUSINESS OF THE COMPANY", "PRINCIPAL SHAREHOLDERS", "MANAGEMENT" and "FINANCIAL STATEMENTS.") In a private sale of securities in March, 1994, the Company issued 225,000 shares of restricted Common Stock to Amyn Dahya, an unrelated third party, as additional consideration for a loan in the amount of $100,000.00, a portion of which was used to acquire some of the current properties owned by the Company. Mr. Dayha does not have registration rights with respect to any of the shares purchased. The loan was due and payable on March 29, 1995 and accrues interest at the rate of 12% per annum until paid in full. The payment date was subsequently extended and the note is now due on September 30, 1998. (See "PRINCIPAL SHAREHOLDERS" and "FINANCIAL STATEMENTS.") In a private sale of securities in March, 1995, the Company issued 2,200,000 shares of restricted Common Stock to Anchor Holdings, Inc., an unrelated third party, in exchange for $2,200.00 in cash. Anchor Holdings, Inc. does not have registration rights with respect to any of the shares purchased. (See "PRINCIPAL SHAREHOLDERS" and "FINANCIAL STATEMENTS.") On March 7, 1995, the Company entered into a Loan Agreement with C.W. and Neva B. Lewis ("Lewis"), unrelated third parties, wherein Lewis advanced $20,000.00 to the Company. In consideration for the loan, the Company will pay Lewis the sum of $50,000 from the proceeds of this Offering and has issued 30,000 shares of its restricted Common Stock to Lewis. (See "USE OF PROCEEDS.") On March 10, 1995, the Company entered into a Purchase Agreement with Big Mike Limited Partnership to acquire all right, title and interest in and to certain unpatented mining claims in Pershing County, Nevada. The purchase price for the property was $125,000.00, and 150,000 shares of the Company's common stock upon Closing of the transaction. The purchase price was to be 33 paid as follows: $25,000 upon signing the contract ; the balance of $100,000 and the 150,000 shares upon closing of the transaction. Because of the currently reduced price of copper, the Company has elected not to complete the purchase, and has forfeited the $25,000 down payment. The Company has no further liability pursuant to the contract. The Company anticipates using the services of Mineral Research Laboratory for all of its primary geological sampling, testing and ore certification. Mineral Research Laboratory is wholly owned by Dr. Ralph Pray, a former officer, director and principal shareholder of the Company. Dr. Pray may be required to hire additional personnel to work directly on the Company's projects and the salaries of all such personnel would be reimbursed by the Company for the hours devoted to the business of the Company. The Company estimates that the amount expended to Mineral Research Laboratory could be between $2,000 and $3,000 per month, depending on the work load and number of additional employees required. Any such services obtained from the Mineral Research Laboratory and/or Dr. Pray will be obtained at rates and on conditions competitive in the marketplace and favorable to the Company. (See "MANAGEMENT", "BUSINESS OF THE COMPANY" and "CONFLICTS OF INTEREST".) CONFLICTS OF INTEREST --------------------- Certain conflicts of interest presently exist from the standpoint that one of the former Officers of the Company is directly involved in and owns another business which will be utilized by the Company and for which he will receive compensation from the Company. Dr. Ralph E. Pray, a former officer, director and principal shareholder of the Company, is an officer, director and principal shareholder of Mineral Research Laboratory in Monrovia, California, a facility which will act as the Company's primary geological sampling, testing and certification center. (See "RISK FACTORS - CONFLICTS OF INTEREST", "CERTAIN TRANSACTIONS", "MANAGEMENT", "USE OF PROCEEDS" and "PRINCIPAL SHAREHOLDERS.") The foregoing arrangements with Dr. Pray was made by the Company and did not result from arm's-length negotiations. Accordingly, this arrangement could be deemed as a conflict of interest, not only from the standpoint that Dr. Pray will be paid from proceeds of this Offering, but also to the extent that he will be devoting his time and energy to other companies and projects which may compete with the Company. (See "RISK FACTORS - CONFLICTS OF INTEREST", "CERTAIN TRANSACTIONS", "MANAGEMENT", "USE OF PROCEEDS" and "PRINCIPAL SHAREHOLDERS.") LITIGATION ---------- The Company is not a part to any pending litigation and, to the best of its knowledge, none is contemplated or threatened. ADDITIONAL INFORMATION ---------------------- The Company has filed with the Securities and Exchange Commission ("Commission"), 450 Fifth Street N.W., Washington, D.C. 20549, an SB-2 Registration Statement under the Securities Act of 1933, as amended, with 34 respect to the securities offered by this Prospectus. This Prospectus omits certain information contained in the Registration Statement. For further information, reference is made to the Registration Statement and the Exhibits and Schedules filed therewith. Statements contained in this Prospectus as to the contents of any document referred to are not necessarily complete, and where such document is an Exhibit to the Registration Statement, each such statement is deemed to be qualified and amplified in all respects by the provisions of the Exhibit. Copies of the complete Registration Statement, including Exhibits, may be examined at the Securities and Exchange Commission offices in Washington, D.C. Copies of the Registration Statement may be obtained upon payment of the usual fees prescribed by the Commission for reproduction and handling. EXPERTS ------- The audited financial statements of the Company as of December 31, 1995, 1996 and October 31, 1997, included in this Prospectus, have been examined by Luxenberg & Associates, Certified Public Accountants, 22431 Antonio Parkway, #B160-457, Rancho Santa Margarita, California 92688. LEGAL MATTERS ------------- The law office of Steven L. Siskind, 645 Fifth Avenue, Suite 403, New York, New York 10022, Telephone (212) 750-2002, has acted as legal counsel for the Company regarding the validity of the securities offered hereby. FINANCIAL STATEMENTS -------------------- The Company's fiscal year ends December 31. The audited financial statements for the Company for the period October 31, 1997, December 31, 1996 and December 31, 1995 follow immediately. 35 REPORT OF INDEPENDENT PUBLIC ACCOUNTANT --------------------------------------- The Stockholders Summa Metals Corp. Lake Havasu City, Arizona I have audited the accompanying balance sheet of Summa Metals Corp. as of October 31, 1997 and December 31, 1996 and 1995 and the related statements of operations, changes in stockholders equity and cash flows for the periods January 1, 1995 through October 31, 1997. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Summa Metals Corp. as of October 31, 1997 and December 31, 1996 and 1995, and the results of its operations, changes in stockholders equity and its cash flows for the period January 1, 1995 through October 31, 1997, in conformity with generally accepted accounting principles. The aforementioned financial statements have been prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As discussed in the attached notes, the Company has been in the exploration stage since its inception on March 8, 1994. The Company has no present source of income and will require financial assistance to pursue its objectives and meet obligations as they become due. Realization of a major portion of the assets is dependent upon the Company's ability to meet its future financing requirements, and the success of future operations, the outcome of which cannot be determined at this time. /s/ Luxenberg & Associates November 24, 1997 Rancho Santa Margarita, California SUMMA METALS CORP. (an Exploration Stage Company) Balance Sheets December 31, December 31, October 31, 1995 1996 1997 ----------- ----------- ---------- ASSETS CURRENT ASSETS Cash $ 17 $ 1,694 $ 30 -------- --------- --------- TOTAL CURRENT ASSETS 17 1,694 30 Leasehold deposit - Notes 2 and 4 25,000 30,000 30,000 Due from stockholders 2,050 2,050 2,050 Syndication costs - 19,000 27,073 Investments in leasehold - Notes 2 and 3 - - - -------- --------- --------- TOTAL ASSETS $ 27,067 $ 52,744 $ 59,153 ======== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable - stockholder - Note 3 $102,500 $ 155,200 $ 173,200 Note payable - stockholder - Note 3 20,000 20,000 20,000 Accounts payable 2,500 3,595 3,595 Accrued interest payable - Note 3 21,000 33,000 43,000 -------- --------- --------- TOTAL LIABILITIES - all current 146,000 211,795 239,795 -------- --------- --------- COMMITMENTS AND CONTINGENCIES - Note 4 STOCKHOLDERS' EQUITY Common stock - 25,000,000 shares authorized, par value $.001, 2,325,000 and 4,555,000 issued and outstanding - Note 2 4,555 4,555 4,555 Accumulated deficit (123,488) (163,606) (185,197) -------- --------- --------- TOTAL STOCKHOLDERS' EQUITY (118,933) (159,051) (180,642) -------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,067 $ 52,744 $ 59,153 ======== ========= ========= The accompanying notes are an integral part of these financial statements. F-1 SUMMA METALS CORP. (an Exploration Stage Company) Statements of Operations For The Year For The Year For the Ten Ended Ended Months Ended Dec. 31, 1995 Dec. 31, 1996 October 31, 1997 ------------- ------------- ---------------- Interest income $ 99 $ - $ - ------------- ------------- ------------ Expenses On-site operating expenses 12,000 12,720 3,890 General and administrative 18,802 14,398 7,701 Interest 12,000 12,000 10,000 ------------- ------------- ------------ Total expenses 42,802 40,118 21,206 ------------- ------------- ------------ Net loss $ (42,703) $ (40,118) $ (21,591) ============= ============= ============ The accompanying notes are an integral part of these financial statements. F-2 SUMMA METALS CORP. (an Exploration Stage Company) Statements of Changes in Stockholders' Equity For The Period January 1, 1995 through October 31, 1997 Common Stock Par Value $.001 --------------- Accumulated Shares Amount Deficit --------- ------- ----------- Balance - December 31, 1994 2,325,000 $ 2,325 $ (80,785) Issuance of common stock (March 1995 - cash) 2,200,000 2,200 - Issuance of common stock (March 1995 - note payable) Note 3 30,000 30 - Net loss - - (42,703) --------- ------- ---------- Balance - December 31, 1995 4,555,000 4,555 (123,488) Net loss - - (40,118) Balance - December 31, 1996 4,555,000 4,555 (163,606) Net loss (21,591) --------- ------- ---------- Balance - October 31, 1997 4,555,000 $ 4,555 $ (185,197) ======== ======= ========== The accompanying notes are an integral part of these financial statements. F-3 SUMMA METALS CORP. (an Exploration Stage Company) Statements of Cash Flows For The Period January 1, 1995 through October 31, 1997
For The Year For The Year For The Ten Ended Ended Months Ended Dec. 31, 1995 Dec. 31, 1996 Oct. 31, 1997 ------------- ------------- ------------- Cash Flows From Operating Activities: Net loss $ (42,703) $ (40,118) $ (21,591) Adjustments to reconcile net income to net cash provided by operating activities: Increase in accounts payable 2,500 1,095 - Increase in interest payable 12,000 12,000 10,000 ------------- ------------- ------------- Cash consumed by operating activities (28,203) (27,023) (11,591) ------------- ------------- ------------- Cash Flows From Investing Activities: Leasehold deposit (25,000) (5,000) - ------------- ------------- ------------- Cash consumed by investing activities (25,000) (5,000) - ------------- ------------- ------------- Cash Flows From Financing Activities: Proceeds from issuance of common stock 2,230 - - Syndication costs - (19,000) (8,073) Proceeds from notes payable - stockholders 22,500 52,700 18,000 ------------- ------------- ------------- Cash provided from financing activities 24,730 33,700 9,927 ------------- ------------- ------------- Increase in cash and cash equivalents (28,473) 1,677 (1,664) Cash balance - beginning 28,490 17 1,694 ------------- ------------- ------------- Cash balance - ending $ 17 $ 1,694 $ 30 ============= ============= ============= Cash paid for interest and income taxes are as follows: Interest $ - $ - $ - ============= ============= ============= Income taxes $ - $ - $ - ============= ============= =============
The accompanying notes are an integral part of these financial statements. F-4 SUMMA METALS CORP. (an Exploration Stage Company) Notes to Financial Statements For The Period January 1, 1995 through October 31, 1997 THE COMPANY Summa Metals Corp. (the Company) was incorporated on March 8, 1994, in the state of Nevada, for the purpose of drilling and exploration of precious metals on land that it currently has rights to and future properties it intends to obtain. The Company has been in the development and exploration stage since its formation. NOTE 1 - SUMMARY OF ACCOUNTING POLICIES The following is a summary of the accounting policies and practices of the Company: Accounting method - The Company utilizes the accrual method of accounting for financial statement reporting and income tax filing purposes. Accounting for investments - Investments are accounted for using the cost method of accounting. NOTE 2 - INVESTMENT IN LEASEHOLD The investment in leasehold consists of subleased rights to mine four separate parcels of real property. One of the leasehold investments consists of the subleased rights to certain mill tailings, primarily of gold and silver, located in Durango, Mexico. The second and third investments are the subleased rights to explore and mine properties located in Northern California. The fourth investment is the subleased rights to mine a currently non-operating, unpatented load and placer mining claim located in Pershing County, Nevada. During April 1994, the Company acquired the first three investments from two of its stockholders. The Company issued 2,050,000 shares of its common stock in exchange for the investment. The investment has been recorded at the cost basis of the stockholders in accordance with generally accepted accounting principles. Since the costs incurred by the stockholders would have been operating expenses if the Company had incurred them, the cost basis for these rights is zero and has been recorded at zero on the Company's balance sheet. The fourth investment was purchased in March 1995 for total consideration of $125,000 (cash of $25,000 plus a note payable of $100,000, see note 3" ) plus an agreement on behalf of the Company to issue 150,000 shares of restricted stock upon the payment of the note payable. If the note payment is not paid when due, the seller has the option to terminate the agreement and keep the $25,000 down payment. The terms of the agreement require that in the event of termination, the Company will not issue the 150,000 shares of stock. F-5 NOTE 3 - NOTES PAYABLE The notes payable - stockholders consists two notes to two different stockholders. The first note, in the amount of $100,000, bears interest at an annual rate of twelve percent (12%). The note is payable to one of the stockholders of the Company. The entire amount of principal and interest is due at maturity of the note, October 1, 1998. As of October 31, 1997, $43,000 of interest has been accrued on the note payable. The second stockholder note, in the amount of $20,000, arose in connection with the purchase by the stockholder of 30,000 shares of Company stock. The terms of the note require a lump sum repayment of $50,000 upon receipt of funds from the public offering of the Company. As of October 31, 1997, no interest has been accrued on this note. NOTE 4 - COMMITMENTS AND CONTINGENCIES The Company has entered into an agreement to acquire a leasehold interest in a mining claim located in Pershing County, Nevada (See note 2). The terms of the agreement require that the Company make a payment of $100,000 to complete the acquisition. As of September 30, 1995, the Company has made a non-refundable deposit of $25,000 for the option to acquire the mine. If the Company decides to complete the transaction, it will need to make a final payment of $100,000 on or before the extended due date of October 1, 1998. F-6 PART II INFORMATION NOT REQUIRED IN PROSPECTUS -------------------------------------- Item 22. Indemnification of Directors and Officers. The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officer of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows: (1) Article XII of the Articles of Incorporation of the Company, filed as Exhibit 3.1 to the Registration Statement. (2) Article XI of the By-Laws of the Company, filed as Exhibit 3.2 to the Registration Statement. (3) Nevada Revised Statutes, Chapter 78. The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making the Company responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity. Item 23. Other Expenses of Issuance and Distribution. The estimated expenses of the offering (assuming all Shares are sold), all of which are to be paid by the Registrant, are as follows: SEC Registration Fee $ 930.00 National Association of Securities Dealers, Inc. Filing Fees 800.00 Printing Expenses 500.00 Accounting Fees and Expenses 5,000.00 Legal Fees and Expenses 30,000.00 Blue Sky Fees/Expenses 1,000.00 Transfer Agent Fees 500.00 Miscellaneous Expenses 1,270.00 ---------- TOTAL $40,000.00 1 Item 24. Recent Sales of Unregistered Securities. During the past three years, the Registrant sold securities, all of which were shares of Common Stock which were not registered under the Securities Act of 1933, as amended, pursuant to an exemption under Section 4(2) of that Act, as follows: Name and Address Date Shares Consideration - ---------------- ---- ------ ------------- Anchor Holdings, Inc. 3-24-95 2,200,000 raise capital 5277 Cameron Street #130 Las Vegas, NV 89118 C.W. & Neva B. Lewis 3-7-95 30,000 additional consideration P.O. Box 1160 for $20,000 loan Powell, Wyoming 82435 In 1994, the Registrant sold securities, all of which were shares of Common Stock which were not registered under the Securities Act of 1933, as amended, pursuant to an exemption under Section 4(2) of that Act, as follows: Name and Address Date Shares Consideration - ---------------- ---- ------ ------------- Michael M. Chaffee 3-8-94 1,050,000 Assets/Leasehold Rights 1588 Sea Lancer Dr. (see "Financial Lake Havasu City, AZ Statements") 86403 Dr. Ralph E. Pray 3-8-94 1,000,000 Assets/leasehold Rights 805 S. Shamrock Avenue (see "Financial Monrovia, CA 91091 Statements") Amyn Dahya 4-8-94 225,000 $100,000 Loan 3/25/94 1335 Greg Street (see "Financial Sparks, NY 89431 Statements") Glen Dobbs 6-28-94 4,000 Repay $10,000 Loan dated 1536 W. Pacific 10/3/92 Coast Highway Long Beach, CA 90810 Robert Kay 6-28-94 10,000 Services 611 W. 6th Street #2610 Los Angeles, CA 92262 2 Oline Higginbothem 6-28-94 10,000 Repay two Loans $15,000 722 N. Calle Rolph each dated 3/12/91 Palm Springs, CA & 8/1/91 92262 William Palmertree 6-28-94 5,000 Repay $15,000 Loan 13766 Star Hill Lane dated 3/2/93 La Punte, CA 91764 Maria Cammelo 6-28-94 10,000 Repay two Loans $15,000 Berth 202 each dated 3/12/91 Long Beach, CA 90744 & 8/1/91 Coy Green 6-28-94 1,000 Repay $2,000 Loan dated 12480 Cedar Street 6/2/92 Chino, CA 91709 John Adams 6-28-94 1,000 Repay $2,00 Loan c/o Newmarks Center dated 1/15/93 Berth 204 Wilmington, CA 90744 Jospeh Granitelli 6-28-94 8,000 Repay $24,000 Loan 1260 Calle Suerte dated 1/23/92 Camerio, CA 93012 Tom Gibson 6-28-94 1,000 Repay $1,000 Loan 6821 Masquito Rd. dated 8/2/93 Placerville, CA 95667 All purchasers of the Registrant's Common Stock acknowledged in writing that they were obtaining "restricted securities", as defined in Rule 144 under the Act; that such shares cannot be transferred without appropriate registration or exemption therefrom; that they must bear the economic risk of the investment for an indefinite period of time; that they would not sell the securities without registration or exemption therefrom; and that the Registrant would restrict the transfer of the securities in accordance with such representations. Each purchaser agreed that any certificate representing such shares would be stamped with the usual legend restricting the transfer of such shares. No underwriters were used in the sale and issuance of the foregoing shares and none of the shares were offered publicly. All of the foregoing shares were issued in transactions between the Company and third parties not involving any public offering. The purchasers were all friends and/or associates of the Company's officers and directors, some of whom were "accredited investors", as that term is defined in Regulation D, Rule 501. In addition, each of the sales was effected without the benefit of advertising or any general solicitation and each purchaser represented that he/she had such 3 knowledge and experience in financial and business matters such that he/she is capable of evaluating the merits and risks of the prospective investment and purchased the shares for their personal account without any view toward resale or future distribution of whatsoever nature. The shares issued to repay loans were issued to purchasers who fell within the scope of the paragraph set forth above. The loans were advanced to the Company on verbal agreements with the lenders and the funds were used in the organizational phase of the Company. The services provided by Robert Kay were for assistance in financial consulting and structuring of the Company and its plan of distribution for this Offering. Item 25. Exhibits. The following Exhibits are filed as part of this Registration Statement, pursuant to Item 601 of Regulation K: Exhibit No. Title - ----------- ----- 1 Underwriting Agreement 3.1 Articles of Incorporation 3.2 Bylaws 5 Opinion of Steven L. Siskind, Esq. regarding the legality of the Securities being registered 24 Consent of Steven L. Siskind, Esq. (See Exhibit 5) 24(a) Consent of Luxenberg & Associates, CPA 28(a) Escrow Agreement 28(b) Subscription Agreement 28(c) Proposed Selected Dealers Agreement 28(e) Promissory Note payable to Amyn Dahya & Extension Agreement 28(f) Agreement with Jose Echenique re: Promontorio Mine Tailings 28(g) Gold Spur Mine Sublease 28(h) Deep Gold Mine Sublease 28(i) Loan Agreement with C.W. & Neva Lewis Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, 4 therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (This Space Left Blank Intentionally) 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized in Lake Havasu City, Arizona on the day of January, 1997. SUMMA METALS CORP. By: /s/ Michael M. Chaffee ------------------------------------- Michael M. Chaffee, President Pursuant to the requirements of the Securities At of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signatures Date /s/ Michael M. Chaffee 1-24, 1998 ------------------------------ ---- Michael M. Chaffee President and Director /s/ Kathy A. Folkers 1-24, 1998 ------------------------------ ---- Kathy A. Folkers, Secretary /s/ Raymond Baptista 1-24, 1998 ------------------------------ ---- Raymond Baptista, Director, Treasurer and Chief Financial Officer /s/ Eric A. Popkoff 1-24, 1998 ------------------------------ ---- Eric A. Popkoff, Vice-President Corporate Relations, Director 6 EX-1 2 PROPOSED UNDERWRITING AGREEMENT Exhibit 1 PROPOSED UNDERWRITING AGREEMENENT Gentlemen: SUMMA METALS CORP. (the "Company"), a Nevada corporation incorporated on March 8th, 1994 desires to offer for sale to the public an aggregate of 510,000 Units at a price of $6.00 per unit. Each Unit will consist of one share of the Company's Company stock ( the "Common stock" or "Shares") and two redeemable Common Stock Purchase Warrants ("Warrant"), designated "A" Warrants" and "B" Warrants. Each of the A warrants entitles the registered holder hereof to purchase one share of the Common stock at a price of $8.00, subject to adjustment in certain circumstances at any time after the Warrants become separately tradable, until 12 months form the date of the Prospectus. Each of the B Warrants entitles the registered holder thereof to purchase one share of the Common stock at a price of $7.00, subject to adjustment in certain circumstances, at any time after the exercise of the "A" Warrant related to the units until 24 months from the date of the Prospectus. The Common stock and the Warrants included in the Units will not be separately transferable until 90 days after the day the Prospectus or such earlier date as the Company may determine. The Company desires to offer such Shares for sale through you, Boe and Company (the "underwriter"). The offering will be undertaken by the Underwriter as agent for the Company on a "best efforts, 130,000 Units or none" basis as to a minimum of 130,000 Units and on a "best efforts" basis thereafter up to a maximum of 510,000 Units. In the event $780,000 for the minimum purchase of 130,000 Units is not received within the agreed period, no Units will be sold and the Underwriter will not be entitled to any compensation other than as set forth herein. 1. Appointment of Underwriter The Company hereby appoints Underwriter, on all the terms and conditions hereinafter set forth, as the Company's agent to use its best efforts to sell on behalf of the Company up to 510,000 Units at the public offering price set forth herein. 2. Representations and Warranties of the Company As an inducement to and to obtain the reliance of the Underwriter in connection herewith, the Company represents, warrants and agrees with the Underwriter as follows: (a) The Company has prepared and filed with the United States Securities and Exchange Commission (the "Commission"), a Registration Statement on Form SB-2, including a Prospectus, relating to the shares in accordance with Section 5 of the Securities Act of 1933, as amended, and the Rules and Regulations of the Commission promulgated thereunder (collectively referred to hereinafter as the "Act"). As used in this Agreement, the term "Registration Statement" means such Registration Statement, including exhibits, financial statements and schedules, as amended, when the post-effective amendment thereto naming the Underwriter as "underwriter" becomes effective and the term "Prospectus" means the Prospectus filed with said Registration Statement. (The Registration Statement and Prospectus, as defined herein, are herein-after collectively referred to as the "Filing") . The company will utilize its best efforts to cause the Registration Statement to become effective and to maintain its effectiveness during the term hereof. (b) The Commission has not issued and to the knowledge and belief of the Company does not have cause to issue an order preventing or suspending the use of the Prospectus; the Registration Statement and Prospectus conform in all material respects with the requirements of the Act and the rules and regulations of the Commission promulgated thereunder (the "Regulations") and do not include any untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and on the Effective Date (as hereinafter defined) and at all times subsequent thereto up to the Termination Date (as hereinafter defined), the Filing and any amendment or supplement thereto will fully comply with the provisions of the Act and the Regulations, and will not contain any untrue statements of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the foregoing representations and warranties shall not apply to statements in or omissions from the Filing, or any amendments or supplements thereto, made in reliance upon and in conformity with information furnished herein or in writing to the Company by or on behalf of the Underwriter expressly for use therein. (c) The Company has no subsidiaries. (d) Except as reflected in or contemplated by the Filing, since the respective dates as of which information is given in the Filing, there as not been and on the Effective Date there will not have been, any material adverse changes in the condition of the Company, financial or otherwise, or in the results of its operations. (e) The authorized capital stock of the Company consists of 25,000,000 shares of common stock, par value $.00l, of which 4,605,00 shares of common stock are duly and validly authorized and issued, are fully paid and non-assessable, and conform to the description thereof contained in the Filing. On the Termination Date, the Shares (as hereafter defined) will be duly and validly authorized, and, when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and non-assessable, and will conform to the description thereof contained in the Filing. The execution and delivery of, and compliance with, this Agreement, and the issuance of the Shares will not conflict with or constitute a breach of or default under the Articles of Incorporation or By-Laws of the Company, and indenture, agreement or other instrument by which the Company is bound or any order, decree, rule or regulation of any court, or any law or administrative regulation, applicable to the Company. (f) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada with an authorized and outstanding capitalization as set forth in the Filing and with full corporate power and authority to carry on the business in which it is now engaged. The Company is qualified or licensed and in good standing as a foreign corporation in each jurisdiction in which the ownership or leasing of any properties or the character of its operations requires such qualification or licensing. The Company has all requisite corporate power and authority, and all material and necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies to own or lease its properties and conduct its businesses as described in the Prospectus, and the Company is doing business in strict compliance with all such authorizations, approvals, orders, licenses, certificates and permits and all federal, state and local laws, rules and regulations concerning the business in which the Company is engaged. The disclosures in the Filing concerning the effects of federal, state and local regulations on the Company's business as currently conducted and as contemplated are correct in all material respects and do not omit to state a material fact. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained or will have been obtained prior to the Closing Date. No consent, authorization or order of, and no filing with any court, governmental agency or other body is required for the issuance of the Shares pursuant to the Prospectus and the Registration Statement, except with respect to applicable federal and State securities laws. (g) The Filing contains or will contain on the Effective Date an audited balance sheet of the Company as of October 31, 1997, ("the Balance Sheet"); the related audited statements of operations, changes, in stockholders' equity and changes in financial position of the Company for the period from inception to October 31, 1997, including the notes hereto, together with the opinion of Luxenberg & Associates, certified public accountants, with respect thereto (the "Financial Statements"). Such Financial Statements have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods indicated, except as otherwise indicated in the notes thereto. The Balance Sheet presents fairly as of its date the financial condition of the Company; the Company did not have, as of the date of such Balance Sheet, except as and to the extent reflected or reserved against in such Balance Sheet (including the notes thereto), any liabilities or obligations (absolute or contingent) of a nature customarily reflected in a balance sheet or the notes thereto prepared in accordance with generally accepted accounting principles. The statement of income included in the Financial Statements present fairly the results of operations of the Company for the period indicated. The statement of stockholders' equity and changes in financial position present fairly the information which should be presented therein in accordance with generally accepted accounting principles. (h) Except as set forth in the Filing, there is no action, suit or proceeding before any court or government agency, authority or body pending or, to the knowledge of the Company, threatened which might result in judgments against the Company which is not adequately covered by insurance, or which is pending or, to the knowledge of the Company, threatened by any public body, agency or authority, which might result in any material adverse change in the condition (financial or otherwise), business or prospects of the Company or would materially affect its properties or assets. (i) The execution and delivery of this Agreement, the consummation of the transactions herein contemplated, and compliance with the terms and provisions hereof will not conflict with, or constitute a breach of, any of the terms, provisions or conditions of any agreement or instrument to which the Company is a party, nor will any one or any combination of the foregoing have such a result. (j) The Company has the legal right, power and authority to enter into this Agreement, and the execution, delivery and, except as otherwise indicated in this Agreement, performance thereof by the Company do not require the consent or approval of any governmental body, agency or authority which has not been obtained. (k) The Company is not a party to any material contract (meaning thereby a contract materially affecting its business or properties) that is not referred to in the Filing. No default of any material significance exists in the due performance and observance by the Company of any term, covenant or condition of any such contract; all such contracts are in full force and effect and are binding upon the parties thereto in accordance with their terms; and, to the knowledge of the Company, no other party to any such material contract has threatened or instituted any action or proceeding wherein the Company is alleged to be in default thereunder. (l) No stock options or warrants are or will be outstanding or issued during the period covered by this Agreement except as set forth in the Filing. (m) The Company is not delinquent in the filing of any tax return or in the payment of any taxes, knows of no proposed predetermination or assessment of taxes; and has paid or provided for adequate reserves for all known tax liabilities. (n) The Company has obtained a CUSIP number for its Shares. (o) During the period of the offering of the Shares and for six (6) months from the Effective Date, the Company will not sell any securities without the Underwriter's prior written consent, which will not be unreasonably withheld. (p) The Company's securities, however characterized, are not subject to pre-emptive rights. (q) The Company will have the legal right and authority to enter into this Agreement upon its execution, to effect the proposed sale of the Shares, and to effect all other transactions contemplated by this Agreement. (r) The Company knows of no person who rendered any services in connection with the introduction of the Company to the Underwriter. No broker's or other finder's fees are due and payable by the Company and none will be paid by it. (s) The Company and its affiliates are not currently offering any securities nor has the Company or its affiliates offered or sold any securities except as required to be described in the Prospectus. (t) All original documents and other information relating to the Company's affairs have and will continue to be made available upon request to the Underwriter and to its counsel at the Underwriter's office or at the office of the Underwriter's counsel and copies of any such documents will be furnished upon request to the Underwriter and to its counsel. Included within the documents made available have been at least the Articles of Incorporation and any Amendments, Minutes of all of the meetings of the Incorporators and Directors and Shareholders, all financial statements and copies of all contracts, leases, patents, copyrights, licenses or agreements to which the Company is a part or in which the Company has an interest. (u) The Corporation will use the proceeds from the sale of the Shares as set forth in the Prospectus. (v) There are no contracts or other documents required to be described in the Prospectus or to be filed as exhibits to the Prospectus which have not been described or filed as required. (w) The Company has not made any representations, whether oral or in writing, to anyone, whether an existing shareholder or not, that any of the Shares will be reserved for or directed to them during the proposed offering. (x) The Company has caused each of its current shareholders to agree in writing with respect to shares acquired by them prior to the effective date that they have acquired the shares for investment purposes only and they acknowledge that they hold "restricted securities" as defined in Rule 144. 3. Employment of the Underwriter Upon the foregoing representations, agreements, and warranties and subject to the terms and conditions of this Agreement: (a) The Company hereby employs the Underwriter as its agent to sell for the Company's account up to 510,000 Units. The Underwriter agrees to use its best efforts as agent, promptly following the receipt of written notice of the Effective Date of the Registration Statement, to offer for sale the aggregate of 510,000 Units subject to the terms, provisions, and conditions hereinafter set forth. (b) In the event the Underwriter does not find subscribers for the minimum number of Shares having a total aggregate purchase price of $780,000 within 90 days following the Effective Date (unless extended for up to an additional 90 days by written agreement of the Company and the Underwriter), this Agreement shall terminate and neither party to this Agreement shall have any obligations to the other party hereunder except for certain expenses payable to the Underwriter. Appropriate arrangements for placing all funds received for the Shares in escrow shall be made prior to the commencement of the offering hereunder, with provisions for refund to the purchasers as set forth above or for delivery to the Company of the net proceeds therefrom if more than $ 780,000 in cash has been received from the sale of Shares hereunder. (c) The 510,000 Units shall be offered to the general public at the initial public offering price of $6.00 per Unit. (d) The Underwriter is granted irrevocable authority as agent for the Company to declare any contract to purchase Shares offered to the public hereunder in default if such Shares are not paid for in cash within seven (7) days after the contract date. The Underwriter shall deposit promptly pursuant to the requirements of Rule 15c2-4 promulgated under the Securities Exchange Act of 1934 the gross proceeds from sales of Shares in the amount with the escrow agent until $780,000 is received from said sale. In no event shall the deposit in escrow of any proceeds required hereunder be made later than noon of the business day after receipt of such funds by the Underwriter. Said deposit shall include all cash and checks received with respect to the offering and all checks received from customers shall be made payable to the escrow agent. (e) As its compensation and subject to the sale of the minimum number of Shares, the Underwriter shall be entitled to receive a commission of 10% of the sales price per Share, a non-accountable expense allowance of 3% and Warrants equal to 10% of the public offering under the same terms and conditions as offered to the public. If this Agreement terminates prior to the sale of the Shares, accountable expenses of the Underwriter shall be paid by the Company. (f) The Company agrees to issue or have issued such Shares in such names and denominations as may be specified by the Underwriter, and to deliver certificates representing the Shares against payment to the Company in cash or cashier's check in the amount of the selling price of the Shares less the Underwriter's sales commission and expenses as provided herein. Such payment and delivery shall be made to _________at such a date and time within three (3) days following the sale of the minimum number of Shares as provided in subparagraph 3 (b) hereof as shall be agreed upon by the Underwriter and the Company (the "Closing Date") . The Underwriter's requisitions for certificates shall be in writing and shall be given to the Company before the delivery date. The Underwriter agrees to deliver certificates to the buyers of the Shares within seven (7) days of the delivery of certificates to the Underwriter as provided herein. For purposes of expediting the checking and packaging of the certificates, the Company agrees to make the certificates available for inspection by the Underwriter, the transfer agent or other authorized representative at the Company's principal office at least 24 hours prior to the time of each closing. (g) The Underwriter is hereby authorized to organize a group of participating dealers consisting exclusively of members of the National Association of Securities Dealers, Inc. (the "selling group"). Such members of the selling group are to act as agents, and shall be allowed to purchase from the Underwriter at a price which provides a concession out of the Underwriter's commission in such amount as the Underwriter may determine. (h) The Company has appointed American Securities Transfer (AST) in Denver Colorado to act as the Transfer Agent. AST has acted in said capacity since the inception of the Corporation. 4. Representations and Warranties of the Underwriter As an inducement and to obtain the reliance of the Company in connection herewith, the Underwriter represents, warrants and agrees with the Company as follows: (a) The Underwriter is duly registered as a securities broker-dealer in accordance with the Securities Exchange Act of 1934 and the states in which the offering shall be sold by it. (b) The Underwriter will not publish, issue or circulate or authorize the publication, issuance or circulation of any circular, notice or advertisement which offers the Shares for sale which shall not have previously been approved by the Company and its counsel, except for so-called "tombstone" advertisements, and which has not been approved by the Commission prior to its use, if such prior approval is required. (c) The Underwriter is, to the best of its information and belief, in good standing with and in full and current compliance in all material respects with the rules of the National Association of Securities Dealers, Inc., ("NASD"). It is understood that any Dealer to whom an offer may be made as herein before provided shall be a member of the NASD or a foreign dealer not eligible for membership in the NASD who agrees not to re-offer, resell or deliver the Stock in the United States of to persons to whom it has reason to believe are citizens or residents of the United States and, in making sales, to comply with the NASD's Interpretation with Respect to Free-riding and withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of Fair Practice as if such foreign dealer were an NASD member and Section 25 of such Article III as it applies to a non-member broker or dealer in a foreign country. 5. Covenants by the Company In further consideration of the agreements by the Underwriter herein contained, the Company covenants as follows: (a) At least 48 hours prior to submission of the Filing or any amendment or supplement thereto to the Commission, the Underwriter and its counsel shall be provided with a copy of such Filing or amendment, and no such Filing will be made to which the Underwriter or its counsel shall object within the 48 hour period. (b) The Company will use its best efforts to cause the registration Statement to become effective and will not at any time, whether before, on or after the Effective Date, file any amendments to the Filing or supplement to the Prospectus without first obtaining the Underwriter's approval. Such approval shall be obtained by compliance with subsection (a) above. Said Filings or any amendments or supplements thereto shall be in compliance with the Act and the Regulations of the Commission to best of the Company's knowledge, information and belief. (c) As soon as the Company is advised thereof, the Company will advise the Underwriter and confirm the advice in writing (i) as to when the Registration Statement has become effective; (ii) of any request made by the Commission for amendment of the Filing, for supplementing the Prospectus or for additional information with respect thereto; and (iii) of the issuance by Commission of any stop order suspending the effectiveness of the Registration Statement or of any amendment thereto or the initiation, or threat of initiation, of any proceedings for such purpose, and the Company will use its best efforts to prevent the issuance of any such order and to obtain as soon as possible the lifting thereof, if issued. (d) The Company will deliver to the Underwriter and members of the selling group, as designated by the Underwriter, prior to the Effective Date, preliminary prospectuses and, on the Effective Date of the Registration Statement, without charge and from time to time thereafter, Prospectuses and amendments thereto as required by law to be delivered in connection with sales, in such quantities as the Underwriter may request. (e) The Company will deliver to the Underwriter, without charge, one manually executed copy and one conformed copy of the Registration Statement together with all required exhibits, as filed and all amendments thereto with exhibits which have not previously been furnished to the Underwriter, and will deliver to the Underwriter and to members of the selling group, as designated by the Underwriter, without charge, such reasonable number of copies of the Registration Statement and Prospectus (excluding exhibits) and all amendments thereto as the Underwriter may reasonable request. (f) Prior to the Termination Date if, in the opinion of the Underwriter's counsel, any statements are contained in the Prospectus which are misleading or inaccurate in light of the circumstances under which they are made, the Underwriter may require the Company to amend or supplement the Prospectus to correct said statements and may request such reasonable number of copies of any amended or supplemented Prospectus as may be necessary to comply with the Act and Regulations. (g) The Company will secure, on or before the Effective Date of the Registration Statement, and maintain for such period as may be required for distribution, such exemptions, registrations and qualifications of the Shares as will permit the public offering thereof under the securities or "blue sky" laws of the states as the Underwriter and the Company shall agree upon; provided, that no such qualification shall be required if, as a result thereof, the Company would be made subject to service or general process or would be required to qualify for authority to do business as a foreign corporation in any jurisdiction where it is not now so subject or qualified. (h) The Company will pay all costs and expenses incident to the performance of its obligations under this Agreement, including (i) all expenses incident to its insurance and delivery of the Shares, (ii) the fees and expenses incident to the preparation, printing and filing of the Registration Statement and Prospectus (including all exhibits thereto) with the Commission, the various "blue sky" agencies and the National Association of Securities Dealers, Inc., and (iii) the costs of furnishing the Underwriter copies of the Registration Statement, Prospectus and preliminary prospectuses. The Company shall not, however, be required to pay for transfer tax stamps on any sales of the Shares which the Underwriter may make; or to pay for any of the Underwriter's expenses or those of any other dealers other than as herein set forth. (i) For a period of five years from the Effective Date, the Company will furnish the Underwriter with (i) all reports and financial statements, if any, filed with or furnished by the Company to the Commission or any stock exchange upon which the securities of the Company are listed, (ii) such other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its stock, (iii) every press release and every news item and article with respect to the affairs of the Company which was released by the Company, and (iv) such additional documents and information with respect to the affairs of the Company which was released by the Company, if any, as the Underwriter may from time to time reasonably request. For 180 days following the Effective Date of the registration Statement, the Company will cause its transfer agent or agents to furnish to the Underwriter weekly transfer sheets covering the transfers of the Company's securities, including the Shares. (j) The Company will mail or otherwise make generally available to its security holders as soon as practicable, but in no event more than fifteen months after the close of the fiscal quarter ending after the Effective Date of the Registration Statement, an earnings statement, which need not be audited, covering a period of at least twelve months beginning after the Effective Date of the Registration Statement. (k) The Company will, as promptly as practicable after the end of each fiscal year, release to the press an appropriate report covering its operations for such year, and send to the Underwriter, to all holders of record of the Company's common stock and to recognized statistical services, a report covering operations for such year, including a balance sheet of the Company and statements of earnings and of retained earnings, as examined by the Company's independent accountants. (l) The Company will apply the net proceeds from the offering received by it in substantially the manner set forth in the Prospectus. (m) The Company will comply with the reporting requirements to which it is subject pursuant to Section 15(d) of the Securities Exchange Act of 1934. (n) The Company will file with the Commission the required Reports on Form SR and will file with the appropriate state securities commissioners any sales and other reports required by the rule and Regulations of such agencies and will supply copies to the Underwriter. (o) Except with the Underwriter's approval, the Company agrees that the Company will not do the following until (a) the completion of the offering of the Shares, or (b) the termination of this Agreement, or (c) 90 days after the Effective Date, whichever occurs later: (i) Undertake or authorize any change in its capital structure or authorize, issue, or permit any public or private offering of additional securities; (ii) Authorize, create, issue, or sell any funded obligations, notes or other evidences of indebtedness, except in the ordinary course of business and within 12 months from their creation; (iii) Consolidated or merge with or into any other corporation; or (iv) Create any mortgage or any lien upon any of its properties or assets except in the ordinary course of its business. (p) The Company agrees to have the Shares listed in the "Pink Sheets" of the National Quotation Bureau on the first day of trading in the Shares. (q) Within 30 days after the successful termination of the offering of the Shares, the Company agrees to submit information about the Company to be included in various securities manuals, including Standard and Poor's Corporation Records to facilitate secondary trading in the Shares. (r) The Company agrees to cause the stock certificates of all of the current shareholders of the Company and of any future officers or directors of the Company to be clearly legended as being restricted against transfer without compliance with the Act and to cause the Company's transfer agent to put stop transfer instructions against such stock certificates. 6. Reciprocal Indemnification (a) The Company agrees to indemnify and hold harmless the Underwriter and members of the selling group and any person who may be deemed to be in control of the Underwriter or any member of the selling group within the meaning of Section 15 of the Act; and (b) The Underwriter agrees to indemnify and hold harmless the Company, its directors, such of its officers as sign the Registration Statement and any person who may be deemed to control and company within the meaning of the Act, and to obtain a similar indemnification from each of the members of the selling group; against any and all losses, claims, damages or liabilities whatsoever (including, but- not limited to, any and all legal or other expenses whatsoever reasonably incurred in investigating, preparing or defending against any actions or threatened actions or claims) based on or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus (as from time to time amended or supplemented) or any application or other document filed in any state in order to register, qualify or obtain an exemption for the Shares under the laws thereof (blue sky application), as the case may be, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by any of the indemnifying parties of any provisions of the Act or any Regulation, or of common or statutory law, and against any and all losses, claims, damages or liabilities whatsoever to the extent of the aggregate amount paid in settlement of any action, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such violation (including but not limited to any and all legal or other expenses whatsoever reasonably incurred in investigation, preparing or defending against any such actions or claims) if such settlement is effected with the written consent of any indemnifying party. The indemnification by the Underwriter and members of the selling group shall not extend to any such statements or omissions made in reliance upon and in conformity with written information furnished by the Company to the Underwriter or members of the selling group. Each of the foregoing indemnification's is expressly conditioned upon the indemnifying parties being notified by the person seeking indemnification, by letter or by telegram confirmed by letter, of any action commenced against such person, within a reasonable time after such person shall have been served with the Summons or other first legal process giving information as to the nature and basis of the claim, and in any event at least ten days prior to the entry of any judgment in such action, but the failure to give such notice shall not relieve any indemnifying party of any liability which such party may have to such person otherwise than on account of this indemnity agreement. Any party whose indemnification is being relied upon shall assume the defense of any action or claim, including the employment of counsel and the payment of all expenses. Any indemnified party shall have the right to separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment thereof shall have been specifically authorized by the indemnifying party or (ii) the indemnifying party shall have failed to assume the defense and employ counsel. The indemnification contained above in this Section 6, and the representations and warranties of the Company set forth in this Agreement will remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter or any controlling person thereof, or by or on behalf of the Company or its directors or officers and will survive delivery of and payment for the Shares. 7. Conditions to Obligations of the Company The obligation of the Company to deliver the Shares being sold by the Underwriter hereunder is subject to the conditions that (i) the Registration Statement shall have become effective not later than 5:00 West Coast Time the twenty-fifth business day following the date hereof or such later time and date as is acceptable to the Company; and (ii) no stop order suspending the effectiveness of the Registration Statement shall have been issued and shall be in effect at the time of closing and no proceeding for that purpose shall have been initiated or, to the knowledge of the Company, threatened by the Commission, it being understood that the Company shall use its best efforts to prevent the issuance of any such stop order and, if one has been issued, to obtain the lifting thereof. In the event that the Shares (or any part thereof) are not delivered by virtue of the provisions of clause (i) of this paragraph, the Company shall not be liable to the Underwriter. 8. Conditions to the Obligations of the Underwriter The several obligations of the Underwriter hereunder are subject to the accuracy, as of the date hereof and on the Closing Date of the representations and warranties made herein by the Company; to the accuracy in all material respects of the statements of the officers of the Company made pursuant to the provisions hereof; to the performance by the Company of its obligations hereunder required on its part to be performed or complied with prior to or at such Closing Date; and to the following additional conditions: (a) The Registration Statement and Prospectus shall have fully complied with the provisions of the Act and the Regulations, and neither document shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that statements or omissions in the Registration Statement or Prospectus in reliance upon, and in conformity with, information furnished in writing by or on behalf of the Underwriter expressly for use therein shall not be considered within the scope of this provision. (b) The Underwriter shall not have advised the Company that the Registration Statement or prospectus, or any amendment or supplement thereto, contains an untrue statement or fact which, in the opinion of counsel for the Underwriter, is material, or omits to state a fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) The Registration Statement shall have become effective not later than the date specified in Section 7, or such later time and date as is acceptable by the Underwriter, and prior to the Closing Date no stop order shall have been issued by the Commission with respect to the Registration Statement and Prospectus, no proceedings therefor shall have been initiated by the Commission, and to the knowledge of the Company or the Underwriter, no such proceedings shall be contemplated by the Commission. (d) Each contract to which the Company is a party and which is filed as an exhibit to the Registration Statement shall be in full force and effect at the Closing Date, or shall have been terminated, in accordance with its terms; no party to any such contract shall have given any notice of cancellation, or to the knowledge of the Company, shall have threatened to cancel any such contract; and there shall be no material misstatement in any description of a contract contained in the Registration Statement or Prospectus. (e) From the date hereof until the Closing Date, no material litigation or legal proceedings of any nature shall have been commenced or threatened against the Company, nor any litigation of the transactions herein contemplated; and no substantial change, financial or otherwise, shall have occurred in or relating to the condition, business or assets of the Company which shall render such condition, business or assets substantially less favorable, in the Underwriter's judgment, than as set forth in the Filing. (f) The Underwriter shall have received at the Closing Date an opinion, addressed to the Underwriter, of Steven L. Siskind, counsel for the Company, dated as of the Closing Date and in a form and substance satisfactory to counsel for the Underwriter, to the following effect: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Nevada, with power and authority to own its properties, hold its franchises and conduct its business, as described in the Prospectus, and, to the best of the knowledge and information of said counsel, is duly qualified to do business and is in good standing in every other jurisdiction where the location of its properties or the conduct of its business makes such qualification necessary; (ii) The Company has authorized capital stock as set forth in the Prospectus; the Shares and all other outstanding shares of common stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; and the description of the capital stock of the Company made in the Registration Statement and Prospectus accurately set forth matters respecting such shares required to be set forth therein; (iii) The Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company; (iv) The certificates to be issued for the Shares are in due and proper form; (v) The Registration Statement has become, and at the Closing Date is, effective under the Act, and is effective in each state in which the Shares are sold and, to the best of the knowledge of such counsel, no proceedings for a stop order are pending or threatened under the Regulations and the Act; (vi) The Registration Statement and Prospectus (except as to the financial statements contained therein, with respect to which said counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the applicable Regulations, and said counsel has no reason to believe that either the Registration Statement or Prospectus as then amended or supplemented contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; (vii) All contracts and documents summarized in the Registration Statement and Prospectus are accurately summarized, such summaries fairly presented the information required to be show; and such counsel does not know of any contract or document required to be summarized, disclosed or filed which have not been so summarized, disclosed or filed; (viii) Such counsel knows of no material legal proceedings pending or threatened against the Company except as set forth in the Prospectus; and (ix) To the best of said counsel's knowledge, the consummation of the transactions contemplated herein did not and will not conflict with or result in a breach of any of the terms, provisions or conditions of any agreement or instrument to which the Company is a party or by which the Company may be bound.Such counsel may rely, as to matters of local law, upon opinions of local counsel satisfactory to him, and, as to matters of fact, upon affidavits or certifications of officers of the Company. (g) The Company shall have furnished to the Underwriter a certificate of the president or vice president and any financial officer of the Company, dated as of the Closing Date, to the effect that: (i) The representations and warranties of the Company in this Agreement are true and correct at and as of the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the first Closing Date. (ii) The Registration Statement has become effective and no order suspending the effectiveness of the Registration Statement has been issued; and to the best of the knowledge of the respective signers, no proceeding for that purpose has been initiated or is threatened by the Commission. (iii) The respective signers have each carefully examined the Registration Statement and the Prospectus and any amendments and supplements thereto, and to the best of their knowledge the Registration Statement and the Prospectus and any amendments and supplements thereto and all statements contained therein are true and correct, and neither the Registration Statement nor any amendment or supplement thereto includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended or supplemented Prospectus which has not been so set forth. (iv) Except as set forth in the Registration Statement and Prospectus, since the respective dates as of which or periods for which information is given in the Registration Statement and Prospectus, and prior to the date of such certificate, (A) there has not been any substantially adverse change, financial or otherwise, in the affairs or condition of the Company, and (B) the Company has not incurred any liabilities, direct or contingent, or entered into any transactions otherwise than in the ordinary course of business. (h) The Company shall have furnished to the Underwriter, at each Closing Date, such other certificates, additional to those specifically mentioned herein, as the Underwriter may have reasonably requested as to the accuracy and completeness, at the Closing Date, of any statement in the Registration Statement or the Prospectus, or in any amendment or supplement thereto, as to the accuracy, at the Closing Date, of the representations and warranties of the Company herein and as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to its obligations hereunder which are required to be performed or fulfilled on or prior to the Closing Date. (i) The Company shall have' furnished to the Underwriter a letter of auditors to the Company, in form and substance satisfactory to the Underwriter, to the effect that: (i) They are independent accountants within the meaning of the Act and the Regulations. (ii) In the opinion of said auditor, the financial statements of the Company included in the Prospectus and covered by their opinion thereon comply as to form in all material respect with the applicable accounting requirements of the Act and the Regulations. (iii) On the basis of a limited review (but not an audit or "examination" as used in accountants' opinions) of the latest available financial statements of the Company, a reading of the minutes of the Company and consultations with and inquiries of officers of the company responsible for financial and accounting matters, said auditor has no reason to believe that during the period from March 8, 1994, to a specified date not more than five business days prior to the Closing Date, there has been any material change in the capital stock, or funded or current debts of the Company, or any significant increases or decreases in the financial position, or results of operations, if any, of the Company from that set forth in the financial statements included in the prospectus, except as set forth or contemplated therein. (iv) On the basis of the examination referred to in their opinion included in the Prospectus, the other procedures referred to in subdivision (iii) above and such other procedures as the Underwriter may specify, nothing came to their attention which in their judgment would indicate that the statements appearing in the Registration Statement and the information of a financial or accounting nature pertaining to the Company set forth in the Prospectus under the captions "Use of Proceeds", "Capitalization", "Dilution", "Description of the Common Stock" to the extent such statements and information are derived from the general accounting records of the Company, and excluding any questions requiring interpretation by legal counsel, are not in all material respects a fair and reasonable presentation of the information purported to be shown. All the opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance satisfactory to counsel to the Underwriter, whose approval shall not be unreasonably withheld. The Underwriter reserves the right to waive any of the conditions herein above set forth. (j) All proceedings taken and to be taken in connection with the sale of the Shares pursuant to this Agreement shall be satisfactory as to legal aspects to counsel to the Underwriter. (k) If (i) any of the foregoing conditions shall not have been fulfilled as above provided; or (ii) prior to the Closing Date, the conditions of the securities market, or any material factor, whether of an economic or military or political nature or otherwise, bearing upon the marketability of the Shares proposed to be sold shall be such as, in the Underwriter's reasonable judgment, would seriously affect the offering, sale or delivery to the public of the Shares, or would render such delivery at the initial public offering price impracticable or inadvisable, the Underwriter shall have the right to terminate its obligations under this Agreement forthwith, by written or telegraphic notice to the Company, without any liability on the part of the Underwriter. (l) If at any time prior to the Closing Date (i) trading in securities on the New York Stock Exchange shall be suspended, (ii) minimum prices shall be established on said Exchange by action of said Exchange or the Commission, (iii) there shall be an outbreak of hostilities between the United States and any foreign power which resulted in the declaration of a national emergency or declaration of war or there shall be an outbreak of civil disorder within the United States which has resulted in the declaration of a national emergency, the Underwriter shall have the right to terminate its obligations under this Agreement forthwith, by written or telegraphic notice to the Company, without any liability on the part of the Underwriter. If the sale of the Shares as herein contemplated shall not be carried out because of any of the conditions set forth in Sections 7 or 8 hereof shall not have been fulfilled, then the Company shall not be liable to the Underwriter for lost profits or expenses incurred by it in connection herewith; provided that the Underwriter shall be entitled to retain the accountable legal expenses allowance to the extent necessary to reimburse it for legal expenses actually incurred. In no event shall the Underwriter be liable to the Company for lost profits or for expenses incurred in connection herewith. 9. Definitions (a) "Effective Date" shall mean the date following any required waiting period, when the Registration Statement shall have been declared effective by the Commission. (b) "Termination Date" shall mean the date specified below which first occurs: (i) The date which is 90 days following the Effective Date, or the date 180 days from the Effective Date if the Company and the Underwriter have agreed to so extend the offering period. (ii) The date upon which all offered Shares are sold and payment received therefor by the Company. 10. Miscellaneous Provisions (a) This Agreement contains the entire agreement of the parties hereto and cannot be altered except in a writing signed by both parties hereto and which makes specific reference to this Agreement. (b) The representations and warranties contained herein shall be effective regardless of any investigations made or participation in the preparation of the Filing, or any amendment or supplement thereto and shall survive the Termination Date and the delivery of and payment of the Shares contemplated herein. (c) This Agreement has been and is made solely for the benefit of the Underwriter, the Company and their respective successors, and, to the extent expressly provided herein, for the benefit of the directors of the Company, the officers of the Company who signed the Filing, or authorized the same, the persons controlling the Underwriter or the Company, and their respective successors and assigns, and no other person or persons shall acquire or have any right under or by virtue of this Agreement. The term "successor" shall not include any purchaser, as such, of any Shares from the Underwriter. (d) Each of the parties hereto hereby respectively warrant and represent that the person executing this Agreement on its behalf has full power and authority to execute, acknowledge and deliver this Agreement for and on behalf of such corporation. (e) Except as otherwise provided herein, all communications hereunder shall be in writing and, if sent to the Underwriter, shall be mailed, delivered or telegraphed to it at the following address: with copies to: Or, if sent to the Company, shall be mailed, delivered or telegraphed and confirmed to it at the following address: 28281 Crown Valley Pky, Suite 225 Laguna Niguel, CA 92677-1461 with copies to: Steven L. Siskind, Esq. 645 Fifth Avenue, Suite 403 New York, NY 10022 (f) In the event that any party prevails in any action or suit brought by them to obtain relief for any default under the terms hereof, the non-prevailing party shall be liable to the prevailing party for all costs, including reasonable attorney's fees, incurred in connection with such action or suit. (g) The representations, warranties and undertakings herein on the part of the Company and the Underwriter shall not create any rights in or duties to any person not a party to this Agreement. It is expressly understood and agreed that such persons as shall purchase Shares in the public offering described herein, shall be entitled to rely solely and only on the statements and representations made in the Prospectus. (h) This Agreement may be executed in one or more counterparts which taken together shall constitute one and the same instrument. As evidence of our understanding, this Agreement has been signed, accepted and copies thereof delivered by or on behalf of, and to, the Company and the Underwriter, on December 7, 1997. BY____/s/ Michael M. Chaffee, President, Duly Authorized Officer The foregoing Underwriting Agreement is accepted on the date first above written. By__/s/ Jeff Boe for Boe and Company, Duly Authorized Officer . EX-3.(I) 3 ARTICLES OF INCORPORATION Exhibit 3.1 ARTICLES OF INCORPORATION OF SUMMA METALS CORP. The undersigned, to form a Nevada corporation, CERTIFIES THAT: I. NAME: The name of the corporation is: SUMMA METALS CORP. II. REGISTERED OFFICE; RESIDENT AGENT: The location of the registered office of this corporation within the State of Nevada is 1025 Ridgeview Drive, Suite #400, Reno, Nevada 89509; this corporation may maintain an office or offices in such other place within or without the State of Nevada as may be from time to time designated by the Board of Directors or by the By-Laws of the corporation; and this corporation may conduct all corporation business of every kind or nature, including the holding of any meetings of Directors or Stockholders, within the State of Nevada, as well as without the State of Nevada. The Resident Agent for the corporation shall be Michael J. Morrison, Esq., 1025 Ridgeview Drive, Suite #400, Reno, Nevada 89509. III. PURPOSE: The purpose for which this corporation is formed is: To engage in any lawful activity. IV. AUTHORIZATION OF CAPITAL STOCK: The amount of the total authorized capital stock of the corporation shall be TWENTY FIVE THOUSAND DOLLARS ($25,000.00), consisting of TWENTY FIVE MILLION (25,000,000) shares of Common Stock with a par value of $.001 per share. V. INCORPORATOR: The name and post office address of the incorporator signing these Articles of Incorporation is as follows: NAME --------------- Rita S. Dickson POST OFFICE ADDRESS ------------------------------------------ 1025 Ridgeview Dr. #400 Reno, Nevada 89509 IV. DIRECTORS: The governing board of this corporation shall be known as directors, and the first board shall be one in number. The corporation shall have only one shareholder at present. The number of directors may, pursuant to the By-Laws, be increased or decreased by a duly adopted amendment to these Articles of Incorporation, or in such manner as provided in the By-Laws of this corporation. The name and post office address of the director constituting the first Board of Directors is as follows: NAME POST OFFICE ADDRESS ------------------ -------------------------------- Michael M. Chaffee 28281 Crown Valley Parkway Laguna Niguel, California 92677 VII. STOCK NON-ASSESSABLE: The capital stock or the holders thereof, after the amount of the subscription price has been paid in, shall not be subject to any assessment whatsoever to pay the debts of the corporation. VIII. TERM OF EXISTENCE: This corporation shall have perpetual existence. IX. CUMULATIVE VOTING: No cumulative voting shall be permitted in the election of directors. X. PREEMPTIVE RIGHTS: Stockholders shall not be entitled to preemptive rights. XI. LIMITED LIABILITY: NO officer or director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as an officer or director, except for liability (i) for any breach of the officer or director's duty of loyalty to the Corporation or its Stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) for any transaction from which the officer or director derived any improper personal benefit. If the Nevada General Corporation Law is amended after the date of incorporation to authorize corporate action further eliminating or limiting the personal liability of officers or directors, then the liability of an officer or director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Nevada General Corporation Law, or amendments thereto. No repeal of modification of this paragraph shall adversely affect any right or protection of an officer or director of the Corporation existing at the time of such repeal or modification. XII. INDEMNIFICATION: Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person for whom he or she is the legal representative; is or was an officer or director of the Corporation or is or was serving at the request of the corporation as an officer or director of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans whether the basis of such proceeding is alleged action in an official capacity as an officer or director or in any other capacity while serving as an officer or director shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Nevada General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) , against all expense , liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be an officer or director and shall inure to the benefit of his or her heirs , executors and administrators; provided, however, that except as provided herein with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided however, that, if the Nevada General Corporation Law requires the payment of such expenses incurred by an officer or director in his or her capacity as an officer or director (and not in any other capacity in which service was or is rendered by such person while an officer or director, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, payment shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it shall ultimately be determined that such officer or director is not entitled to be indemnified under this Section or otherwise. If a claim hereunder is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim and, if successful, in whole or in part, the claimant shall be entitled to be paid the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Nevada General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, Independent Legal Counsel, or its Stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Nevada General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, Independent Legal Counsel, or its Stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, Agreement, vote of Stockholders or Disinterested Directors or otherwise. The Corporation may maintain insurance, at its expense, to protect itself and any officer, director, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification to any employee or agent of the Corporation to the fullest extent of the provisions of this section with respect to the indemnification and advancement of expenses of officers and directors of the Corporation or individuals serving at the request of the Corporation as an officer, director, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise. THE UNDERSIGNED, being the incorporator hereinbefore named for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Nevada, does make and file these Articles of Incorporation, hereby declaring and certifying the facts herein stated are true, and, accordingly, has hereunto set her hand this 7th day of MARCH, 1994. /s/ Rita S. Dickson --------------- Rita S. Dickson STATE OF NEVADA COUNTY OF WASHOE On this 7th day of MARCH, 1994 before me, a Notary Public, personally appeared Rita S. Dickson, who acknowledged she executed the above instrument. /s/ Willet Y. Smith -------------------------------- Willet Y. Smith - Notary Public CERTIFICATE OF ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT In the matter of SUMMA METALS CORP. I, Michael J. Morrison, with the address of 1025 Ridgeview Drive, Suite 400 Reno, Nevada 89509, hereby accept the appointment as Resident Agent of the above-entitled corporation in accordance with NRS 78.090. Furthermore, that the mailing address for the above registered office is 1025 Ridgeview Drive, Suite #400, Reno, Nevada 89509 IN WITNESS WHEREOF, we hereunto. set our hand this 7th day of March, 1994. BY: /s/ Michael J Morrison ----------------------------------- Michael J. Morrison, Resident Agent EX-3.(II) 4 BY-LAWS Exhibit 3.2 BYLAWS OF SUMMA METALS CORP. ARTICLE 1 OFFICES 1.1 Business Office The principal business office of the corporation shall be located at any place either within or without of the State of Nevada as designated in the corporation's most current Annual Report filed with the Nevada Secretary of State. The corporation may have such other offices, either within or without the State of Nevada as the Board of Directors may designate or as the business of the corporation may require from time to time. The corporation shall maintain at its principal office a copy of certain records as specified in section 2.14 of Article 2. 1.2 Registered Office The registered office of the corporation shall be located within Nevada and may be, but need not be, identical with the principal office, provided the principal office is located within Nevada. The address of the registered office may be changed from time to time by the Board of Directors. ARTICLE 2. SHAREHOLDERS 2.1 Annual Shareholder Meeting The annual meeting of the shareholders shall be held on the 1st day of February each year, beginning with the year 1995, at the hour of 10:00 A.M. or at such other time on such other day within such month as shall be fixed by the Board of Directors for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Nevada such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any subsequent continuation after adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as convenient. 2.2 Special Shareholder Meetings. Special meetings of the shareholders, for any purpose or purposes described in the notice of meeting, may be called by the president, or by the Board of Directors, and shall be called by the president at the request of the holders of not less than one-tenth of all outstanding shares of the corporation entitled to vote on any issue at the meeting. 2.3 Place of Shareholder Meetings The Board of Directors may designate any place, either within or without the State of Nevada, as the place for any annual or any special meeting of the shareholders, unless by written consent, which may be in the form of waivers of notice or otherwise, all shareholders entitled to vote at the meeting designate a different place, either within or without the State of Nevada, as the place for the holding of such meeting. If no designation is made by either the Board of Directors or unanimous action of the voting shareholders, the place of meeting shall be the principal office of the corporation in the State of Nevada. 2.4 Notice of Shareholder Meeting (a) Required Notice. Written notice stating the place, day and hour of any annual or special shareholder meeting shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, the Board of Directors, or other persons calling the meeting, to each shareholder of record entitled to vote at such meeting and to any other shareholder entitled by the laws of the State of Nevada governing corporations (the "Act" ) or the Articles of Incorporation to receive notice of the meeting. Notice shall be deemed to be effective at the earlier of: (1) when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid; (2) on the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee; (3) when received; or (4) 5 days after deposit in the United States mail, if mailed postpaid and correctly addressed to an address, provided in writing by the shareholder, which is different from that shown in the corporation's current record of shareholders. (b) Adjourned Meeting. If any shareholder meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, and place if the new date, time, and place is announced at the meeting before adjournment. But if a new record date for the adjourned meeting is, or must be fixed (see Section 2.5 of this Article 2) then notice must be given pursuant to the requirements of paragraph (a) of this Section 2.4, to those persons who are shareholders as of the new record date. (c) Waiver of Notice. A shareholder may waive notice of the meeting (or any notice required by the Act, Articles of Incorporation, or Bylaws), by a writing signed by the shareholder entitled to the notice, which is delivered to the corporation (either before or after the date and time stated in the notice) for inclusion in the minutes of filing with the corporate records. A shareholder's attendance at a meeting: (1) waives objection to lack of notice or defective notice of the meeting unless the shareholder, at the beginning of the meeting, objects to holding the meeting or transacting business at the meeting; and (2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to consideration of the matter when it is presented. (d) Contents of Notice. The notice of each special shareholder meeting shall include a description of the purpose or purposes for which the meeting is called. Except as provided in this Section 2.4(d), or as provided in the corporation's articles, or otherwise in the Act, the notice of an annual shareholder meeting need not include a description of the purpose or purposes for which the meeting is called. If a purpose of any shareholder meeting is to consider either: (1) a proposed amendment to the Articles of Incorporation (including any restated articles requiring shareholder approval); (2) a plan of merger or share exchange; (3) the sale, lease, exchange or other disposition of all, or substantially all of the corporation's property; (4) the dissolution of the corporation; or (5) the removal of a director, the notice must so state and be accompanied by, respectively, a copy or summary of the: (a) articles of amendment; (b) plan of merger or share exchange; and (c) transaction for disposition of all, or substantially all, of the corporation' s property. If the proposed corporate action creates dissenters' rights, as provided in the Act, the notice must state that shareholders are, or may be entitled to assert dissenters' rights, and must be accompanied by a copy of relevant provisions of the Act. If the corporation issues, or authorizes the issuance of shares for promissory notes or for promises to render services in the future, the corporation shall report in writing to all the shareholders the number of shares authorized or issued, and the consideration received with or before the notice of the next shareholder meeting. Likewise, if the corporation indemnifies or advances expenses to an officer or a director, this shall be reported to all the shareholders with or before notice of the next shareholder meeting. 2.5 Fixing of Record Date For the purpose of determining shareholders of any voting group entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any distribution or dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date. Such record date shall not be more than 70 days prior to the date on which the particular action requiring such determination of shareholders entitled to notice of, or to vote at a meeting of shareholders, or shareholders entitled to receive a share dividend or distribution. The record date for determination of such shareholders shall be at the close of business on: (a) With respect to an annual shareholder meeting or any special shareholder meeting called by the Board of Directors or any person specifically authorized by the Board of Directors or these Bylaws to call a meeting the day before the first notice is given to the shareholders: (b). With respect to a special shareholder meeting demanded by the shareholders, the date the first shareholder signs the demand; (c). With respect to the payment of a share dividend, the date the Board of Directors authorizes the share dividend; (d). With respect to actions taken in writing without a meeting (pursuant to Article 2, Section 2.12), the first date any shareholder signs a consent; and (e). With respect to a distribution to shareholders, (other than one involving a repurchase or reacquisition of shares), the date the Board of Directors authorizes the distribution. When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this section, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. If no record date has been fixed, the record date shall be the date the written notice of the meeting is given to shareholders. 2.6 Shareholder List The officer or agent having charge of the stock transfer books for shares of the corporation shall, at least ten (10) days before each meeting of shareholders, make a complete record of the shareholders entitled to vote at each meeting of shareholders, arranged in alphabetical order, with the address of and the number of shares held by each. The list must be arranged by class or series of shares. The shareholder list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting. The list shall be available at the corporation's principal office or at a place in the city where the meeting is to be held, as set forth in the notice of meeting. A shareholder, his agent, or attorney is entitled, on written demand, to inspect and, subject to the requirements of Section 2.14 of this Article 2, to copy the list during regular business hours and at his expense, during the period it is available for inspection. The corporation shall maintain the shareholder list in written form or in another form capable of conversion into written form within a reasonable time. 2.7 Shareholder Quorum and Voting Requirements A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders . If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting. If a quorum exists, a majority vote of those shares present and voting at a duly organized meeting shall suffice to defeat or enact any proposal unless the Statutes of the State of Nevada, the Articles of Incorporation or these Bylaws require a greater-than-majority vote, in which event the higher vote shall be required for the action to constitute the action of the corporation. 2.8 Increasing Either Quorum or Voting Requirements For purposes of this Section 2.8, a "supermajority" quorum is a requirement that more than a majority of the votes of the voting group be present to constitute a quorum; and a "supermajority" voting requirement is any requirement that requires the vote of more than a majority of the affirmative votes of a voting group at a meeting. The shareholders, but only if specifically authorized to do so by the Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a "supermajority" quorum or "supermajority" voting requirement. The adoption or amendment of a Bylaw that adds, changes, or deletes a "supermajority" quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then if effect or proposed to be adopted, whichever is greater. A Bylaw that fixes a supermajority quorum or voting requirement for shareholders may not be adopted, amended, or repealed by the Board of Directors. 2.9 Proxies At all meetings of shareholders, a shareholder may vote in person, or vote by written proxy executed in writing by the shareholder or executed by his duly authorized attorney-in fact. Such proxy shall be filed with the secretary of the corporation or other person authorized to tabulate votes before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise specifically provided in the proxy or coupled with an interest. 2.10 Voting of Shares Unless otherwise provided in the articles, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without the transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the Court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares are transferred into the name of the pledgee, and thereafter, the pledgee shall be entitled to vote the shares so transferred. Shares of its own stock belonging to the corporation or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total number of outstanding shares at any given time. Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares. 2.11 Corporation's Acceptance of Votes (a) If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder. (b) If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if: (1) the shareholder is an entity, as defined in the Act, and the name signed purports to be that of an officer or agent of the entity; (2) the name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment; (3) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (4) the name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or (5) the shares are held in the name of two or more persons as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners. (c) The corporation is entitled to reject a vote , consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. (d) The corporation and its officer or agent who accepts Or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this Section 2.11 are not liable in damages to the shareholder for the consequences of the acceptance or rejection. (e) Corporation action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise. 2.12 Informal Action by Shareholders Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if one or more written consents, setting forth the action so taken, shall be signed by shareholders holding a majority of the shares entitled to vote with respect to the subject matter thereof, unless a "supermajority" vote is required by these Bylaws, in which case a "supermajority" vote will be required. Such consent shall be delivered to the corporation secretary for inclusion in the minute book. A consent signed under this Section has the effect of a vote at a meeting and may be described as such in any document. 2.13 Voting for Directors Unless otherwise provided in the Articles of Incorporation, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. 2.14 Shareholders' Rights to Inspect Corporate Records Shareholders shall have the following rights regarding inspection of corporate records: (a) Minutes and Accounting Records. The corporation shall keep, as permanent records, minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the corporation. The corporation shall maintain appropriate accounting records. (b) Absolute Inspection Rights of Records Required at Principal Office. If a shareholder gives the corporation written notice of his demand at least five business days before the date on which he wishes to inspect and copy, he, or his agent or attorney, has the right to inspect and copy, during regular business hours, any of the following records, all of which the corporation is required to keep at its principal office: (1) its Articles or restated Articles of Incorporation and all amendments to them currently in effect; (2) its Bylaws or restated Bylaws and all amendments to them currently in effect; (3) resolutions adopted by its Board of Directors creating one or more classes or series of shares, and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding; (4) the minutes of all shareholders' meetings, and records of all action taken by shareholders without a meeting, for the past three years; (5) all written communications to shareholders within the past three years, including the financial statements furnished for the past three years to the shareholders; (6) a list of the names and business addresses of its current directors and officers; and (7) its most recent annual report delivered to the Nevada Secretary of State. (c) Conditional Inspection Right. In addition, if a shareholder gives the corporation a written demand, made in good faith and for a proper purpose, at least five business days before the date on which he wishes to inspect and copy, describes with reasonable particularity his purpose and the records he desires to inspect, and the records are directly connected to his purpose, a shareholder of a corporation, or his duly authorized agent or attorney, is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation: (1) excerpts from minutes of any meeting of the Board of Directors; records of any action of a committee of the Board of Directors on behalf of the corporation; minutes of any meeting of the shareholders; and records of action taken by the shareholders or Board of Directors without a meeting, to the extent not subject to inspection under paragraph (a) of this Section 2.14; (2) accounting records of the corporation; and (3) the record of shareholders (compiled no earlier than the date of the shareholder's demand) (d) Copy Costs - The right to copy records includes, if reasonable, the right to receive copies made by photographic, xerographic, or other means. The corporation may impose a reasonable charge, to be paid by the shareholder on terms set by the corporation, covering the costs of labor and material incurred in making copies of any documents provided to the shareholder. (e) "Shareholder" Includes Beneficial Owner. For purposes of this Section 2.14, the term "shareholder" shall include a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf. 2.15 Financial Statements Shall Be Furnished to the Shareholders. The corporation shall furnish its shareholders annual financial statements, which may be consolidated or combined statements of the corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of changes in shareholders' equity for the year, unless that information appears elsewhere in the financial statements. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements for the shareholders must also be prepared on that basis. (b) If the annual financial statements are reported upon by a public accountant, his report must accompany them. If not, the statements must be accompanied by a statement of the president or the person responsible for the corporation's accounting records: (1) stating his reasonable belief that the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation: and (2) describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year. (c) A corporation shall mail the annual financial statements to each shareholder within 120 days after the close of each fiscal year. Thereafter, on written request from a shareholder who was not mailed the statements, the corporation shall mail him the latest financial statements. 2.16 Dissenters' Rights. Each shareholder shall have the right to dissent from and obtain payment for his shares when so authorized by the Act, Articles of Incorporation, these Bylaws, or a resolution of the Board of Directors. 2.17 Order of Business. The following order of business shall be observed at all meetings of the shareholders, as applicable and so far as practicable: (a) Calling the roll of officers and directors present and determining shareholder quorum requirements; (b) Reading, correcting and approving of minutes of previous meeting; (c) Reports of officers; (d) Reports of Committees; (e) Election of Directors; (f) Unfinished business; (g) New business; and (h) Adjournment. ARTICLE 3. BOARD OF DIRECTORS 3.1 General Powers Unless the Articles of Incorporation have dispensed with or limited the authority of the Board of Directors by describing who will perform some or all of the duties of a Board of Directors, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of the Board of Directors. 3.2 Number, Tenure and Qualification of Directors. Unless otherwise provided in the Articles of Incorporation, the authorized number of directors shall be not less than 1 (minimum number) nor more than 9 (maximum number). The initial number of directors was established in the original Articles of Incorporation. The number of directors shall always be within the limits specified above , and as determined by resolution adopted by the Board of Directors. After any shares of this corporation are issued, neither the maximum nor minimum number of directors can be changed, nor can a fixed number be substituted for the maximum and minimum numbers, except by a duly adopted amendment to the Articles of Incorporation duly approved by a majority of the outstanding shares entitled to vote. Each director shall hold office until the next annual meeting of shareholders or until removed. However, if his term expires, he shall continue to serve until his successor shall have been elected and qualified, or until there is a decrease in the number of directors. Unless required by the Articles of Incorporation, directors do not need to be residents of Nevada or shareholders of the corporation. 3.3 Regular Meetings of the Board of Directors. A regular meeting of the Board of Directors shall be held without other notice than this Bylaw immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. (If permitted by Section 3.7,any regular meeting may be held by telephone) 3.4 Special Meeting of the Board of Directors. Special meetings of the Board of Directors may be called by or at the request of the president or any one director. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Nevada, as the place for holding any special meeting of the Board of Directors or, if permitted by Section 3.7, any special meeting may be held by telephone. 3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of Directors. Unless the Articles of Incorporation provide for a longer or shorter period, notice of any special meeting of the Board of Directors shall be given at least two days prior thereto, either orally or in writing. If mailed, notice of any director meeting shall be deemed to be effective at the earlier of: (1) when received; (2) five days after deposited in the United States mail, addressed to the director's business office, with postage thereon prepaid; or (3) the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the director. Notice may also be given by facsimile and, in such event, notice shall be deemed effective upon transmittal thereof to a facsimile number of a compatible facsimile machine at the director's business office. Any director may waive notice of any meeting. Except as otherwise provided herein, the waiver must be in writing, signed by the director entitled to the notice, and filed with the minutes or corporate records. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business and at the beginning of the meeting, or promptly upon his arrival, objects to holding the meeting or transacting business at the meeting, and does not thereafter vote for or assent to action taken at the meeting. Unless required by the Articles of Incorporation or the Act , neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. 3.6 Director Quorum. A majority of the number of directors fixed, pursuant to Section 3.2 of this Article 3, shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, unless the Articles of Incorporation or the Act require a greater number for a quorum. Any amendment to this quorum requirement is subject to the provisions of Section 3.8 of this Article 3. Once a quorum has been established at a duly organized meeting, the Board of Directors may continue to transact corporate business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum. 3.7 Actions By Directors. The act of the majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the Board of Directors, unless the Articles of Incorporation or the Act require a greater percentage. Any amendment which changes the number of directors needed to take action is subject to the provisions of Section 3.8 of this Article 3. Unless the Articles of Incorporation provide otherwise, any or all directors may participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. Minutes of any such meeting shall be prepared and entered into the records of the corporation. A director participating in a meeting by this means is deemed to be present in person at the meeting. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless: (1) he objects at the beginning of the meeting, or promptly upon his arrival, to holding it or transacting business at the meeting; or (2) his dissent or abstention from the action taken is entered in the minutes of the meeting; or (3) he delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation within 24 hours after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken. 3.8 Establishing a "Supermaioritv" Quorum or Voting Requirement for the Board of Directors. For purposes of this Section 3.8, a "supermajority" quorum is a requirement that more than a majority of the directors in office constitute a quorum: and a "supermajority" voting requirement is one which requires the vote of more than a majority of those directors present at a meeting at which a quorum is present to be the act of the directors. A Bylaw that fixes a supermajority quorum or supermajority voting requirement may be amended or repealed: (1) if originally adopted by the shareholders, only by the shareholders (unless otherwise provided by the shareholders); or (2) if originally adopted by the Board of Directors, either by the shareholders or by the Board of Directors. A Bylaw adopted or amended by the shareholders that fixes a supermajority quorum or supermajority voting requirement for the Board of Directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the Board of Directors. Subject to the provisions of the preceding paragraph, action by the Board of Directors to adopt, amend, or repeal a Bylaw that changes the quorum or voting requirement for the Board of Directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater. 3.9 Director Action Without a Meeting. Unless the Articles of Incorporation provide otherwise, any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if all the directors sign a written consent describing the action taken. Such consents shall be filed with the records of the corporation. Action taken by consent is effective when the last director signs the consent, unless the consent specifies a different effective date. A signed consent has the effect of a vote at a duly noticed and conducted meeting of the Board of Directors and may be described as such in any document. 3.10 Removal of Directors. The shareholders may remove one or more directors at a meeting called for that purpose if notice has been given that a purpose of the meeting is such removal. The removal may be with or without cause unless the Articles of Incorporation provide that directors may only be removed for cause. If cumulative voting is not authorized, a director may be removed only if the number of votes cast in favor of removal exceeds the number of votes cast against removal. 3.11 Board of Director Vacancies. Unless the Articles of Incorporation provide otherwise , if a vacancy occurs on the Board of Directors, excluding a vacancy resulting from an increase in the number of directors, the director(s) remaining in office shall fill the vacancy. If the directors remaining in office constitute fewer than a quorum of the Board of Directors, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. If a vacancy results from an increase in the number of directors, only the shareholders may fill the vacancy. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled by the Board of Directors before the vacancy occurs, but the new director may not take office until the vacancy occurs. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors are elected. However, if his term expires, he shall continue to serve until his successor is elected and qualifies or until there is a decrease in the number of directors. 3.12 Director Compensation. Unless otherwise provided in the Articles of Incorporation, by resolution of the Board of Directors, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors, or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 3.13 Director Committees. (a) Creation of Committees. Unless the Articles of Incorporation provide otherwise, the Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Each committee must have two or more members, who serve at the pleasure of the Board of Directors. (b) Selection of Members. The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken, or (2) the number of directors required by the Articles of Incorporation to take such action. (c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of this Article 3 apply to committees and their members. (d) Authority . Unless limited by the Articles of Incorporation or the Act, each committee may exercise those aspects of the authority of the Board of Directors which the Board of Directors confers upon such committee in the resolution creating the committee. Provided, however, a committee may not (1) authorize distributions to shareholders; (2) approve or propose to shareholders any action that the Act requires be approved by shareholders; (3) fill vacancies on the Board of Directors or on any of its committees; (4) amend the Articles of Incorporation; (5) adopt, amend, or repeal Bylaws; (6) approve a plan of merger not requiring shareholder approval; (7) authorize or approve reacquisition of shares , except according to ao formula or method prescribed by the Board of Directors; or (8) authorize or approve the issuance or sale, or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares ; except that the Board of Directors may authorize a committee to do so within limits specifically prescribed by the Board of Directors. ARTICLE 4. OFFICERS 4.1 Designation of Officers. The officers of the corporation shall be a president, a secretary, and a treasurer, each of whom shall be appointed by the Board of Directors. Such other officers and assistant officers as may be deemed necessary, including any vice-presidents, may be appointed by the Board of Directors. The same individual may simultaneously hold more than one office in the corporation. 4.2 Appointment and Term of Office. The officers of the corporation shall be appointed by the Board of Directors for a term as determined by the Board of Directors. If no term is specified, they shall hold office until the first meeting of the directors held after the next annual meeting of shareholders. If the appointment of officers is not made at such meeting, such appointment shall be made as soon thereafter as is convenient. Each officer shall hold office until his successor has been duly appointed and qualified, until his death, or until he resigns or has been removed in the manner provided in section 4.3 of this Article 4. The designation of a specified term does not grant to the officer any contract rights, and the Board of Directors can remove the officer at any time prior to the termination of such term. Appointment of an officer shall not of itself create any contract rights. 4.3 Removal of Officers, Any officer may be removed by the Board of Directors at any time, with or without cause. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. 4.4 President. The president shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall generally supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the shareholders. He may sign, with the secretary or any other proper officer of the corporation thereunto duly authorized by the Board of Directors, certificates for shares of the corporation and deeds, mortgages, bonds, contracts, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed. The president shall generally perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Directors from time to time. 4.5 Vice-President. If appointed, in the absence of the president or in the event of the president's death, inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. If there is no vice-president, then the treasurer shall perform such duties of the president. Any vice-president may sign, with the secretary or an assistant secretary, certificates for shares of the corporation the issuance of which have been authorized by resolution of the Board of Directors. A vice-president shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. 4.6 Secretary. The secretary shall (a) keep the minutes of the proceedings of the shareholders and of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of any seal of the corporation and, if there is a seal of the corporation, see that it is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; (d) when requested or required, authenticate any records of the corporation; (e) keep a register of the post office address of each shareholder, as provided to the secretary by the shareholders; (f) sign with the president, or a vice-resident, certificates for shares of the corporation, the issuance of which has been authorized by resolution of the Board of Directors; (g) have general charge of the stock transfer books of the corporation; and (h) generally perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the Board of Directors. 4.7 Treasurer. The treasurer shall (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies, or other depositaries as may be selected by the Board of Directors; and (c) generally perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the Board of Directors. If required by the Board of Directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine, 4.8 Assistant Secretaries and Assistant Treasurers. The assistant secretaries, when authorized by the Board of Directors, may sign with the president, or a vice-president, certificates for shares of the corporation, the issuance of which has been authorized by a resolution of the Board of Directors. The assistant treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine . The assistant secretaries and a ssistant treasurers, generally, shall perform such duties as may be assigned to them by the secretary or the treasurer, respectively, or by the president or the Board of Directors. 4.9 Salaries. The salaries of the officers, if any, shall be fixed from time to time by the Board of Directors. ARTICLE 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES 5.1 Indemnification of Officers, Directors, Employees and Agents. Unless otherwise provided in the Articles of Incorporation, the corporation shall indemnify any individual made a party to a proceeding because he is or was an officer, director, employee or agent of the corporation against liability incurred in the proceeding, all pursuant to and consistent with the provisions of NRS 78.751, as amended from time to time. 5.2 Advance Expenses for Officers and Directors. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, but only after receipt by the corporation of an undertaking by or on behalf of the officer or director on terms set by the Board of Directors to repay the expenses advanced if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. 5.3 Scope of Indemnification. The indemnification permitted herein is intended to be to the fullest extent permissible under the laws of the State of Nevada, and any amendments thereto. ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER 6.1 (a) Certificates for Shares, Content Certificates representing shares of the corporation shall at minimum, state on their face the name of the issuing corporation; that the corporation is formed under the laws of the State of Nevada; the name of the person to whom issued; the certificate number; class and par value of shares; and the designation of the series, if any, the certificate represents. The form of the certificate shall be as determined by the Board of Directors. Such certificates shall be signed (either manually or by facsimile) by the president or a vice-president and by the secretary or an assistant secretary and may be sealed with a corporate seal or a facsimile thereof. Each certificate for shares shall be consecutively numbered or otherwise identified. (b) Legend as to Class or Series If the corporation is authorized to issue different classes of shares or different series within a class, the designations relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series) must be summarized on the front or back of the certificate indicating that the corporation will furnish the shareholder this information on request in writing and without charge. (c) Shareholder List The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. (d) Transferring Shares All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, or mutilated certificate, a new one may be issued therefor upon such terms as the Board of Directors may prescribe, including indemnification of the corporation and bond requirements. 6.2 Registration of the Transfer of Shares. Registration of the transfer of shares of the corporation shall be made only on the stock transfer books of the corporation. In order to register a transfer, the record owner shall surrender the share certificate to the corporation for cancellation, properly endorsed by the appropriate person or persons with reasonable assurances that the endorsements are genuine and effective. Unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the owner, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes. 6.3 Restrictions on Transfer of Shares Permitted. The Board of Directors may impose restrictions on the transfer or registration of transfer of shares, including any security convertible into, or carrying a right to subscribe for or acquire shares. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction. A restriction on the transfer or registration of transfer of shares may be authorized: (1) to maintain the corporation's status when it is dependent on the number or identity of its shareholders; (2) to preserve exemptions under federal or state securities law; or (3) for any other reasonable purpose. A restriction on the transfer or registration of transfer of shares may: (1) obligate the shareholder first to offer the corporation or other persons (separately, consecutively, or simultaneously) an opportunity to acquire the restricted shares; (2) obligate the corporation or other persons (separately, consecutively, or simultaneously) to acquire the restricted shares; (3) require the corporation, the holders or any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or (4) prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable. A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this Section 6.3 and its existence is noted conspicuously on the front or back of the certificate . Unless so noted , a restriction is not enforceable against a person without knowledge of the restriction. 6.4 Acquisition of Shares. The corporation may acquire its own shares and unless otherwise provided in the Articles of Incorporation, the shares so acquired constitute authorized but unissued shares. If the Articles of Incorporation prohibit the reissue of shares acquired by the corporation, the number of authorized shares is reduced by the number of shares acquired, effective upon amendment of the Articles of Incorporation, which amendment shall be adopted by the shareholders, or the Board of Directors without shareholder action (if permitted by the Act) . The amendment must be delivered to the Secretary of State and must set forth: (1) the name of the corporation; (2) the reduction in the number of authorized shares, itemized by class and series; and (3) the total number of authorized shares, itemized by class and series, remaining after reduction of the shares. ARTICLE 7. DISTRIBUTIONS 7.1 Distributions The Board of Directors may authorize, and the corporation may make, distributions (including dividends on its outstanding shares) in the manner and upon the terms and conditions provided by law. 8.1 Corporate Seal. ARTICLE 8. CORPORATE SEAL The Board of Directors may adopt a corporate seal which may be circular in form and have inscribed thereon any designation, including the name of the corporation, Nevada as the state of incorporation, and the words "Corporate Seal." ARTICLE 9. EMERGENCY BYLAWS 9.1 Emergency Bylaws. Unless the Articles of Incorporation provide otherwise, the following provisions shall be effective during an emergency, which is defined as a time when a quorum of the corporation's directors cannot be readily assembled because of some catastrophic event. During such emergency: (a) Notice of Board Meetings Any one member of the Board of Directors or any one of the following officers: president, any vice-president, secretary, or treasurer, may call a meeting of the Board of Directors. Notice of such meeting need be given only to those directors whom it is practicable to reach, and may be given in any practical manner, including by publication and radio. Such notice shall be given at least six hours prior to commencement of the meeting. (b) Temporary Directors and Quorum One or more officers of the corporation present at the emergency board meeting, as is necessary to achieve a quorum, shall be considered to be directors for the meeting, and shall so serve in order of rank, and within the same rank, in order of seniority. In the event that less than a quorum (as determined by Section 3.6 of Article 3) of the directors are present (including any officers who are to serve as directors for the meeting) those directors present (including the officers serving as directors) shall constitute a quorum. (c) Actions Permitted To Be Taken The Board of Directors, as constituted in paragraph (b), and after notice as set forth in paragraph (a), may: (1) Officers' Powers. Prescribe emergency corporation powers to any officer of the Corporation; (2) Delegation of Any Power. Delegate to any officer or director, any of the powers of the Board of Directors; (3) Lines of Succession. Designate lines of succession of officers and agents, in the event that any of them are unable to discharge their duties; (4) Relocate Principal Place of Business. Relocate the principal place of business, or designate successive or simultaneous principal places of business; (5) All Other Action. Take any other action which is convenient, helpful, or necessary to carry on the business of the corporation. AMENDMENTS ARTICLE 10. AMENDMENTS 10.1 The Board of Directors may amend or repeal the corporation's Bylaws unless: (1) the Articles of Incorporation or the Act reserve this power exclusively to the shareholders, in whole or part; or (2) the shareholders, in adopting, amending, or repealing a particular Bylaw, provide expressly that the Board of Directors may not amend or repeal that Bylaw; or (3) the Bylaw either establishes, amends or deletes a "supermajority" shareholder quorum or voting requirement, as defined in section 2.8 of Article 2. Any amendment which changes the voting or quorum requirement for the Board of Directors must comply with Section 3.8 of Article 3, and for the shareholders, must comply with Section 2.8 of Article 2. The corporation 's shareholders may also amend or repeal the corporation's Bylaws at any meeting held pursuant to Article 2. CERTIFICATE OF SECRETARY I hereby certify that I am the Secretary of SUMMA METALS CORP. and that the foregoing Bylaws, consisting of twenty-three (23) pages, constitutes the Code of SUMMA METALS CORP. as duly adopted by the Board of Directors of the corporation on this 23 day of March 1994. IN WITNESS WHEREOF, I have hereunto subscribed my name this 24th day of March, 1994. /s/ Michael M. Chaffee ------------------------------ Michael M. Chaffee - Secretary EX-5 5 OPINION RE: LEGALITY EXHIBIT 5 Law Offices STEVEN L. SISKIND SUITE 403 645 FIFTH AVENUE NEW YORK. N.Y. 10022 ---- (212)750-2002 FAX (212) 371-8527 MEMBER OF NEW YORK FLORIDA OFFICE: AND FLORIDA BARS ONE FINANCIAL PLAZA SUITE 2626 FT LAUDERDALE FL 33394 (305) 523-2626 January 22, 1998 Mr. Michael M. Chaffee Summa Metals, Inc. 28281 Crown Valley Parkway Suite 225 Laguna Niguel, CA 92677 Dear Mr. Chaffee: I have acted as counsel to Summa Metals Corp. (the "Company"), in connection with an offering of 510,000 Units of the Company's securities, pursuant to a Registration Statement on Form SE-2 ("Registration Statement") You have requested my opinion as to certain matters in connection with the post effective amendment to the Registration Statement. In my capacity as counsel to the Company, I have examined and am familiar with the originals or copies, the authenticity of which have been established to my satisfaction, of all documents, corporate records and other instruments I have deemed necessary to express the opinions hereinafter set forth. Based on the foregoing and upon consideration of applicable law, it is my opinion that the 510,000 Units to be issued by the Company, will, upon payment for and delivery of the Units in the manner described in the Registration Statement, be validly issued, fully paid and non-assessable. Furthermore, I consent to the use of this opinion as an Exhibit to the Registration Statement. Very truly yours /s/ Steven L. Siskind -------------------------- Steven L. Siskind EX-24 6 CONSENT Exhibit 24(a) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT ---------------------------------------- I consent to the use in this Registration Statement of my report, dated November 24, 1997, on the financial statements of Summa Metals Corporation, as of October 31, 1997 and December 31, 1996 and 1995, included herein and to the reference made to me under the caption "Experts" in the prospectus. /s/ Luxenberg & Associates ------------------------------- Luxenberg & Associates November 25, 1997 Rancho Santa Margarita, California - -------------------------------------------------------------------------------- 22431 Antonio Parkway, #BI60-457, Rancho Santa Margarita, California 92688 Tel: (714) 788-0402 Fax: (714) 788-0006 EX-28 7 PROCEEDS ESCROW AGREEMENTS Exhibit 28 (a) PROCEEDS ESCROW AGREEMENT THIS PROCEEDS ESCROW AGREEMENT (the "Agreement") is made and entered into this 7 day of December, 1997 by and between SUMMA METALS CORP., a Nevada corporation (the "Company/Issuer") and Steven L. Siskind, 645 Fifth Avenue, Suite 403, New York, NY 10022 (the "Escrow Agent"). Premises The Company proposes to offer for sale to the general public, up to 510,000 Units of Common Stock (the "Offering"), at an offering price of $6.00 per Unit (the " Unit'), in accordance with the registration provisions of The Small Business Investment Incentive Act of 1980, now contained in Section 19 of the Securities Act of 1933, as amended; Rule 504 of Regulation D; and pursuant to a Registration Statement on Form SB-2 (the Registration Statement") filed with the Securities and Exchange Commission. Agreement NOW THEREFORE, the parties hereto agree as follows: 1. Until termination of this Agreement, all funds collected by the Company and/or an Underwriter from subscriptions for the purchase of Units in the subject offering shall be deposited promptly with the Escrow Agent, but in any event no later than noon of the next business date following receipt. 2. Collections. All subscription payments (which payments shall be made payable to Steven L. Siskind, Attorney Escrow Account for the benefit of Summa Metals Corp.) received for Units by the Company and/or Underwriter, will be transmitted to the Escrow Agent by the Company and/or Underwriter by noon of the next business day following receipt by the Company and/or Underwriter. The Company and/or Underwriter shall include a written account of sale, which shall include the Investor's name and address, the number of Units purchased, the amount paid therefor, social security number, taxpayer identification number, and whether the consideration received was in the form of a check, draft or money order ("Payment"). 3. The Escrow Agent shall establish the Escrow Account , forward for collection all Payments received by it; and deposit all funds collected by it into the Escrow Account . Any Payment received that is payable to a party other then Steven L. Siskind, Attorney Escrow Account for the benefit of: Summa Metals Corp., and any payment returned unpaid to the Escrow Agent; , shall be returned to the Company and/or Underwriter. In the event issuer rejects an Investor after the Investor's Payment has been deposited into the Escrow Account, Issuer shall certify in writing to the Escrow Agent the fact .of such rejection, the name of the Investor so rejected, and the amount of Payment for Units made by such Investor, and shall direct the Escrow Agent to return to such Investor a check in the amount of such Payment, without deduction, including such investor's pro rata share of any interest earned while such Investor's funds were on deposit; provided, however, that if Payment by such Investor has been forwarded for collection but funds on which have not been collected, the Escrow Agent shall have no duty to make payment pursuant to this paragraph until receipt of such Collected Funds by Escrow Agent. In the event Issuer rejects an Investor before the Investor's Payment has been deposited in the Escrow Account, Issuer shall direct Escrow Agent to return promptly the Investor's Payment, without interest, directly to Investor. In the event Issuer rejects an Investor before the Investor's Payment has been deposited in the Escrow Account, Issuer shall direct Escrow Agent to return promptly the Investor's Payment, without interest, directly to Investor. 4. Interest. Except to the extent that interest is payable to Investors pursuant to Section 3 of this Agreement, Escrow Agent shall deliver to Issuer in a single, lump-sum payment all interest earned on funds deposited in the Escrow Account. Except as provided in Section 3 of this Agreement, no interest shall be earned by or payable to Investors. If interest is payable to Investors pursuant to Section 3 of this Agreement, the amount of interest payable to each Investor shall be calculated by Escrow Agent and provided to the Company and/or Underwriter. Company and/or Underwriter shall file Form 1099's and any other required reports in connection with the interest earned on the Escrow Account and distributed to Investors. 5. Investments. Collected funds deposited into the Escrow Account shall be invested only in a money market account at First National Bank of Long Island, 253 New York Avenue, Huntington, New York. Issuer represents such fund is an investment permitted under rule 15c2-4 of the Securities Exchange Act of 1934, as amended. 6. Concurrently with transmitting funds to the Escrow Agent, the Company and/or Underwriter shall also deliver to the Escrow Agent a schedule setting forth the name and address of each subscriber whose funds are included in such transmittal, the number of Units subscribed for, and the dollar amount paid. All funds so deposited shall remain the property of the subscriber until the dollar threshold in met. Until the threshold is reached, the subscribers funds held by the Escrow Agent shall not be subject to any liens or charges by the escrow agent or judgments or creditors' claims against the Company and/or the Underwriter. 7. If at any time prior to the expiration of the minimum offering period, as specified in Paragraph 6, $780,000 Has been deposited pursuant to this Agreement, the Escrow Agent shall confirm the receipt of such funds to the Company and/or Underwriter and on written request of the Company, the Escrow Agent shall promptly transmit the balance to the Company (such event is hereinafter referred to as the "Closing"). Thereafter, the Escrow Agent shall continue to accept deposits from the Company and/or Underwriter and transmit, upon written request of the Company the balance to the Company until the offering is terminated. The Company shall notify the Escrow Agent in writing of the completion or the Offering and shall schedule a final closing for the final disbursement and settlement of the balance of funds in the Offering. 9. If at any, time prior to the termination of this escrow the Escrow Agent is advised by the Securities and Exchange Commission, or any state securities division, that a stop order has been issued with respect to the Registration Statement, the Escrow Agent shall, upon receipt of its fee, thereon return all funds without interest to the respective subscribers. 10. It is understood and agreed that the duties of the Escrow Agent are entirely ministerial, being limited to receiving monies from the Company and/or the Underwriter and holding and disbursing such monies in accordance with this Agreement. The Escrow Agent II The Escrow Agent is not responsible or liable in any manner whatsoever for the sufficiency, correctness, geniuses, or validity of any instrument deposited with it, or with respect to the form or execution of the same, or the identity, authority, or the rights of any person executing or depositing the same. 12. The Escrow Agent shall not be required to take or be bound by notice of any default of any person or to take any action with respect to such default involving any expense or liability, unless notice in writing is given to the Escrow Agent of such default by the undersigned , or any of them, unless it is indemnified in manner satisfactory to it against any expense of liability arising therefrom. 13. The Escrow Agent shall not be liable for acting on any notice, request, waiver, consent, receipt, or other paper of document believed by the Escrow Agent to be genuine and to have been signed by the proper party or parties. 14. The Escrow Agent shall not be liable for any error of judgment or for any act done or step taken or omitted by it in good filth, or for any mistake of fact or law, or for having anything which it may do or refrain from doing in connection herewith, except its own willful misconduct. 15. The Escrow Agent shall not be answerable for the default or misconduct of any attorney or employee appointed by it if such agent, attorney or employee shall have been selected with reasonable care. 16. The Escrow Agent may consult with legal counsel in the event of any dispute or question as to the consideration of the foregoing instructions or the Escrow Agent's duties hereunder and the Escrow Agent shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel. 17. In the event of any, disagreement between the undersigned, or any of them, the person or persons named in the foregoing instructions, and/or any other person, resulting in adverse claims and/or demands being made in connection with or for any papers, money or property involved herein or affected hereby, the Escrow Agent shall be entitled at its option to refuse to comply with any such claim or demand so long as such disagreement shall continue and, in so refusing, the Escrow Agent shall not be or become liable to the undersigned or any of them or to any person named in the foregoing instructions for the failure or refusal to comply with such conflicting or adverse demands, and the Escrow Agent shall be entitled to continue to so refrain and refuse to so act until: (a) The rights of adverse claimants have been finally adjudicated in a court assuming and having jurisdiction of the parties and the money, papers and property involved herein or affected hereby; and/or (b) All differences shall have been adjusted by agreement and the Escrow' Agent shall have been notified thereof in writing signed by all of the person interested. 18. The fee of the Escrow Agent is $2,500. The fee agreed upon for services rendered hereunder is intended as full compensation for the Escrow Agent's services as contemplated by this Agreement; however, in the event that the conditions of this agreement are not fulfilled, or the Escrow Agent renders any material service not contemplated by this Agreement, or there is any assignment of interest in the subject matter of this Agreement, or any material modification thereof, or if any material controversy arises hereunder, or the Escrow Agent is made a party to or justifiably intervenes in any litigation pertaining to this Agreement, or the subject matter hereof, the Escrow Agent shall be fully reimbursed for all such extraordinary expenses, including reasonable attorney's fees, including the reasonable value of legal services rendered by the Escrow Agent in his capacity as attorney in connection with such services, and all extraordinary expenses shall be paid by the Company. 19. Resignation. Escrow Agent may resign at any time and be discharged from its duties as Escrow Agent hereunder by giving other parties hereto at least fifteen (15) days notice hereof. As soon as practicable after the resignation, Escrow Agent shall turn over to a successor escrow agent all monies and properties held hereunder (less such amount as Escrow Agent is entitled to retain) upon presentation to Escrow Agent of the document appointing the new, escrow agent and its acceptance of such appointment. If no successor Escrow Agent is to appointed within a thirty day period following such notice of resignation, Escrow Agent shall deposit the monies and property with the Supreme Court of the State of California in and for the County of Orange or United States District Court for the District of Orange, as it deems appropriate. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers, as of the date first above written. By: SUMMA METALS CORP. 28281 Crown Valley Pky, Suite 225 Laguna Niguel, CA 92677-1461 (602) 680-5513 /s/ Michael M. Chaffee, President /s/ Steven L. Siskind, as Escrow Agent EX-28 8 SUBSCRIPTION AGREEMENT Exhibit 28 (b) SUBSCRIPTION AGREEMENT SUMMA METALS CORP. 28281 Crown Valley Parkway Suite 225 Laguna Nigel, CA 92677-1461 Dear Sirs: Concurrent with execution of this Agreement, the undersigned (the "Purchaser") is purchasing ________________ Units of Common Stock of Summa Metals Corp. (the "Company") at a price of $6.00 per Unit (the "Subscription Price") Purchaser hereby confirms the subscription for and purchase of said number of Units and hereby agrees to pay herewith the Subscription Price for such Units. MAKE CHECK PAYABLE TO: "Steven L. Siskind, Escrow Agent for Summa Metals Corp." Executed this day of , 1998 at Street Address Signature of Purchaser Printed Name of Purchaser City State Zip Code Social Security Number/Tax I.D. Number of Shares Purchased SUMMA METALS CORP. BY: EX-28 9 PROPOSED SELECTED DEALER AGREEMENT Exhibit 28 (c) PROPOSED SELECTED DEALER AGREEMENT Dear Sirs: Subject to the terms and conditions of the Underwriting Agreement with _______ we have been employed to find purchasers for an aggregate of 510,000 Units of Common Stock of Summa Metals Corp., (the "Company") (on a best efforts, 130,000 Units or none basis as to the minimum offering, and on a best efforts basis thereafter up to 510,000 Units), as more fully described in and subject to the conditions set forth in the Prospectus contained in the Registration Statement on Form SB-2 under the Securities Act of 1933 with respect to the which is effective. The public offering price is $6.00 per Unit. As Underwriters, we are offering to certain selected dealers who are members in good standing of the National Association of Securities Dealers Inc. ("NASD") (herein collectively called the "Selected Dealers") the right as set forth herein to subscribe to a portion of the Shares at the public offering price of $6.00 per Unit, less a concession as set forth below and on the following terms and conditions; provided, however, that no NASD member may re-allow commissions to any non-member broker-dealer. 1. Terms and Allotments. We expressly reserve the right to accept or reject in our discretion, either in whole, or in part, and to allot and over-allot. In the case of over-allotment, we agree to accept subscriptions, up to the amount of a Selected dealer's Allotment, in the order of their receipt by us. If the above-described offering is over allotted, we agree to notify you as soon as practicable if we may not be able to fill orders for the entire number of Shares indicated on your acceptance hereof. 2. Concessions. Except as may otherwise expressly be agreed, we agree to allow a concession of $___ per Share on all Shares confirmed by us. We reserve the right to modify or change, but not decrease, the foregoing concessions, and shall be under no obligation to allow the same concession to all Selected Dealers. We reserve the right not to pay such concession on Shares purchased by members from us and repurchased by us at or below the public offering price prior to termination of this Agreement. Subscribers will be permitted to purchase only whole number of Units in round lots as the Company will issue no fractional Units. 3. Delivery and Payment. You will notify us in writing when you have obtained subscriptions to the Shares allotted to you and have received the purchase price therefor. All checks received in payment for the Shares shall be payable to " Steven L. Siskind, Escrow Agent for Summa Metals Corp.". You agree and covenant to transmit such subscriptions (if any) without deduction for concessions promptly upon the receipt thereof, (but in any event by noon of the business day following receipt) for deposit directly to the escrow account of Steven L . Siskind, For the Benefit of Summa Metals Corp. at First National Bank of Long Island, 253 New York Avenue, Huntington, New York 11743, where they will be held until paid to the Company on the closing elate, hereinafter specified or until returned to the respective subscribers. Each transmittal of funds to the escrow account must be accompanied by a transmittal letter specifying the total amount transmitted and the name, address, tax I.D. number and number of Units purchased for each subscriber whose funds are being transmitted. A copy of such letter must be sent to us at ____. In the event that subscriptions for a minimum of 130,000 Units are obtained, you will receive a notice from us to that effect specifying a closing date on which delivery will be made to you of Units purchased by you pursuant hereto against payment therefor at the public offering price. The closing shall be held at the offices of ____ on such closing date. In the event that a minimum of 130,000 units are not sold prior to _____ 1998, (90 days form the Effective Date) or the date 90 days thereafter if we have notified you of such extension, your will be so notified, and you covenant and agree, in such event, that all subscriptions received by you (other than those subscriptions returned directly by the Escrow Agent) shall be returned promptly upon receipt of notice from us. Delivery of certificates for Units subscribed for by you and confirmed by us hereunder will take place at the closing or as soon thereafter as practicable. Certificates delivered will be in customer's names where practicable and the balance in street name and, in denominations of 1,000 units. Settlement for concessions payable will be made as promptly as practicable after an accepted subscription as above provided. We may, in addition to any other remedies provided by law, cancel such subscription by letter, telephone or telegraph notice to you. 4. Offering. Selected Dealers may immediately offer Units for sale and take orders therefor, but only subject to confirmation. We, in turn, are prepared to receive subscriptions and orders, subject, as set forth above, to acceptance and allotment by us in whole or in part. Orders transmitted to us by telephone should be confirmed by you by letter or telegram. You agree to make a bona fide public offering of said Units, but you will not offer or sell any of such Units below the public offering price before the termination of this Agreement. You also agree to abide by all applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, and the Rules and Regulations under such Acts. You agree, upon our request, at any time or times prior to the termination of this Agreement to report to us as to the number of Units purchased by you pursuant to the provisions hereof which then remain unsold and sell to us, for our account, such portion of such unsold Units as we may designate, at the public offering price less an amount to be determined by us not in excess of the concession allowed to you. No expenses shall be charged to Selected Dealers; however, you shall pay any transfer tax on sales of the Units by you and you shall pay your proportionate share of any transfer tax or other tax in the event that any such tax shall from time to time be assessed against you and other Selected Dealers as a group or otherwise. You further agree not to sell any of the Units offered hereunder to any officer, director, controlling stockholder, partner, employee or agent of your organization, or member of the immediate family of any such person, except as permitted under the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and the interpretations thereof. 5. Blue Sky. You agree to limit your offers and sales of the to the following state in which you are qualified to act as a broker or dealer in securities: 6. Termination. This Agreement shall terminate 90 days from the Effective Date unless the offering is extended for an additional 90 days or unless sooner terminated by us by notice to you for any reason. You understand that the offering is being made on a 130,000 Units or none best efforts basis, as to the minimum of 130,000 Units by the Underwriter in accordance with the terms of the Underwriting Agreement and will be terminated in the event 130,000 Units' are not sold in accordance with the terms thereof. In such event, none of the Units to be sold hereunder shall be issued or sold; and you agree that in such case you will promptly return all funds received by you and that you may be holding on account of proposed purchases of the Units to the persons who tendered the same, without deduction. In the event of any termination, the Underwriter shall have no responsibility to you. Notwithstanding such termination, you may remain liable to the extent provided by law for your proportionate amount of any claim, demand or liability which may be asserted against you alone or against you together with other Selected Dealers and/or us, based upon the claim that the Selected Dealers or any of them and/or we constitute an association, an unincorporated business, or any other separate entity. 7. Use of Prospectus. Neither you nor any other person is authorized by the Company or by us to give any information or make any representation other than those contained in the Prospectus in connection with the sale of the Units and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or us. You also agree to deliver a copy of the Prospectus to each prospective purchaser as required by the Securities Act and by the Rules and Regulations thereunder. Additional copies of the Prospectus will be supplied in reasonable quantity upon request. You are not authorized to act as our agent or as agent for the Company in offering the Units to the public or otherwise. Nothing contained herein or otherwise shall constitute Selected Dealers partners with us or with one another. 8. Underwriter's Authority. We shall have authority to take such action as we deem advisable in respect of all matters pertaining to the Offering or arising hereunder. We and our agents shall be under no liability to you for or in respect of the authorization, issue, full payment, non-accessibility or validity of the Shares or the component securities thereof; for or in respect of the form of, or the statements contained in or omitted from the Prospectus, the Underwriting Agreement, or other instruments executed by the Company or by others; for or in respect of the delivery of the Shares or the performance by the Company or by others of any agreement on its or their part; for or in respect of the qualifications of the Shares for sale under the laws of any jurisdiction; or for or in respect of any other matter connected with this Agreement, except agreements expressly assumed by us herein and for lack of good faith. No obligations not expressly assumed herein shall be implied; provided that nothing herein contained shall be deemed to deny, exclude or impair any liability imposed upon us or our agents as an underwriter by state or federal securities law. 9. Applicable Securities Laws. By accepting this offer to become a Selected Dealer, you represent to the Underwriter that you are qualified under the Securities Exchange Act of 1934 and the Blue Sky laws of any State in which you offer the Shares, as a dealer or broker in securities, and that you are a member in good standing of the National Association of Securities Dealers, Inc.; provided, however, that no NASD member may reallocate commission to any non-member broker-dealer. Alternatively, this offer may be accepted by a foreign dealer not eligible for membership in the NASD who agrees not to re-offer, resell or deliver the Shares in the United States or to persons to whom it has reason to believe are citizens or residents of the United States and, in making sales, to comply with NASD's Interpretation with Respect to Free-Riding and Withholding and Sections 8, 24 and 36 of Articles III of the NASD's Rules of Fair Practice as if such foreign dealer were an NASD member and Section 25 of such Article III as it applies to a nonmember broker or dealer in a foreign country. 10. Communications. All communications from you to us should be addressed to ______. All communications from us and/or the Company to you shall be deemed to have been duly given if mailed, telegraphed or telephoned to you at the address to which this letter is mailed, unless written notification shall be received from you of a change in address. If you desire to become a Selected Dealer, please advise us immediately by signing and returning to us the form of acceptance attached hereto. Very truly yours, By Dated Dear Sirs: We agree to become a Selected Dealer with respect to the offering of Units of Common Stock of Summa Metals Corp. at the public offering price of $6.00 per Unit as outlined in this Agreement, and we acknowledge receipt of the Prospectus, dated _____, 1998. We agree to subscribe on the terms set forth in this Agreement for ________________ Units of Common Stock of Summa Metals Corp,, as described in the Prospectus, and to make payment for such securities within (10) days of the date of the confirmation from you of our order, provided that funds received from our customers on subscription for Shares shall be transmitted to the escrow account of Steven L. Siskind, for the benefit of Summa Metals Corp. at First National Bank of Long Island in accordance with Rule 15c2-4. We confirm that we are a member in good standing of the National Association of Securities Dealers, inc., and we agree to abide by the "Rules of Fair Practice" of the National Association of Securities Dealers, Inc., and the interpretations thereof. DATED Signature of Selected Dealer Address: Phone: EX-28 10 PROMISSORY NOTE Exhibit 28 (e) PROMISSORY NOTE Dated 4-8-94 $ 100,000.00 Reno, Nevada The undersigned corporation, SUMMA METALS, INC., a Nevada corporation, hereinafter referred to as 'Maker", promises to pay to the order of AMYN S. DAHYA, an individual, and/or assigns ("Holder"), the sum of One Hundred Thousand Dollars ($100,000.00), payable as follows: The entire balance, plus accrued interest at the rate of 12% per annum, commencing on the date hereof, shall be due and payable in full one year from the date hereof. Maker reserves the right to prepay all or any portion of the indebtedness evidenced by this Note at any time, without penalty. The Holder shall not by any act of omission or commission be deemed to waive any rights or remedies hereunder unless such waiver be in writing signed by the Holder, and then only to the extent set forth therein. Maker agrees to pay all costs and expenses included in enforcing collection of any portion of this Note by suit or otherwise, including a reasonable attorney's fee, if an attorney is used in such collection, regardless of whether a suit is instituted for collection. If a suit is instituted for collection, the Court shall adjudge the attorney's fee allowed. If a suit is not instituted, but an attorney is retained, maker shall pay the actual attorney's fee incurred. Presentment, notice of dishonor and protest are hereby waived by maker. This Note shall be the uncontestable obligation of Maker. Such liability shall continue in the event any extension of time for repayment is given. Maker hereby expressly represents and warrants that, until the total amount of principal and interest due and payable hereunder has been paid to Holder, Maker will not in any way encumber any of its assets, which consist of valuable mineral properties, together with any other assets which it may acquire at any time during the term hereof, The Holder of this Note may accelerate this Note, that is, declare the entire unpaid balance due and payable, upon (1) failure of Maker to stay current with its State corporation and regulatory filings and/or state and federal securities laws, rules and regulations; (2) any attempt to encumber any of Maker's assets during the term of this Note: and (3) the insolvency of maker, or any guarantor, if any, of this Note. Protest is waived. Upon any default hereunder, the undersigned agrees to pay all costs of collection and attorney's fees incurred by Holder in collecting this Note, or in exercising any judicial or nonjudicial remedies available to Holder. In the event litigation is necessary to collect this Note, Maker expressly consents to jurisdiction in Washoe county, Nevada, which shall be the exclusive venue for such litigation, This Note shall be guaranteed by Michael M. Chaffee, who Shall, at all times during the term of this Note, be and remain an officer, director and principal shareholder of Maker. SUMMA METALS, INC., a Nevada corporation ("Maker") By /s/ Michael M. Chaffee ----------------------------- Michael M. Chaffee, President For valuable personal consideration, receipt of which is hereby acknowledged, and as further inducement for Holder to make the loan hereunder, the undersigned expressly and unequivocally guarantees all payments due and payable hereunder and expressly accepts all terms and conditions of this Promissory Note as his personal obligation. /s/ Michael M. Chaffee --------------------------------- Michael M. Chaffee, an individual Summa Metals, Inc. - --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 28281 CROWN VALLEY PKWY SUITE #225, LAGUNA NIGUEL, CA 92677-1461 TEL: (714) 348-0749 FAX: (719) 368-9747 15 October, 1997 Mr. Amyn Dahya 1335 Greg Street, Sparks, NV, 89431 Dear Amyn, This is to confirm our conversation of this date RE: the extension of our past due note in the amount of $100,000. You have given your agreement to extend said note, to be due and payable without penalty, to September 30th, 1998. In the event the Company is in a position to make partial payments, without compromise to its operations prior to that date, we will make every effort to do so. The Company appreciates your understanding that it must use the majority of the proceeds from its IPO to continue and expand operations for the benefit of all its Shareholders. We will continue to keep you informed on the progress of the Company. Please initial below, return via Fax, and I will forward under separate cover, the revised note. Sincerely, THE SUMMA METALS CORPORATION /s/ Raymond C. Baptista ----------------------------------- Raymond C. Baptista Vice President, Chief Financial Officer Amyn Dahya /s/ Amyn Dahya --------------- ARIZONA * NEVADA * CALIFORNIA * CHIHUAHUA * BAJA CALIFORNIA EX-28 11 AGREEMENT Exhibit 28 (f) A G R E E M E N T The undersigned Jose Echenique, owner of the mill tailings at Promontorio in the State of Durango, Mexico, hereby grants exclusive permission to Engineer Ralph E. Pray and assignees to treat and remove from all of those tailings any contained mineral or metal under the,following provisions: 1. The term of this agreement shall be ten years. 2. Pray shall pay Echenique a royalty of five percent (5%) of all gross revenue derived from the tailings. 3. Echenique shall retain ownership in all land and presently existing improvements thereon, the use of which shall be fully available to Pray during the term of this agreement. 4. Pray shall retain at all times full and complete ownership of all machinery, equipment and supplies obtained by Pray for use on the project. 5. Pray shall assume responsibility for all aspects of land, road and forest use during operations. 6. Echenique shall be notified when operations begin and when they cease. 7. All processing, production, transportation and sales records shall be available for inspection by Echenique at any time. Jose A. Echenique Ralph E. Pray ----------------------------- ------------------------- /s/ Jose A. Echenique date /s/ Ralph E. Pray date address address Comfort 151 Sur 805 S. Shamrock Toddeiond Casa Monrovia, CA 91016 27000 Mexico PROMONTORIO The material behind the Promontorio dam, built in 1890, was washed in behind the dam by repeated rainfall across upstream Promontorio silver cyanide mill tailings. This fill material reaches within a foot or so of the stone structure top, and is regarded by Mexican government officials as sand and gravel. Alluvial sand and gravel for construction is officially valued at 1,930 pesos per cubic meter. The dam is estimated by Mexican officials to contain 30,000 cubic meters of sand and gravel. Pepe has an approved application to purchase the sand and gravel, which contains all of my estimated 150,000 tons of the old silver tailings. The price is $0.34 (U.S) per ton. This amounts to $0.14. (U.S.) per ton with 150,000 tons used. Payment for the material can be, made in three installments of $6,700 each, but should be completed prior to any major activity on the property, such as road building or equipment delivery. Upon completion of the pilot plant work, which will result in obtaining the proper scale-up tank sizes, an application to permit construction of a small process plant will be submitted to the Durango State office of the Direccion General de Minas. The plant products and effluent will be described in an application for approval before the newly formed Secretaria de Ecology. A lease will be obtained on a five acre parcel upon which to set the plant. This lease will issue from the local resident woodcutters and cattle owners, all of whom live primitive lives but who look upon nearby land use as part of their business. An affidavit of this lease will be filed with the proper Department of Agriculture office. Water sources exist in nearby deep mines, drainages and springs. However, it appears now that an independent water source on held ground is necessary to assure an uninterrupted supply. DR. RALPH PRAY PROMONTORIO The silver mines of Durango, Mexico began production under Spanish rule 450 years ago. The Promontorio mines, in the District of El Oro, produced silver during these historic years, until the nationalization of American and British companies by President Cardenas in 1938. During the productive years, in 1890, a dam was constructed across the major drainage below the mines and villages of Promontorio. This dam, made of hand-hewn rock blocks, still stands intact, some 108 feet high and 200 feet wide. During the almost 50 years of operation prior to 1938, sand tailings from the ore processing facilities near the mines collected in an area on the edge of the major drainage pattern. Since that time, fifty years of sporadic cloudbursts have transported the Promontorio sand tailings downhill to the dam, where they now completely fill the volume behind the giant wall. In 1964 the Sol Naciente Mining Company, owned by Sr. Alfonso Burciaga, examined the tailings under the supervision of Engineer Carlos Poulliott. Ownership passed to Engineer Carlos Echenique shortly thereafter. in 1980 an agreement was made between Echenique and Maguinara El Gorrion, S.A. (The Sparrow Machinery) financed and operated by Guy Sparrow, lately of the NBA New York Knickerbocker basketball team. Sparrow brought dozens of Promontorio tailings samples to Mineral Research Laboratory for assay. His personal investment of $182,000, during the period that silver was about $12 per ounce, was not a sufficient amount to permit installation and start-up. Sparrow relinquished his lease, and Echenique left the concession to his surviving widow and son, Jose Echenique, with whom the undersigned has a ten-year lease paying five percent royalty. The tailing tonnage has been estimated to be: Echenique 150,000 to 300,000 tons Sparrow over 200,000 tons Pray 175,000 tons The silver value of the material behind the dam is reported to be: Echenique 7 oz/ton Sparrow samples 10 oz/ton Pray samples 8 oz/ton Many attempts have been made to extract the silver from these tailings. Re-treatment by cyanide yields a very low silver recovery. The widespread presence of manganese dioxide, as the mineral psilomelane, in the tailings and in the vein rock of the region, points to the reason for refractory behavior. A portion of the silver resides within the manganese mineral structure and, since this mineral is unaffected by cyanide, the silver within is protected from attack. The obvious approach is to dissolve the manganese then go after the silver, and that is precisely the practise utilized in conventional ore treatment. in this case, the process works admirably. EX-28 12 REPORT OF GOLD SPUR Exhibit 28 (g) GOLD SPUR MINE -------------- REPORT ------ 1993 ---- Ralph E. Pray, D.Sc. Mining & Metallurgy Mineral Research Laboratory Monrovia, CA 91016 Telephone 818-357-6511 GOLD SPUR INTRODUCTION - ------------ The Gold Spur is a once-active underground gold mine situated in Inyo County, California, near the southern end of the Panamint Mountains, eight miles west of Death Valley National Monument. It is located in the SW l/4 of Section 4, T24S, R45E, Mount Diablo Meridian. It is reached by taking the state highway north from Trona twenty miles to the Ballarat Road, then a county road east three miles to Ballarat, and south fourteen miles by county road to a side road that leads east into Coyote Canyon, one of many steep drainage systems on the west flank of the Panamints. At the mouth of the canyon, a company locked gate stands at the western boundary of the Hostage Well Millsite. Past the gate, the road continues east along the canyon for two miles to the base of the Gold Spur aerial tramway. The main ore bin at the lower end of the cable system, capable of holding fifty tons, is fed by the tramway cars, The vein upon which the mine was developed outcrops high on the hill forming the south wall of the canyon, at an elevation of 2,950 feet. Underground workings at the Gold Spur consist of an adit at elevation 2,880 feet leading to 420 feet of drifts and crosscuts. Ore processed while the mine was active came from a stope 180 feet from the portal. The vein was worked both upward toward the surface, in the stope, and downward into the vein, on a face sixty feet long. Along this face, the vein is from two to six feet wide, and averages about four feet. Between two and three hundred tons of ore were -Dr. Ralph E. Pray GOLD SPUR drilled and blasted underground in 1990 from the vein in the slope. This broken ore remains in the mine, and is ready for transport to a treatment facility. Gold occurs in the free state and in sulfides. The values are liberated by grinding to 150 mesh. The gold may be separated from the host rock by gravity concentration, mercury amalgamation, chemical flotation, cyanidation, or a combination of these methods. Test results of the most efficient method, cyanidation, are contained in this report. There is a rail system consisting of approximately 380 feet of dual track in the underground workings, and between the mine and the upper ore bins. The topside ore chutes and bin system are in need of further repair. However, the gravity-powered aerial tramway, from elevation 2,200 feet to 2,840 feet, was recommissioned in 1982, and was last operated in early 1991. A Datsun gasoline engine was installed on the upper end of the tramway to assist in bringing equipment up the cableway to the mine. The main ore bin, at the base of the tramway, is also serviceable for receiving ore and loading ore trucks. A two-inch steel pipeline for air, and a one-inch steel water line, lie between the canyon floor and the mine. Both are in operating condition and were used extensively in 1990. A new cabin was built and furnished on the property in 1990. Access to the mine is by foot trail up the mountain behind the cabin, main ore bin, road and canyon floor. Dr. Ralph E. Pray GOLD SPUR HISTORY - ------- F.W. Gray and H.M. Truman were the earliest known owners of the Gold Spur. In 1975 a set of their location papers, dated January 1, 1907, and preserved in an old rusty can, was found on the property. In 1915 the California State Mineralogist reported Gray and Truman as the owners and described the vein they were working as a surface outcrop 1,000 feet long, with an ore shoot 300 feet long, 4 feet wide, and averaging 0.43 ounces of gold per ton. In 1938 the mine consisted of sixteen claims and a series of underground workings that had exposed portions of two vein systems. The California Division of Mines reported that the owners at that time, J. Lester and J.J. Rogers of Los Angeles, were planning to drive a tunnel 900 feet long into the mountain, 600 feet below the earlier workings. Those plans were never carried out. In 1951 the Division of Mines reported that Mrs. J.H. Lester of San Francisco was the owner. The workings, values, and ore shipments were also described. According to that report, the mine last operated in 1940, when 600 tons of ore were shipped by truck to the Silver Queen Mining Company's mill in Mojave. Dr. Ralph E. Pray GOLD SPUR GEOLOGY - ------- The Gold Spur vein is an auriferous quartz that intruded into gneissic country rock. The gneiss is Precambrian and the lack of contortions in the exposed sections of the vein indicates that it was intruded after the peak metamorphic deformation. Its age is otherwise unknown. The quartz is milky and varies in color from white to blue and gray. In addition to gold, it carries pyrite and hematite. It also carries a higher concentration of sulfur than other quartz veins in the district. The vein strikes N15E and dips 45 degrees northwest into the mountain. Its average width is about four feet, with a maximum width of six feet. At the surface, it is exposed for a distance of more than 1,000 feet. Within the main stope, which was excavated along the ore shoot, the vein is exposed for about fifty feet. From the surface and stope exposures, the width of the vein remains constant with depth. However, except at the old workings, the features of the vein with depth have not been determined. This vein is bounded at both ends. To the southwest it is truncated at a tributary canyon by a fault. To the northeast, as previously mentioned, it outcrops on a hill forming the south wall of the canyon, several hundred feet above the canyon floor. If it continues with depth, the northeast edge of the vein, below the outcrop, lies buried beneath alluvium. Across the canyon, along the hill forming the north wall, there are no traces of an extension. Dr. Ralph E. Pray GOLDSPUR SAMPLES AND ASSAYS - ------------------ The Gold Spur Mine was first relocated and sampled by the undersigned in 1973, at which time the road in the mouth of Coyote Canyon was covered with a rock slide. In 1978 a violent rainstorm completely demolished the two-mile road to the claim. In October 1979, the mine was sampled underground in three sites, which averaged 0.58 ounces/ton in gold. The underground ore was further examined in August 1980, when a sample in the base of the stope returned 1.90 ounces/ton gold. In July 1981, a more comprehensive sampling program was conducted, with fourteen channel samples taken underground and five samples taken from the surface. Further and numerous samples were taken for vein evaluation, cyanide tests, outside assays, and by other engineers. This work is summarized in tabulated form, chronologically, and in map form, showing the location of early samples. Dr. Ralph E. Pray LODE LOCATION NOTICE TO WHOM IT MAY CONCERN: Please take notice that: 1. The name of this claim is the _______Gold Spur__________Lode Mining Claim. Said claim is situated In Section ___4(Proj)__(If known), Township __24S___ Range __45E__M.D.__Meridian, in the____South Park_____Mining District, County of Inyo, State of California. The date of this location is the__28th__day of 19_79_. 2.The undersigned locators are citizens of the United States, or have declared their Intention to become such. 3. The said locator__do_es_ hereby locate and claim __1500__linear feet of this vein or lode, together with surfact ground extending __300__feet In width on each side of the middle of said vein or lode and more particularly described as follows: Commencing at the monument where this notice is posted, which monument is at the point of discovery on said vein or lode and on the center line of this location ___I__hereby claim__500__feet extending In a__Westerly__direction along the course of said vein from the discovery monument and__1,000__ feet In an__Easterly__direction from the discovery monument, along the course of said vein. The general course of said vein is in a ___Westerly and ___Easterly direction__. The discovery monument is situated about _650 feet south of the floor of Coyote Canyon, and 1.5 miles east of the entrance to Coyote Canyon, at elevation 2,900 feet, This is a __relocation of old wirking s previously known by names such as the Lestro, Soft Spot, etc. ____________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 4. All dips, variations, spurs, angles and all veins, ledges, or deposits within the lines of this claim, together with all water and timber and any other rights appurtenant allowed by the laws of this State or of The United States are hereby claimed. 5. The commodity discovered is __GOLD__. /s/ Ralph B. Pray ------------------------------ Ralph B. Pray 40 North Sycamore Avenue Pasadena, CA 91107 STATEMENT OF THE MARKING OF THE BOUNDARIES NOTICE IS HEREBY GIVEN by the undersigned locator -that in accordance with the provisions of the Mining Law:- 1. There has been erected at the discovery point. at each corner and at the center of each end line of said claim a ____________conspicuous monument._______ DATED_____October 31, ___19_79_ LOCATORS ________Ralph B. Pray_____ __________________________ __________________________ 12-1361-491 EX-28 13 HISTORY OF DEEP GOLD MINE EXHIBIT 28 (h) DEEP GOLD MINE The DEEP GOLD placer mine located in Marble Canyon, Inyo County, California, was first taken possession of on the public domain by the undersigned in 1981. 1981 original acquisition, multiple placer claims. 1982 Removal of old buildings and area cleanup. 1983 Access road repair by Sierra Construction, Bishop, CA. U.S. Forest Service approval of Notice of Intent. 1984 Main shaft collar preliminary repair. U.S. Bureau of Mines field party examination. U.S. Geological Survey field party examination. 1985 Main shaft headframe reconstruction. 1986 original acquisition consolidated into single 80-acre claim. Main shaft equipped with 150 feet of new wooden ladders. 1987 Main shaft collar concrete repairs completed. U.S. Forest Service Plan of Operations approved. 1988 Access road repair and improvement. Mining crew hired from Bishop to renovate shaft interior. 1989 Steel hoisting guides and steel ladder installed in shaft. 1990 Four tons of debris hoisted from bottom of shaft. Base of shaft and bedrock tested for gold values. 1991 Magnetometer survey conducted across Marble Canyon. Main shaft collar barricaded shut. 1992 Seven-traverse magnetometer survey completed to locate magnetic black sands concentrated in paystreak with gold, also showing old shaft did not enter paystreak area. 1993 Based on the definitive magnetometer survey, drill sites were chosen to explore the paystreak anomaly. 1994 Short drill rig roads branching from the mine road will be prepared using a Bishop contractor. A drilling contractor from either Benton or Apple Valley, CA will be hired to retrieve samples to bedrock. The paystreak will be delineated by percussion drill sample evaluation, and a mining plan will be designed to test the technical and economic feasibility of different sized operations. The volume of gold placer values available on the claim can be estimated using the paystreak width and thickness values reported in the California Division of Mines Report XXXIV for the Lewis and the IRON Nugget claim groups, both included in the Deep Gold claim. The average width of the paystreak is 57 feet, and the thickness is reported at 6 feet. The average value of recovered gold, at $35 per ounce, was $5.50 per cubic yard. Taking the 8,000 foot length of the claim as containing the average paystreak, there are an estimated 101,333 cubic yards of ore. At a gold concentration of 0.157 ($5.50/$35) ounces per ton there are 15,909 ounces of recoverable gold present. With gold at $350 per ounce the resource has a potential value of $5.5 million. Ralph E. Pray ---------------------- /s/ Ralph E. Pray, D.Sc. August 5, 1994 RECORDING REQUESTED BY & WHEN RECORDED MAIL TO: Dr. Ralph E. Pray 805 South Shamrock Ave. Monrovia, CA 91016 AMENDED PLACER LOCATION NOTICE NOTICE is hereby given that the below named persons have this 29th day of September, 1986, located a PLACER MINING CLAIM situate on public surveyed land in the County of Inyo, State of California, described as follows: Commencing at the NE corner, corner No. 1, the Location Monument, located 100 feet east of the County Road and 4,190 feet N65E from the SW corner of section 12, Township 10 South, Range 36 East, M.D.M.; thence due west 1,120 feet to corner No. 2; thence N77W 2,100 feet to corner No. 3; thence S63W 2,320 feet to corner No. 4; thence N81W 2,380 feet to corner No. 5; the NW corner; thence due south 440 feet to corner No. 6, the SW corner; thence S81E 2,380 feet to corner No. 7; thence N63E 2,320 feet to corner NO. 8; thence S77E 2,100 feet to corner NO. 9; thence due east 1,120 feet to corner No. 10, the SE corner; thence 440 feet due north to corner No. 1, the point of beginning, each corner marked by a white-colored monument, enclosing an area of 80 acres, named the DEEP GOLD placer mining claim. Locators: /s/ Ralph E. Pray ---------------------------- Ralph E. Pray 805 South Shamrock Ave. Ross Pray Monrovia, CA 91016 Maxwell Pray (818) 357-65ll Thomas P. Sullivan <---map inserted here---> DEEP GOLD placer mining claim Sections 11 & 12, Township 10 South, Range 36 East, M.D.M. UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY Mineral resources and mineral resource potential of the Saline Valley and Lower Saline Wilderness Study Areas Inyo County, California by Chester T. Wrucke, Sherman P. Marsh, Gary L. Raines, R. Scott Werschky, Richard J. Blakely, and Donald B. Hoover U.S. Geological Survey and Edward L. McHugh, Clayton M. Rumsey, Richard S. Gaps, and J. Douglas Causey U.S. Bureau of Mines U.S. Geological Survey Open-File Report 84-560 Prepared by U.S. Geological Survey and U.S. Bureau of Mines <---US DEPARTMENT OF THE INTERIOR LOGOS---> for U.S. Bureau of Land Management This report is preliminary and has not been reviewed for conformity with U.S. Geological Survey editorial standards and stratigraphic nomenclature. 1984 Physiography The Saline Valley and Lower Saline Wilderness Study Areas are in the western part of the Basin and Range province and are as close as 20 mi to the Sierra Nevada. The study areas include the mountainous terrain east of the high northern parts of the Inyo Mountains, the Saline Range, the southern half of the Last Chance Range, and the range that extends north and south of Dry Mountain. Drainage is toward the three closed basins of Eureka, Saline, and Death Valleys, but there are no permanent streams. The highest and lowest points are Dry Mountain and the eastern side of Saline Valley, respectively 8,674 ft and about 1,200 ft above sea level. The bottom of Saline Valley just west of the study area is the lowest place in the northern Death Valley region. The general topographic trend of the mountains and valleys is approximately north-south, but significant local variations exist from this trend. Mining history Prospecting in the region of the Saline Valley and Lower Saline Wilderness Study Areas probably began in the late 1850s or early 1860s, as mineral discoveries were made in the Inyo Mountains as early as 1859 and the Lone Pine mining district was organized in 1866 (Chaflant, 1933). The rich silver-lead deposits at Cerro Gordo in the Inyo Mountains, southwest of the study areas, are reported to have been discovered in the interval 1861-1866 (Merriam, 1963). Several mines in the eastern foothills of the Inyo Mountains just outside the study areas were opened between 1879 and 1907 (Waring and Huguenin, 1917), including the Loretto (copper), Scheelite (tungsten and copper), Opal (lead and silver), Bedell (lead and silver), Waucoba (tungsten and copper), Bunker Hill (lead and silver), and Blue Monster (lead and silver) mines (fig. 2). Mineral production is recorded from these mines for the period 1899-1964; none is currently operating. The Victor Consolidated mine, located as a gold prospect in 1909, was patented in 1912 and was later operated as a talc mine. The Loretto mine, developed by an 1,800 ft-deep shaft during the period 1907-1915 (Waring and Huguenin, 1917), was patented in 1922 and was under exploration as recently as 1975. Silver- and lead-bearing quartz veins at the Lee, Del, August, Ruby Port, Emma, Hillside, and Morning Star prospects in the Whipporwill Flat - Jackass Flats area were prospected probably before 1900. Placer gold was discovered in Marble Canyon before 1904 (Tucker and Sampson, 1938). Substantial development began in 1934 and at least three placer mines just west of the study area were active in 1982. Silver-lead-zinc deposits in the Ubehebe district, which includes the Lower Saline Wilderness Study Area, were mined in the early 1900s. All of these mines are outside this study area. The first recorded production from the district was of silver from the Ubehebe mine (fig. 2) in 1908. The Lippincott mine was worked for lead and silver as early as 1908, and the Blue Jay mine, one-half mile east of the south end of the Saline Valley Wilderness Study Area, produced high-grade copper and silver ore in 1915 (McAllister, 1955) All were idle in 1982. Salt deposits were discovered in the playa at the bottom of Saline Valley, outside the study areas, in 1864 (Bailey, 1902). An aerial tramway across the Inyo Mountains to Owens Valley was used to haul salt from the deposits between 1913 and 1930 (Ver Planck, 1958). Borax from surficial deposits was mined in Saline Valley west of the Lower Saline Wilderness Study Area from 1895 to 1907 (McAllister, 1955; Gale, 1914). Talc deposits northwest of the Saline Valley Wilderness Study Area were known by the early 1900s and were worked as recently as 1970; Talc deposits in the Inyo Mountains and small amounts of chalcopyrite. Skarn adjacent to the Hunter Mountain quartz monzonite in the southern part of the study area contains copper minerals and molybdenite. Chalcopyrite, specular hematite and molybdenite are scattered through garnet-rich tactite at the Blue Jay mine, 0.5 mi east of the Saline Valley Wilderness Study Area (fig. 2). Core from 3,807 ft of drilling in 11 holes near the Blue Jay mine in 1970 contained a maximum of 2.67 percent copper and 0.18 percent molybdenum in small erratically distributed pods (Rumsey, 1983). Small copper-bearing skarn pods exist in nearby parts of the study area at the Lucky Rich prospect (fig. 2, no. 44), and other prospects (fig. 2, nos. 46, 47). Gold Placer gold occurs in Marble Canyon (fig. 2), and lode gold is known at many localities in the Saline Valley and Lower Saline Wilderness Study Areas. Gold-bearing gravels extend for a distance of nine miles along the bottom of Marble Canyon (fig. 2). Eighteen shafts and 3,000 ft of drifts have been dug in the gravels west of the Saline Valley Wilderness Study Area. All of the recently active workings are in this part of the canyon. Three shafts, partly or completely caved, are inside the study area. The source of the gold in the Inyo Mountains is not known. McKee and others (1983) speculated that the gold may have been derived from a pre-Tertiary stream system that originated north of Marble Canyon, possibly in the White Mountains. Production has been mostly unrecorded, but at least 329 oz gold and 22 oz silver were recovered from more than 7,300 cu yd of gravel between 1936 and 1960. Gravel mined during that period averaged $1-7 per cu yd at a gold price of $35 per oz. The largest single nugget had a value of $300 (Tucker and Sampson, 1938). Three placer mines just west of the study area were active in 1982. Gold occurs in hydrothermally altered shear zones at the Jenny B. prospect located at the north end of the range that contains Dry Mountain (fig. 2, no. 38). The host rocks are limestone and intensely sheared quartzite at the sole of the Last Chance thrust. Samples of altered rock collected at the surface contain anomalous concentrations of boron, copper, lead, manganese , niobium, and silver. Chip samples from workings on the property contain from a trace to 0.19 oz gold per ton and a wide range of silver and copper concentrations (table 1). The Leah-Venessa prospect (fig. 2, no. 37), 0.6 mi southwest of the Jenny B. prospect, has gold in veins in highly faulted calcareous shale and limestone of the Lost Burro Formation. Chip samples collected across one mineralized zone averaged 0.099 oz gold per ton (table 1). Geochemical samples collected at the surface have the same suite of elements as samples from rocks at the Jenny B. prospect. Anomalous concentrations of gold were found in rock samples collected in the vicinity of the Crater mine, both inside and outside the study area (fig. 2). A sulfur deposit, a mercury mine, and numerous mercury prospects exist in the area around the Crater mine and are discussed later, but no properties have been worked for gold. However, stream-sediment samples and rock samples from prospects in this area have high concentrations of mercury, antimony, and arsenic, which are key elements in the well known geochemical suite characteristic of epithermal gold deposits (Erickson and others, 1966; White, 1981). Various combinations of these elements were found at mercury prospects southwest of the Crater mine (fig. 2, nos. 5-10, 12-14), and gold was detected at four of the prospects (table 1). The high detection limit for gold by the spectrographic technique used-10 ppm in stream-sediment samples and 20 ppm in heavy mineral concentrates-is too high to assess adequately the gold potential in the Crater survey. Epithermal gold deposits also commonly exhibit evidence of several stages of silicification, brecciation, and stockwork veining. Such repetitive hydrothermal activity is not in evidence in these areas. Placer Gold.- Areas 12 and 13 outline alluvial gravels in Marble Canyon in the western part of the study area. Area 12 contains the gravels that extend into the study area from the west and can be followed a distance of about 1.5 mi down the canyon from the west border of the area. Because these gravels contain mines at several localities along a considerable portion of area 12 inside as well as outside the study area, the area is assessed as having a high potential for resources of placer gold at localities that have not been explored by mine workings. Bedrock is exposed along the bottom of Marble Canyon downstream from the east end of area 12 to the west end of area 13. Gravel is again exposed in area 13 to the lower end of the canyon, and these gravels could be expected to have placer gold that was transported downstream beyond area 12. Significant concentrations of placer gold, it present in area 13, reasonably would be at and near the bottom of the alluvium as they are in area 12. Area 13 has a moderate potential for the occurrence of gold resources in placer deposits. Vein gold.- Area 5 is in the northern part of the mountains that contain Dry Mountain and has the Jenny B. prospect at its northeast end and the Leah-Venessa prospect at its southwest end. Evidence of iron oxides of hydrothermal origin in the area were detected in remote sensing data. Anomalous concentrations of boron, copper, lead, manganese, niobium, and silver, mentioned earlier as having been found at both prospects, is permissive of an origin by mesothermal mineralization. Despite the modest values of precious metals identified at the prospects, the area appears to be weakly mineralized and is assigned a low potential for the occurrence of gold resources. Copper and Molybdenum Copper and molybdenum occur in skarn deposits developed in calcsilicate rocks formed from Paleozoic carbonate rocks adjacent to the Hunter Mountain pluton near the southern end of the study area, and in small skarn bodies enclosed in the Hunter Mountain pluton in nearby parts of Death Valley National Monument. The amounts of copper, molybdenum, and various other metals are low in these deposits, and the areas containing the skarns are interpreted as having no recognized potential for resources of these metals. Copper and precious metals occur in skarn developed in a marble inclusion in the diorite of Marble Canyon near the north end of the study area (Black Rock prospect, fig. 2, no. 16). Despite modest metal values at the prospect, the small size of this and similar marble inclusions indicate that no recognized resource potential exists for copper or other metals in the area containing the inclusions. Copper without associated molybdenum has been explored in workings of the Loretto mine (fig. 2), but because mineralized rock at this property does not extend into the study area the resource potential for copper in the mine area was not determined. Concentrations of metals (as much as 1,500 ppm arsenic, 1,000 ppm copper, 0.8 ppm gold, 200 ppm lead, 1,000 ppm molybdenum, 15 ppm silver, and 500 ppm zinc) in veins containing iron oxides and quartz were found in area 9 (fig. 3) in Burchfiel's (1969) border phase of the Hunter Mountain pluton. Tungsten, boron, and niobium also were found in selected samples. These veins, the pervasive sericitic alteration between the veins, and a local stockwork of fine-grained quartz veins in the granite are indicative of a hydrothermal system probably related to the cooling of the Hunter Mountain pluton. An audiomagnetotelluric survey in the area indicated that the alteration extends 1/2 to 1 km in depth. EX-28 14 LOAN AGREEMENT Exhibit 28 (i) Loan Agreement This agreement is entered into by and between Summa Metals Corp., a Nevada Corporation (Summa) having its principal offices at 1588 Sea Lancer, Lake Havasu City, AZ, and Mr. C.W. Lewis and Mrs. Neva B. Lewis or their assigns (Lewis), both as Individuals whose address is Box 1160 Powel, Wyoming, 82435 and WHERE AS: Summa is a company involved in the mining of Gold in the United States and Mexico and; WHERE AS: Summa is in need of short term operating capital and, WHERE AS: Lewis is wanting to provide Summa with said short term operating capital and THEREFORE: In consideration of the representations and warranties, covenants and agreements hereinafter made, the parties hereto have agreed and do hereby agree in manner and form as hereinafter set forth: Lewis will provide $20,000, receipt of which is hereby acknowledged, as forth in 2 and 3 below. In consideration for the $20,000 Summa will pay to Lewis the sum of $50,000 from the proceeds of its planned public offering no later than June 1, 1995. In the event of default by Summa, Lewis may at his sole option, extend the June 1 date having no other effect on the obligations of Summa. Summa will in addition to the above $50,000 will provide Lewis , or his designee, 30,000 shares of the company's restricted capital stock. Such notification to the company's transfer agent will be within three working days from the date of this agreement. Threatened of pending proceedings. Lewis and Summa warrant that no proceedings shall have been initiated of threatened by any governmental department, commission, bureau, board, agency of instrumentality or any other bona fide third party seeking to enjoin or otherwise restrain or to obtain an award for damages in connection with consummation of the transaction contemplated hereby. Authorization. All corporate action necessary to authorize the execution, delivery and performance by both parties of this Agreement and any other agreements or instruments contemplated hereby to which either is a party, have been duly and validly taken by Summa and Lewis and be furnished each to the other with copies of all applicable resolutions certified by the Secretary of the respective companies. Consents. Both Summa and Lewis shall have received the approvals, consents and authorizations of all third parties necessary to effect the validly of this agreement. Brokerage. Neither Lewis nor Summa has dealt with any broker or finder in connection with the transaction contemplated herein, and each of them agrees to indemnify and hold the other party harmless in connection with any claims for commissions or other compensation made by any broker of finder claiming to have been employed by it on its behalf in connection with the transactions contemplated herein. Expenses. Except as other wise provided herein, Lewis and Summa shall pay the fees and expenses of their respective accountants and legal counsel incurred in connection with the transactions contemplated by this Agreement. Notices. Any demand, notice or other communication required of permitted under or in connection with the transactions contemplated by this Agreement shall be in writing and shall be deemed to be effective when delivered by facsimile or in person or deposited in the United States mail and sent by certified or registered mail, return receipt requested, addressed a s follows: If to Summa: Summa Metals Corp. 28281 Crown Valley Pky, Suite 225 Laguna Niguel, CA 92677-1461 If to Lewis : P.O. Box 1160 Powell, Wyoming 82435 Waiver. The failure of any party hereto at any time or times hereafter to exercise any right, power, privilege or remedy hereunder or to require strict performance by the other or another party of any of the provisions, terms or conditions contained in this Agreement or in any other document, instrument or agreement contemplated hereby or delivered in connection herewith shall not waive, affect, or diminish any right, power, privilege or remedy of such party at any time or times thereafter to demand strict performance thereof; and, no rights of any party hereto shall be deemed to have been waived by any act of knowledge of such party hereto on any of its rights on any one occasion shall operate as a waiver of any other of its rights or any of its rights on a future occasion. Section Headings. The section headings in this agreement are for the convenience of reference only and shall not be deemed to be a part of this Agreement or to alter or affect any provisions, terms or conditions contained herein. Exhibits and Schedules. Any exhibits, appendices and/or schedules referenced herein, shall be deemed to be attached hereto and made a part hereof. All references herein to the Agreement shall include all schedules, exhibits, appendices and financial statements and/or other documents delivered hereunder. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If any portion of this Agreement is declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of the Agreement which shall continue in full force and effect as if this Agreement had been executed with the invalid portion thereof deleted. Furthermore, the entirety of this Agreement shall continue in full force and effect in all other jurisdiction. Entire understanding. This Agreement contains the entire understanding between the parties hereto with respect to the transactions contemplated hereby and such understandings shall not be modified except in a writing signed by or on behalf of the parties hereto. Binding Effect. This Agreement shall be binding upon and shall inure to the exclusive benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. This Agreement is not intended to, nor shall it create any rights in any other party. Governing Law. This Agreement is and shall be deemed to be a contract entered into and made pursuant to the laws of the laws of the State of California and shall in all respects be governed , construed, applied and enforced in accordance with the laws of said state, without reference to conflict of principals, and any dispute arising from this Agreement shall be brought solely within the courts of Orange County, City of Orange, the State of California. References. Each reference herein to a party hereto shall be deemed to include such party's legal representatives, successors and assigns, all of whom shall be bound by the provisions hereof. Each reference to a party hereto and any pronouns referring thereto as used herein shall be construed in the masculine, feminine, neuter, singular or plural, as the context may require. Assignment. Each party hereto shall be able to sell, pledge, assign or otherwise transfers rights under this Agreement, in whole or in part, only upon receiving written consent from the other, a consent that shall not be unreasonably withheld. For purposes hereof the transfer of the party's rights under this Agreement shall be deemed to include a transfer of a majority of the voting tights with respect to such party. Counter parts. This Agreement may be signed in any number of counterparts each of which shall be deemed to be an original and all of which together shall constitute by one and the same instrument. . Executed on this _7th__day of March, 1995 in the City Lake Havasu, the county of Mohave, the state of Arizona. By: THE SUMMA METALS CORPORATION Lewis /s/ Michael M. Chaffee /s/ C.W. Lewis ------------------------ ------------------------- Michael M. Chaffee C.W. Lewis, an Individual President, Chairman, CEO /s/ Neva Lewis ------------------------- Neva Lewis, an Individual -----END PRIVACY-ENHANCED MESSAGE-----