<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION NO.: 333-34685
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
APEX SILVER MINES LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS 1044 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
CALEDONIAN HOUSES, GROUND FLOOR
MARY STREET
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS, BRITISH WEST INDIES
(345) 949-0050
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
THOMAS S. KAPLAN
PRESIDENT & CHIEF EXECUTIVE OFFICER
APEX SILVER MINES CORPORATION
1700 LINCOLN STREET, SUITE 3050
DENVER, COLORADO 80203
(303) 839-5060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------
COPIES TO:
PATRICK J. DOOLEY, ESQ. ROBERT F. WALL, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, WINSTON & STRAWN
L.L.P. 35 WEST WACKER DRIVE, SUITE 4200
590 MADISON AVENUE CHICAGO, ILLINOIS 60601
NEW YORK, NEW YORK 10022 (312) 558-5600
(212) 872-1000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus; one to be used
in connection with an offering to the public and a concurrent offering to a
shareholder of the Company in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering to the public outside the United States and Canada (the
"International Prospectus"). The two prospectuses are identical except for the
front cover page, back cover page and the "Underwriting" section. The front
cover page, back cover page and "Underwriting" section to be used in the
International Prospectus are included herein and are labeled "Alternate Front
Cover Page for International Prospectus", "Alternate Back Cover Page for
International Prospectus" and "Alternate Page for International Prospectus",
respectively.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
NOVEMBER 18, 1997
PROSPECTUS
9,000,000 SHARES
[LOGO OF APEX SILVER MINES LIMITED APPEARS HERE]
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
Of the 9,000,000 shares (the "Shares") of ordinary shares, par value $0.01 per
share, (the "Ordinary Shares") of Apex Silver Mines Limited (the "Company")
offered hereby (the "Offerings"), 6,100,000 Shares are being offered initially
in the United States and Canada by the U.S. Underwriters, 1,800,000 Shares are
being offered initially outside the United States by the International
Underwriters and 1,100,000 shares are being offered in a Concurrent Offering by
the Company directly to a shareholder of the Company at a price per share equal
to the initial public offering price per share. The consummation of the
Concurrent Offering and the initial public offering are contingent upon each
other. To the extent the shareholder purchases less than the maximum 1,100,000
Ordinary Shares to be sold pursuant to the Concurrent Offering, the number of
Ordinary Shares available to the general public by the U.S. Underwriters will
be increased accordingly. See "Concurrent Offering" and "Underwriting." Upon
completion of the Offerings (assuming the over-allotment options granted to the
U.S. Underwriters and the International Underwriters are not exercised), the
Company will own 76.2 percent of the outstanding share capital of Apex Silver
Mines LDC ("Apex LDC"), the Company's principal operating subsidiary. See
"Corporate Structure". The minority shareholders of Apex LDC (the "Minority
Shareholders") are entitled to sell their shares of Apex LDC to the Company
for, at the Company's sole option, Ordinary Shares on a one-for-one basis,
cash, or a combination of cash and Ordinary Shares. The Company currently
expects that any future purchases by the Company of shares of Apex LDC from the
Minority Shareholders will involve only Ordinary Shares of Apex Silver Mines
Limited. Any such transactions will not affect the beneficial or economic
interest in Apex LDC attributable to shareholders of Apex Silver Mines Limited.
Currently, the Company has approximately 13,601,544 Ordinary Shares outstanding
and approximately 7,077,007 Ordinary Shares reserved for issuance for
approximately 7,077,007 shares of Apex LDC owned by the Minority Shareholders.
If all such shares of Apex LDC were issued, the Company would have 20,678,551
Ordinary Shares outstanding, excluding the Shares to be sold in the Offerings.
See "Certain Transactions". An application has been made to list the Shares for
quotation on the American Stock Exchange under the trading symbol "SIL",
subject to notice of issuance.
Prior to the Offerings, there has been no public market for the Shares. It is
anticipated that the initial offering price will be between $13.00 and $15.00
per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN PURCHASING THE SHARES OFFERED HEREBY, SEE "RISK FACTORS" ON PAGE
8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Ordinary Share.............................. $ $ $
Total(3)........................................ $ $ $
</TABLE>
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(1) Salomon Brothers Inc, PaineWebber Incorporated, Scotia Capital Markets
(USA) Inc. and Smith Barney Inc. are also acting as the Company's Placement
Agents in connection with the Concurrent Offering, and the Company has
agreed to pay the Placement Agents a fee of $ per Ordinary Share sold in
the Concurrent Offering. In addition, the Company has agreed to indemnify
the U.S. Underwriters and the Placement Agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting".
(2) Before deducting certain expenses of the Offerings, payable by the Company,
estimated to be $1,500,000.
(3) The Company has granted the U.S. Underwriters and the International
Underwriters 30-day options to purchase up to an aggregate 1,185,000
additional Ordinary Shares, at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If the U.S. Underwriters
and the International Underwriters exercise such options in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting".
The Ordinary Shares offered in the initial public offering are subject to
receipt and acceptance by the U.S. Underwriters, to prior sale, and to the U.S.
Underwriters' right to reject any order in whole or in part and to withdraw,
cancel or modify the offer without notice. It is expected that delivery of the
Shares will be made at the office of Salomon Brothers Inc, Seven World Trade
Center, New York, New York, or through the facilities of the Depository Trust
Company, on or about , 1997.
SALOMON BROTHERS INC
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS
SMITH BARNEY INC.
The date of this Prospectus is , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
(i)
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES LAWS
Apex Silver Mines Limited is a Cayman Islands corporation, and certain of
its officers and directors are residents of various jurisdictions outside the
U.S. All or a substantial portion of the assets of the Company and of such
officers and directors, at any one time, are or may be located in
jurisdictions outside the U.S. In particular, Apex Silver Mines LDC, the
Company's majority-owned subsidiary, through which the Company conducts all of
its operations, is a Cayman Islands exempted limited duration company.
Therefore, it ordinarily could be difficult for investors to effect within the
U.S. service of process on the Company or any of those officers and directors
who reside outside the U.S. or to recover against the Company or such
individuals on judgments of courts in the U.S., including judgments predicated
upon civil liability under the U.S. federal securities laws and similar state
laws. Notwithstanding the foregoing, the Company has irrevocably agreed that
it may be served with process with respect to actions based on offers of
Shares made hereby in the U.S. by serving Apex Silver Mines Corporation, 1700
Lincoln Street, Suite 3050, Denver, Colorado 80203, its United States agent
appointed for that purpose.
The Company has been advised by its Cayman Islands counsel, W. S. Walker &
Company, that there may be circumstances where the courts of the Cayman
Islands would not enforce (i) judgments of U.S. courts obtained in actions
against the Company or officers or directors of the Company not resident
within the U.S. predicated upon the civil liability provisions of the U.S.
federal securities laws and similar state laws or (ii) original actions
brought in the Cayman Islands against the Company or such persons predicated
solely upon U.S. federal securities laws. There is no treaty in effect between
the U.S. and the Cayman Islands providing for such enforcement, and there are
grounds upon which Cayman Islands courts may not enforce judgments of U.S.
courts. Certain remedies available under the laws of U.S. jurisdictions,
including certain remedies under U.S. federal securities laws, may not be
allowed in Cayman Islands courts as contrary to public policy.
* * * * *
Except as expressly provided in the Underwriting Agreement, no Shares may be
offered or sold in the Cayman Islands.
(ii)
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, (i) all references to the "Company" include Apex Silver
Mines Limited, its predecessor entities, and each of its direct and indirect
subsidiaries or other entities in which Apex Silver Mines Limited has a direct
or indirect equity or voting interest, (ii) all references to "Apex Limited"
refer exclusively to Apex Silver Mines Limited, and (iii) all references to
"dollars" or "$" refer to dollars of the United States of America. References
herein to the "Offerings" include the 6,100,000 Ordinary Shares being offered
initially in the United States and Canada by the U.S. Underwriters (the "U.S.
Offering"), the 1,800,000 Ordinary Shares being offered initially outside the
United States by the International Underwriters (the "International Offering")
and the 1,100,000 Ordinary Shares to be sold by the Company directly to a
shareholder concurrent with the initial public offering (the "Concurrent
Offering"). See "Concurrent Offering" and "Underwriting." Except where
otherwise specified, all information in this Prospectus assumes that the over-
allotment options granted to the U.S. Underwriters and the International
Underwriters are not exercised. Capitalized terms used herein without
definition are defined elsewhere in this Prospectus. See "Glossary" for
definitions of certain technical terms.
THE COMPANY
Apex Silver Mines Limited is engaged in the exploration and development of
silver properties in South America, Central America and Central Asia. The
Company has accumulated one of the largest, privately controlled portfolios of
silver exploration properties in the world. Since 1993, the Company has
acquired the rights to or gained control of 27 non-producing silver properties
located in or near the traditional silver producing regions of Bolivia, Peru,
Chile, Honduras, Mexico, Kyrgyzstan, Mongolia and Tajikistan. Exploration
efforts since 1993 have successfully produced the Company's first development
project, the San Cristobal project (the "San Cristobal Project") located in
southern Bolivia, where regular and close spaced drilling and analysis have
delineated substantial proven and probable reserves of silver, zinc and lead.
In addition, exploration activities at the Company's other properties in
Bolivia, Peru and Honduras indicate the presence of significant quantities of
mineralized material containing silver and other metals.
SAN CRISTOBAL STUDY
A first phase feasibility study (the "San Cristobal Study") was completed in
August of 1997 with respect to the San Cristobal Project, which is located in
the San Cristobal district of the Potosi department in southern Bolivia, a
region that has historically produced a significant portion of the world's
silver supply. The San Cristobal Study indicates that the San Cristobal Project
contains in excess of 219 million ounces of silver in the proven and probable
reserves of 122.9 million tonnes of ore based on an average grade of
approximately 1.8 ounces of silver per tonne and contains in excess of 1.8
million tons of zinc and 0.6 million tonnes of lead in these proven and
probable reserves, based on average grades of 1.49 and 0.51 percent,
respectively. At and near the San Cristobal Project, several deposits contain
an additional 57.1 million tonnes of mineralized material, comprised of 43.3
million tonnes of mineralized material with average grades of 1.28 ounces of
silver per tonne and 1.1 percent of zinc and 0.34 percent of lead and 13.8
million tonnes of mineralized material at an average grade of 4.21 ounces of
silver per tonne. The full dimensions of the mineral deposits at the San
Cristobal Project have not yet been determined; mineralized material extends
outward from the identified ore body in most directions as well as to depths
below 200 meters. The reserve estimates are limited by the current extent of
the Company's program of closely spaced drilling analysis. The Company will be
conducting an ongoing exploration program in order to fully delineate the
mineralized zones.
1
<PAGE>
The San Cristobal Study was prepared for the Company by Kvaerner Metals, Davy
Nonferrous Division ("Davy"), an international engineering procurement,
construction and management firm. Davy was also retained by the Company to
confirm independently the reliability of the Company's drilling and sampling
procedures at the San Cristobal Project. A more detailed summary of key
conclusions from the San Cristobal Study is provided elsewhere in this
Prospectus. See "Development Project--San Cristobal Project--First Phase
Feasibility Study Results".
All aspects of this confirmatory process were controlled by Davy, including
(i) the number of test holes required (four), site selection and drilling of
the four reverse circulation drill holes parallel to holes previously drilled
by the Company; (ii) sample collection, preparation and transportation; and
(iii) assay analysis. Davy's work confirmed results reported by the Company.
Behre Dolbear & Company Inc. ("Behre Dolbear"), a geological and mining
consulting firm, conducted a technical audit of and confirmed, within the
accuracy of plus or minus 25 to 30 percent, the work undertaken by Davy and the
other independent technical specialists who contributed to the San Cristobal
Study. The San Cristobal Study concluded with an economic assessment of the
identified mineral deposits.
Based on the San Cristobal Study, the San Cristobal Project, as currently
delineated, is forecast to produce an average of 14 million ounces of silver,
132,700 tonnes of zinc and 39,500 tonnes of lead per year over the anticipated
11.5 year life of the project. The San Cristobal Project is expected to consist
of two large scale, open pit mining operations using conventional mining and
processing technologies capable of producing and processing an aggregate 30,000
tonnes per day ("tpd") of ore. The stripping ratio for open pit operations is
1.66 tonnes of waste for each tonne of ore. The average cash production cost
over the life of the San Cristobal Project is forecast to be $2.66 per silver
equivalent ounce. Capital expenditures are estimated to total $327 million for
pre-production development and construction to complete the San Cristobal
Project. Based on the favorable results of the San Cristobal Study, the Company
is targeting the completion of a second phase feasibility study of the San
Cristobal Project by the third quarter of 1998 with a goal of securing
committed financing by late 1998. Subject to the completion of a second phase
feasibility study and securing committed financing, the Company anticipates
beginning construction at the San Cristobal Project in early 1999, with silver,
zinc and lead production commencing in early 2001.
In addition, the Company's recent drilling at its Cobrizos property, located
approximately 12 kilometers north of the San Cristobal Project within the San
Cristobal district, has identified approximately 10.8 million tonnes of
mineralized material with an average grade of 4.3 ounces of silver per tonne.
The Company plans to conduct further drilling and engineering studies to
establish proven and probable reserves.
The Company estimates that its San Cristobal district properties may contain
some of the largest known open pit silver, zinc and lead deposits in the world.
Based on the general geology of the San Cristobal district, the drilling and
analysis performed for the San Cristobal Study, and the amount of mineralized
material identified to date, the Company expects that the San Cristobal Project
could be extended in life and/or increased in scale.
There are certain specific risks associated with the San Cristobal Project,
and thus there can be no assurance that the Company will successfully develop
the San Cristobal Project. See "Risk Factors--San Cristobal Project Risks."
OTHER PROPERTIES
The Company is currently evaluating three other advanced-stage exploration
properties: the El Ocote silver property in southwestern Honduras; the San Juan
de Lucanas silver and gold property in southern Peru; and the Choroma silver
prospect in southern Bolivia. At the El Ocote property, the
2
<PAGE>
Company has completed a conceptual engineering study in order to determine the
feasibility of bringing the property into production. Based on the results of
this study, the Company is planning a comprehensive metallurgical sampling and
test program. Upon completion of the registration of its ownership of the San
Juan de Lucanas property, the Company will conduct a focused exploration and
evaluation program to establish and develop reserves by, among other things,
drilling targets identified by previous exploration activities. Sampling of
outcrops at the Choroma silver prospect has defined several anomalies which the
Company plans to drill to test for bulk mineable mineralization and access
existing underground workings for further sampling.
The Company controls a portfolio of silver properties covering more than two
million acres of mineral rights in eight countries. The Company has conducted
limited drilling and sampling at some of these other exploration properties and
anticipates that certain of these properties may contain significant silver
mineralization.
BUSINESS STRATEGY
The Company is one of a limited number of mining companies with a primary
focus on silver exploration, development and production. The Company's business
strategy is to capitalize on its sizeable reserve and mineralized material base
in order to achieve long-term profitable growth and enhance shareholder value.
The principal elements of the Company's business strategy are as follows: (i)
to complete a second phase feasibility study of a large scale open pit mining
operation at the San Cristobal Project; (ii) to secure the financing required
to develop the San Cristobal Project; (iii) to proceed to develop the San
Cristobal Project into a large scale open pit mining operation; (iv) to
continue exploration and evaluation activities at the Cobrizos property in
southern Bolivia, the El Ocote property in southwestern Honduras, the San Juan
de Lucanas property in southern Peru, and to commence drilling and underground
sampling at the Choroma property in southern Bolivia; (v) to evaluate other
properties in the Company's portfolio of silver exploration properties,
focusing the Company's exploration and development efforts on those properties
which are most likely to contain significant silver mineralization and
divesting itself of those properties that are not of continuing interest to the
Company; and (vi) to identify and acquire additional mining and mineral
properties that the Company believes contain significant amounts of silver or
have exploration potential.
The Company believes that its expanding international portfolio of
development and exploration properties position it to take advantage of future
increases in demand for silver and certain co-occurring minerals, such as zinc,
lead, copper and gold.
BUSINESS STRENGTHS
The Company's substantial proven and probable reserves of silver, zinc and
lead, its additional significant silver, zinc, lead, copper and gold
mineralized material, its large exploration property portfolio and its
experienced management team position the Company to become a major precious and
base metals producer and to benefit from favorable developments in these
markets.
MAJOR SILVER DEVELOPMENT PROJECT
The San Cristobal Study indicates that the San Cristobal Project may
constitute one of the largest known mineable silver deposits in the world.
Based on the San Cristobal Study, two of the 15 mineralized deposits identified
at the San Cristobal Project are estimated to contain total proven and probable
reserves of 219 million ounces of contained silver as well as significant
amounts of zinc and
3
<PAGE>
lead. The San Cristobal Study indicates that production at the San Cristobal
Project could commence as early as 2001 at a rate of 30,000 tpd of ore
producing on average 14 million ounces of silver, 132,700 tonnes of zinc metal
and 39,500 tonnes of lead metal, subject to the results of a second phase
feasibility study and securing the required financing. The San Cristobal Study
indicates that the nature and extent of the deposits at the San Cristobal
Project will enable the development of a large scale, open pit mining operation
with low stripping ratios that utilizes conventional mining and processing
technology, enabling the Company to benefit from economies of scale in
production.
DIVERSIFIED PORTFOLIO OF SILVER PROPERTIES
The Company's current property portfolio is diversified not only in terms of
property location, but also in terms of stages of evaluation. The Company's
development, advanced exploration and other exploration stage mineral
properties are located primarily in or near traditional silver producing
regions in South America, Central America and Central Asia. These properties
include substantial holdings throughout southern Bolivia, northern Chile,
southwestern Honduras, southern Peru, and the Zacatecas district of Mexico, as
well as significant mineral concessions in Kyrgyzstan, Mongolia and Tajikistan.
Initial analyses of several of the Company's early-stage exploration properties
indicate the presence of sufficient silver mineralization to warrant additional
exploration and evaluation in order to determine the potential for future
development. Notwithstanding its primary focus on silver, the Company intends
to exploit, where economically feasible, co-occurring minerals, such as zinc,
lead, copper and gold, at its mineral properties.
EXPERIENCED MANAGEMENT TEAM
The management of the Company is comprised of an experienced team of mining
experts, whose experience in managing, identifying, developing, building and
bringing into production major mining enterprises averages approximately 30
years. In addition, many of the members of the Company's management team have
extensive experience in operating large scale mining projects for major
international mining companies throughout the world. Certain of the Company's
senior executives and the members of its Development Committee have had overall
responsibility for the development and operation of major mining operations,
including, among others, one major expansion of an existing iron ore mine
costing $170 million, two new mine developments each costing $165 million, the
operation and administration of major open pit iron and zinc/silver mines
located in Peru, the development, construction and start up of the $230 million
Muruntau gold project in Zarafshan, Uzbekistan, the $450 million (Australian)
Mount Keith open pit nickel mine, and participation in the identification of
several multi-million ounce gold deposits.
COMPANY HISTORY
The Company was founded in 1993 to acquire and develop attractive silver
properties throughout the world. Since 1993, the Company has accumulated a
portfolio of silver exploration properties covering more than two million acres
in eight countries. These acquisitions were premised on several factors,
including (i) the low price of silver relative to the price of other precious
metals, (ii) a perception that silver supply and demand fundamentals were
stronger than the then-prevailing price of silver suggested, (iii) the general
scarcity of attractive publicly-traded silver companies and (iv) the perception
of negative sentiment within the traditional silver mining community.
In December of 1994, in connection with an investment by Silver Holdings LDC
("Silver Holdings"), the Company reorganized as a Cayman Islands holding
company with regionally targeted subsidiaries. See "Corporate Structure",
"Certain Transactions" and "Principal Shareholders".
4
<PAGE>
Following this reorganization and new investment, Apex Silver Mines LDC, an
exempted limited duration company organized under the laws of the Cayman
Islands ("Apex LDC"), accelerated its program of acquiring silver exploration
properties. In March of 1996, in connection with a private placement of common
stock (the "1996 Private Placement"), Apex Limited was organized. The 1996
Private Placement, which was completed as of August 6, 1996, raised gross
proceeds of $34.1 million. See "Certain Transactions".
Apex Limited conducts all of its operations through Apex LDC and the
subsidiaries of Apex LDC; Apex Limited's assets consist exclusively of its
shares in Apex LDC. Prior to the Offerings, Apex Limited owned approximately 66
percent of the issued and outstanding shares of Apex LDC; upon completion of
the Offerings (assuming the over-allotment options granted to the U.S.
Underwriters and International Underwriters are not exercised), Apex Limited
will own approximately 76.2 percent of the issued and outstanding share capital
of Apex LDC. Currently, Apex Limited has approximately 13,601,544 Ordinary
Shares outstanding and approximately 7,077,007 Ordinary Shares reserved for
issuance for approximately 7,077,007 shares of Apex LDC owned by the Minority
Shareholders. If all such shares of Apex LDC were issued, Apex Limited would
have 20,678,551 Ordinary Shares outstanding. See "Corporate Structure" and
"Certain Transactions".
ADDRESS, PRINCIPAL OFFICE
The Company was formed under the laws of the Cayman Islands and maintains its
registered office at Caledonian House, Ground Floor, Mary Street, George Town,
Grand Cayman, Cayman Islands, British West Indies.
The Company has contracted with Apex Silver Mines Corporation ("Apex
Corporation"), a wholly-owned subsidiary of Apex LDC, for certain management
services. Apex Corporation maintains its principal office at 1700 Lincoln
Street, Suite 3050, Denver, Colorado 80203.
5
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Ordinary Shares offered by the
Company:
U.S. Offering............... 6,100,000 shares
International Offering...... 1,800,000 shares
Concurrent Offering......... 1,100,000 shares
----------------
Total(1).................. 9,000,000 shares
Ordinary Shares to be
outstanding after the
Offerings(1)(2).............. 22,601,554
Use of Proceeds............... The Company intends to use the net proceeds
for one or more of the following purposes: (i)
feasibility studies, financing and
construction and development of its San
Cristobal district properties in Bolivia, (ii)
exploration and development activities at any
of the other properties within the Company's
existing portfolio, (iii) maintenance of
control or ownership of the Company's existing
mineral properties including ongoing lease
payments, and paying royalties and other
maintenance and registration fees, and (iv)
acquisition of additional properties or
businesses that are complementary to those of
the Company. In addition, the Company may use
the net proceeds as working capital and to
finance other general corporate purposes. Apex
Limited will contribute the gross proceeds
from the Offerings, and all associated
expenses, to Apex LDC.
American Stock Exchange
Symbol....................... SIL
</TABLE>
- --------
(1) Does not include up to an aggregate 1,185,000 additional Ordinary Shares
subject to over-allotment options granted to the U.S Underwriters and the
International Underwriters. See "Underwriting".
(2) Excludes (i) Ordinary Shares reserved for issuance pursuant to options that
were or may be granted pursuant to the Company's Employee Share Option Plan
and Non-employee Director Share Option Plan, and (ii) approximately
7,077,007 Ordinary Shares reserved for issuance to the Minority
Shareholders. See "Executive Compensation--Share Option Plans" and "Certain
Transactions".
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN RISK FACTORS RELATING
TO AN INVESTMENT IN THE SHARES. SEE "RISK FACTORS".
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<PAGE>
RESERVES AND MINERALIZED MATERIAL DATA
The following table sets forth the Company's proven and probable reserves of
silver, zinc and lead as of August 29, 1997 at the San Cristobal Project. The
reserves reflected below are based on an equivalent cut-off grade of 1.0 ounce
of silver per tonne and prices of $5.00 per ounce for silver and $0.55 and
$0.30 per pound for zinc and lead, respectively. Proven and probable reserves
include an average recovery of 75.5 percent for silver, 78.0 percent for zinc
and 73.3 percent for lead. The proven and probable reserves and mineralized
material have been determined by Mine Reserves Associates Inc. ("MRA"),
independent consultants working as members of the first phase feasibility
consultants' team. Confirmation of the reserves and mineralized material was
also conducted by another independent consulting firm, Pincock, Allen & Holt
("PAH") which developed an independent resource grade model using a common data
set that checked closely with the reserve estimates. Davy and, separately,
Behre Dolbear acting as technical auditor, reviewed the reserve estimates and
confirmed the results reported below within the accuracy of the study. See
"Properties--Development Project--San Cristobal Project--Reserves and
Mineralized Material."
PROVEN AND PROBABLE RESERVES--SAN CRISTOBAL PROJECT
<TABLE>
<CAPTION>
CONTAINED METALS
AVERAGE GRADE (000'S)
-------------------------------- --------------------------
TONNES SILVER SILVER ZINC LEAD
(000'S) (OUNCES/TONNE) ZINC (%) LEAD (%) (OUNCES) (TONNES) (TONNES)
-------- -------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
122,891 1.79 1.49 0.51 219,472 1,836 629
</TABLE>
Stripping ratio for the open pit operations is 1.66 tonnes of waste for each
tonne of ore.
The following table sets forth the Company's estimates of the silver, zinc
and lead mineralized material contained in its property portfolio. Mineralized
material is that part of mineral deposits (i) for which tonnage and grade are
computed (a) partly from specific measurements, samples or production data
compiled from appropriately spaced assays of outcrops, trenches, underground
workings or drill holes and (b) partly from projections based on geological
evidence, and (ii) that have not been measured and sampled with sufficient
confidence to determine that the identified deposit can be economically and
legally extracted at the time of such determination. The mineralized material
estimates were determined by MRA for the Tesorera and Jayula deposits, and by
the Company with respect to the other deposits. In the case of the Cobrizos
deposit, the mineralized material estimates were verified by MRA. In the case
of the El Ocote deposit, the mineralized material estimates were developed by
the Company and reviewed by Behre Dolbear.
MINERALIZED MATERIAL
<TABLE>
<CAPTION>
AVERAGE GRADE
--------------------------------
SILVER
TONNES (000'S) (OUNCES/TONNE) ZINC (%) LEAD (%)
-------------- -------------- -------- --------
<S> <C> <C> <C> <C>
San Cristobal District
Tesorera deposit.............. 2,611 0.77 1.37 0.37
Jayula deposit................ 32,122 1.22 0.91 0.22
Animas deposit................ 8,600 1.67 1.71 0.76
Toldos deposit................ 3,000 3.86 -- --
Cobrizos deposit.............. 10,800 4.31 -- --
El Ocote deposit................ 2,100 9.90 -- --
</TABLE>
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Shares offered hereby should consider
carefully, in addition to the other information contained in this Prospectus,
the following risk factors:
LIMITED OPERATING HISTORY; HISTORY OF LOSSES
The Company, incorporated in the Cayman Islands in March of 1996, is the
successor to the mineral property acquisition, exploration and development
activities conducted by its affiliates since 1993. The Company has incurred
losses since its inception, and expects to incur additional losses for at
least the next four years. As of September 30, 1997, the Company had an
accumulated deficit of $30,795,900. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
RESERVE AND OTHER MINERALIZATION ESTIMATES
The reserves and other mineralization figures presented herein, unless
otherwise indicated, are based on estimates of contained silver and other
metals made by independent geologists and/or the Company's personnel. These
estimates are imprecise and depend on geological interpretation and
statistical inferences drawn from drilling and sampling which may prove
unreliable. There can be no assurance that such estimates will be accurate, or
that indicated reserves or mineralization can be profitably exploited. Since
production has not yet commenced on any of the Company's properties, reserves
and other mineralization estimates for these properties may require
adjustments or downward revisions based on actual production experience. Any
material reductions in estimates of the Company's reserves and other
mineralization, or of the Company's ability to extract such reserves or
mineralization, could have a material adverse effect on the results of
operations and financial condition of the Company.
The Company has completed a first phase feasibility study with respect to a
portion of only one of its properties, the San Cristobal Project. Accordingly,
the Company has not established the presence of any proven or probable
reserves at any of its other mineral properties. Although conceptual studies
have been prepared with respect to the Company's El Ocote and San Juan de
Lucanas exploration properties by independent parties using data and
assumptions provided by the Company, these studies involve assumptions and
projections based on a level of data insufficient to establish the presence of
proven or probable reserves. There can be no assurance that subsequent testing
or future feasibility studies will establish additional reserves at the
Company's properties. The failure to so establish additional reserves could
restrict the Company's ability to successfully implement its strategies for
long term growth.
In addition, there can be no assurance that the proven or probable reserves
set forth in the San Cristobal Study will actually be able to be mined and
processed profitably, if at all. The San Cristobal Study is based on many
assumptions, any, some, or all of which may prove to be inaccurate. The
failure of any such assumptions to prove accurate may alter the conclusions of
the San Cristobal Study and may have a material adverse effect on the Company.
In addition, the economics of mining at San Cristobal are based on (i) bench
scale metallurgical testing of drill samples from the property to estimate
extraction yields of silver and other metals, (ii) estimates of the cost of
creating and operating the necessary mine process infrastructure and transport
facilities to profitably extract the minerals at the property and (iii)
estimates of the market price of silver, zinc and lead. Such estimates can be
highly inaccurate. There can be no assurance that the Company will achieve the
anticipated extraction rates or operating costs, or create the necessary
facilities within the budgets, proposed by the San Cristobal Study.
8
<PAGE>
SAN CRISTOBAL PROJECT RISKS
In addition to the other risk factors, the San Cristobal Project involves
the following risks:
The proximity of the town of San Cristobal may adversely affect the
Company's ability to efficiently mine the San Cristobal Project. The Company
expects to seek to relocate the local population of approximately 350. There
can be no assurance that the Company will be able to develop an amicable and
economically feasible relocation program within the time period anticipated by
the Company's development plans. See "Properties--Development Project--San
Cristobal Project".
Although the Company anticipates that the development of the San Cristobal
Project will be successfully completed and that the resulting operations will
be in full production by early 2001, no assurance can be given that the
development of the San Cristobal Project will be completed on a timely basis,
that the operations will achieve the anticipated production capacity or that
the construction costs or ongoing operating costs associated with the
development of the San Cristobal Project will not be higher than anticipated.
The construction of expanded mining operations involves a number of
uncertainties, including factors beyond the Company's control. Failure to
complete the development of the San Cristobal Project on a timely basis or
unexpected cost increases could have a material adverse effect on future
results of operations and financial condition of the Company. If the capital
expenditures required to complete the development of the San Cristobal Project
are significantly higher than expected, there is no assurance that the
Company's capital resources would be sufficient to cover such costs or that
the Company would be able to obtain alternative sources of financing to cover
such costs. See "Use of Proceeds" and "Properties--Development Project--San
Cristobal Project".
NO PRODUCTION HISTORY
The Company has no history of silver production. The Company's strategy to
develop its economically feasible properties will require the construction or
rehabilitation and operation of mines, processing plants and related
infrastructure. As a result, the Company is subject to all of the risks
inherent in the establishment of new mining operations and business
enterprises. There can be no assurance that the Company will successfully
establish mining operations or profitably produce silver or other metals at
any of its properties.
MANAGEMENT OF GROWTH
The Company anticipates that as its mineral properties are brought into
production and as it acquires additional mineral rights, it will experience
significant growth in its operations. This growth is expected to create new
responsibilities for management personnel, as well as added demands on the
Company's operating and financial systems. There can be no assurance that the
Company will be successful in meeting such demands and managing its
anticipated growth. The Company's growth is dependent, in part, on the
continued identification and acquisition of additional mineral rights. There
can be no assurance that the Company will be successful in acquiring
additional mineral rights.
VOLATILITY OF METALS PRICES; HEDGING ACTIVITIES
The profitability of the Company and its long-term viability are dependent
in large part on the market price of silver and other metals, including zinc
and lead. The market prices for such metals are volatile and are affected by
numerous factors beyond the Company's control, including expectations for
inflation, speculative activities, currency exchange fluctuations, global or
regional consumption patterns, supply of and demand for silver and the other
metals, political and economic conditions and production and transportation
costs. The aggregate effect of these factors is impossible for the Company to
predict and could have a material adverse effect on the Company and the
results of its operations.
9
<PAGE>
Certain mining operations, including the San Cristobal Project, may be
dependent upon anticipated proceeds from the production of secondary metals
and a decline in the price of any metals extracted by the Company could
materially adversely affect the profitability of the Company. If the market
price for these metals falls below the Company's production costs and remains
at such level for any sustained period, the Company will experience additional
losses and may determine to discontinue the development of a project or mining
at one or more of its properties. See "Metals Market Overview".
The Company currently does not hedge against commodity and base metals price
risks. However, the Company anticipates that as its mineral properties are
brought into production and it begins to derive revenue from the production,
sale and exchange of commodity and base metals, the Company may utilize
various price hedging techniques to lock in forward delivery prices on a
portion of its production, and thereby mitigate some of the risks associated
with fluctuations in the prices of the metals it produces. The Company may
also engage in hedging activities to hedge the risk of exposure to currency
fluctuations as a result of its operations in several foreign countries. There
can be no assurance that the use of hedging techniques will always benefit the
Company. For example, there is the possibility that the Company will lock in
forward deliveries at prices lower than the market price at the time of
delivery. Such an event would negatively affect the Company's revenues and
profits. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
EXPLORATION AND DEVELOPMENT RISKS
The degree of profitability of the Company's operations will be affected by
the costs and results of its continued exploration and development programs.
The Company is seeking to expand its reserves through a broad program of
exploration and development, including ongoing development activities at the
San Cristobal Project. Mineral exploration is highly speculative in nature,
involves many risks, and frequently is nonproductive. There can be no
assurance that the Company's mineral exploration efforts will be successful.
Once mineralization is discovered, it usually takes a number of years from the
initial phases of exploration until production is possible, during which time
the economic feasibility of production may change. Substantial expenditures
are required to establish ore reserves through drilling, to determine metal
content and metallurgical processes to extract such metal from the ore and, in
the case of new properties, to construct mining and processing facilities. As
a result of these uncertainties, no assurance can be given that the Company's
exploration programs will result in the establishment of new ore reserves.
None of the Company's mineral properties have an operating history upon
which estimates of future cash operating costs may be based. Estimates of
reserves and cash operating costs, particularly for development projects, to a
large extent, are based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques, and feasibility studies which
derive estimates of cash operating costs based upon anticipated tonnage and
grades of ore to be mined and processed, the configuration of the ore body,
expected recovery rates of silver and other metals from the ore, comparable
facility and equipment operating costs, anticipated climatic conditions, and
other factors. As a result, it is possible that actual cash operating costs
and economic returns may differ significantly from those currently estimated
by the Company. It is not unusual in new mining operations to experience
unexpected problems during the start-up phase.
There are a number of uncertainties inherent in any development program,
including the location and dimensions of a deposit, metal content, development
of appropriate metallurgical processes, receipt of necessary governmental
permits and the construction of mining and processing facilities.
The costs involved in building or upgrading all necessary power, water or
transportation facilities at any given property may be considerable,
particularly in light of the frequently remote locations of the Company's
properties. The development of many of the Company's properties will require
the
10
<PAGE>
creation of extensive infrastructure in order to commence production at such
sites. No assurance can be given that minerals will be discovered in
sufficient quantities to justify commercial operations or that the funds
required for development can be obtained at all, or on a timely basis.
Accordingly, there can be no assurance that the Company's future development
activities or exploration efforts will result in profitable mineral
production.
TITLE TO MINERAL PROPERTIES
Although it is the Company's policy to seek to confirm the validity of its
rights to title to, or contract rights with respect to, each mineral property
in which it has a material interest, there is no guarantee that title to its
properties will not be challenged or impugned. Title insurance generally is
not available, and the Company's ability to ensure that it has obtained secure
claim to individual mineral properties or mining concessions may be severely
constrained. The Company has not conducted surveys of all of the claims in
which it holds direct or indirect interests and, therefore, the precise area
and location of such claims may be in doubt. Accordingly, the Company's
mineral properties may be subject to prior unregistered agreements, transfers
or claims, and title may be affected by, among other things, undetected
defects. In addition, the Company may not be able to operate its properties as
permitted, or to enforce its rights with respect to such properties.
The Company's rights to certain of its mineral properties, including certain
of its principal properties at the San Cristobal Project, derive from
leaseholds or purchase option agreements which require the payment of rent or
other installment fees. In the event the Company fails to make such payments
with respect to any of its mineral properties on the relevant due date, the
Company's rights to any such property may lapse. There can be no assurance
that the Company will, or will be able to, effect all such payments by the
requisite payment dates. In addition, certain of the Company's contracts with
respect to its mineral properties mandate development or production schedules.
There can be no assurance that the Company will be able to meet any or all of
such development or production schedules. In addition, the Company's ability
to transfer or sell its rights to certain mineral properties may require
governmental approvals or third party consents, which may not be granted.
The Company's title to, and control over its San Juan de Lucanas property in
Peru has been contested by certain employee creditors of the prior operator of
the property. During the last three years, parts of the property have been
physically controlled by individuals challenging the Company's ownership.
There can be no assurance that the Company will prevail in its attempt to
register title to the property. See "Properties--Advanced Exploration
Properties--San Juan de Lucanas".
MINING RISKS AND INSURANCE
The business of mining is generally subject to a number of risks and
hazards, including adverse environmental effects, industrial accidents, labor
disputes, technical difficulties posed by unusual or unexpected geologic
formations, cave-ins, flooding and periodic interruptions due to inclement or
hazardous weather conditions. Such risks can result in damage to and
destruction of, mineral properties or producing facilities, as well as
personal injury, environmental damage, delays in mining, monetary losses and
possible legal liability. Although the Company maintains, and intends to
continue to maintain, insurance with respect to its operations and mineral
properties within ranges of coverage consistent with industry practice, no
assurance can be given that such insurance will be available at economically
feasible premiums. Insurance against environmental risks (including potential
liability for pollution or other disturbances resulting from mining
exploration and production) is not generally available to the Company.
FOREIGN OPERATIONS
The Company currently conducts exploration activities in countries with
developing economies, including Bolivia, Chile, Honduras, Mexico and Peru in
Latin America, and Kyrgyzstan, Mongolia and
11
<PAGE>
Tajikistan in Central Asia. Each of these countries has experienced recently,
or is experiencing currently, economic or political instability.
Hyperinflation, volatile exchange rates and rapid political and legal change,
often accompanied by military insurrection, have been common in these and
certain other emerging markets in which the Company may conduct operations.
The Company may be materially adversely affected by possible political or
economic instability in any one or more of those countries. The risks include,
but are not limited to, terrorism, military repression, expropriation,
changing fiscal regimes, extreme fluctuations in currency exchange rates, high
rates of inflation and the absence of industrial and economic infrastructure.
Changes in mining or investment policies or shifts in the prevailing political
climate in any of the countries in which the Company conducts exploration and
development activities could adversely affect the Company's business.
Operations may be affected in varying degrees by government regulations with
respect to production restrictions, price controls, export controls, income
and other taxes, expropriation of property, maintenance of claims,
environmental legislation, labor, welfare benefit policies, land use, land
claims of local residents, water use and mine safety. The effect of these
factors cannot be accurately predicted.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
All commercial production and mineral exploration and development by the
Company will be subject to foreign laws and regulations controlling not only
the mining of and exploration for mineral properties, but also the possible
effects of such activities upon the environment. These laws and regulations
are comprehensive and deal with matters such as air and water quality, mine
reclamation, waste handling and disposal, the protection of certain species
and the preservation of certain lands. These environmental laws and
regulations may require the acquisition of permits or other authorizations for
certain activities. Environmental legislation is evolving in a manner which
will require stricter standards and enforcement, increased fines and penalties
for non-compliance, more stringent environmental assessments of proposed
projects and a heightened degree of responsibility for companies and their
officers, directors and employees. Permits from a variety of regulatory
authorities are required for many aspects of mine operation and reclamation.
The Company cannot predict what environmental legislation or regulations will
be enacted or adopted in the future or how future laws and regulations will be
administered or interpreted. Compliance with more stringent laws and
regulations, as well as potentially more vigorous enforcement policies or
regulatory agencies or stricter interpretation of existing laws, may
necessitate significant capital outlays, may materially adversely affect the
Company's future operations or may cause material changes or delays in the
Company's intended activities.
The Company's preliminary analysis of the existing mining activities
conducted by the current owner and operator of the Toldos mine at the San
Cristobal Project indicates that low-level effluents from the site may be
draining into a seasonal stream which flows into the Rio Grande and,
ultimately, into the Salar de Uyuni, a salt lake to the north of the San
Cristobal Project. See "Properties--Development Project--San Cristobal
Project". Pursuant to the recently enacted Bolivian mining code, mining
companies are not liable for identified pre-existing conditions. Nonetheless,
if the Company acquires the Toldos property from its current owner, the
Company expects to improve the environmental situation which may currently
exist at the site. The Company does not expect any such remediation program to
have a material adverse effect on the Company's proposed operations at the San
Cristobal Project.
Environmental conditions may exist on other mineral properties currently
owned or controlled by the Company which are unknown to the Company at present
and which have been caused by previous or existing owners or operators of the
properties. The Company has not sought an environmental analysis at any of its
mineral properties, nor has it conducted a comprehensive review of the
environmental laws and regulations applicable to it in each of the various
jurisdictions in which it owns or controls mineral properties. To the extent
the Company is subject to environmental liabilities, the satisfaction of such
liabilities would reduce the Company's net cash flow and could have a material
12
<PAGE>
adverse effect on the Company's financial position and results of operations.
Should the Company be unable to fund fully the cost of remediation of any
environmental condition, the Company might be required to suspend operations
or enter into interim compliance measures pending completion of the required
remediation.
COMPETITION
The mining industry is intensely competitive. The Company competes with many
companies possessing greater financial resources, operational experience and
technical facilities than itself. Competition in the mining business could
adversely affect the Company's ability to attract requisite capital funding or
acquire suitable producing properties or prospects for mineral exploration in
the future. The Company recently has encountered increasing competition from
other mining groups in its efforts to acquire mineral properties.
HOLDING COMPANY STRUCTURE RISKS
The Company currently conducts, and will continue to conduct, all of its
operations through subsidiaries. The Company's ability to obtain dividends or
other distributions from its subsidiaries may be subject to, among other
things, restrictions on dividends under applicable local law and foreign
currency exchange regulations in the jurisdictions in which the subsidiaries
operate. The subsidiaries' ability to pay dividends or make other
distributions to the Company may also be subject to their having sufficient
funds from their operations legally available for the payment thereof which
are not needed to fund their operations, obligations or other business plans.
If the Company's subsidiaries are unable to pay dividends or make other
distributions to the Company, the Company's growth may be inhibited after the
proceeds of the Offerings are exhausted, unless the Company is able to obtain
additional debt or equity financing on terms which are acceptable to the
Company. In the event of a subsidiary's liquidation, there may not be assets
sufficient for the Company to recoup its investment therein.
DISCRETION AS TO USE OF PROCEEDS
Apex Limited will contribute the gross proceeds of the Offerings, and all
associated expenses, to Apex LDC. While the Company has identified certain
anticipated uses for the net proceeds, it will have broad discretion as to the
expenditure of such proceeds.
REQUIREMENT OF ADDITIONAL FINANCING
The net proceeds of the Offerings will not be sufficient to complete the
Company's planned development of the San Cristobal Project. The Company
intends to seek additional financing to complete development of the San
Cristobal Project and to fund the development of other of its mineral
properties, including the Cobrizos, El Ocote, San Juan de Lucanas, and Choroma
properties. Sources of such external financing include bank borrowings and
future debt and equity offerings. There can be no assurance that additional
financing will be available on terms acceptable to the Company and its
shareholders, or at all. The failure to obtain such additional financing could
have a material adverse effect on the results of operations and the financial
condition of the Company.
The operations contemplated by the Company are expected to be highly capital
intensive. There can be no assurance that the Company will be able to secure
the financing necessary to retain its rights to, or to begin, or, if begun, to
sustain production at the Company's mineral properties.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the services of certain key executives including
its Chairman and the Chief Operating Officer. The loss of these persons, other
key executives or personnel, or the
13
<PAGE>
inability to attract and retain the additional highly skilled employees
required for the expansion of the Company's activities, may have a material
adverse effect on the Company's business or future operations. Although the
Chairman does not have a written contract certain key executives have entered
into written agreements. See "Executive Compensation--Employment Agreements".
The Company does not intend to maintain "key-man" life insurance on any of its
executive officers or other personnel.
SUBSTANTIAL CONTROL BY DIRECTORS AND SIGNIFICANT SHAREHOLDERS
Upon the completion of the Offerings, Thomas S. Kaplan and the Company's
other directors and principal shareholders, together with members of their
families and entities that may be deemed affiliates of or related to such
persons or entities, will beneficially own approximately 46 percent of the
Ordinary Shares outstanding after the Offerings, including approximately
7,077,007 Ordinary Shares which would be issued in the event the Company
elected to satisfy all of its obligations to the Minority Shareholders of Apex
LDC arising under the Buy-Sell Agreement through the issuance of Ordinary
Shares. See "Certain Transactions". Mr. Kaplan and others, together with
certain of the shareholders of Apex LDC, including Silver Holdings, have
entered into an agreement with respect to the appointment of two designees of
Silver Holdings to the Company's board of directors for so long as Silver
Holdings owns one percent of the outstanding Ordinary Shares, including
Ordinary Shares it may receive pursuant to the Buy-Sell Agreement. Silver
Holdings' investors include entities affiliated with Mr. Paul Soros, Mr.
Richard Katz and Mr. Eduardo Elsztain, who are directors of the Company. In
addition, Quantum Industrial Partners LDC and Geosor Corporation, collectively
own more than 50 percent of Silver Holdings. By virtue of his ownership of
Geosor Corporation and his position with Soros Fund Management LLC, an
investment advisor to Quantum Industrial Partners LDC, Mr. George Soros may
have the power to direct the election of the directors of Silver Holdings, who
in turn, will elect the two designees. See "Certain Transactions". Such a high
level of ownership by such persons may have a significant effect in delaying,
deferring or preventing a change in control of the Company or other events
which could be of benefit to the Company's other shareholders. See "Principal
Shareholders".
CONFLICTS OF INTEREST
Certain officers and directors of the Company are officers and/or directors
of, or are associated with, other natural resource companies that acquire
interests in mineral properties. Such associations may give rise to conflicts
of interest from time to time. See "Certain Transactions."
SUBSTANTIAL DILUTION
As a result of the Offerings, persons purchasing Shares in the Offerings
will experience immediate and substantial dilution in the net tangible book
value per share of $9.68. See "Dilution".
ABSENCE OF DIVIDENDS
The Company does not anticipate paying dividends to existing or future
shareholders for the foreseeable future. It is the present intention of the
Company to retain all earnings, if any, in order to support the future growth
of its business. Any determination in the future to pay dividends will be
dependent upon the Company's consolidated results of operations, financial
condition, cash requirements, future prospects and such other factors as the
Company deems appropriate at the time.
NO PRIOR PUBLIC MARKET
Prior to the Offerings, there has been no public market for the Shares. An
application will be made to have the Shares listed for quotation on the
American Stock Exchange. There can be no assurance that an active public
market for the Shares will develop, or if such market does develop, be
sustained. The initial public offering price for the Shares will be determined
by negotiations among the Company and the underwriters. There can be no
assurance that the market price of the Shares after
14
<PAGE>
the Offerings will equal or exceed the initial public offering price. The
market price of the Shares could be subject to significant fluctuations in
response to variations in quarterly operating results, developments relating
to the Company and general trends affecting the metals industry. In addition,
broad market fluctuations and general economic and political conditions may
adversely affect the market price of the Shares regardless of the Company's
performance. See "Underwriting" for a description of the factors to be
considered in determining the initial public offering price.
ORDINARY SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Ordinary Shares in the public market
following the Offerings could adversely affect the market price of the Shares.
The Company and certain of its directors and executive officers, and all
current shareholders (including the shareholders of Apex LDC) have agreed,
during the 180 days following the date of the Prospectus, not to sell any
Ordinary Shares without the prior written consent of Salomon Brothers Inc
("Salomon"). See "Certain Transactions", "Ordinary Shares Eligible for Future
Sale" and "Underwriting".
TAX RISKS
Potential investors should inform themselves as to the tax consequences of
acquiring, holding and disposing of Shares in their particular circumstances.
In particular, potential investors that are U.S. taxpayers should consider
that the Shares may be considered interests in a "passive foreign investment
company" ("PFIC") for U.S. tax purposes, and should consult their own tax
advisers as to the taxation of U.S. shareholders of PFICs in light of their
particular circumstances. If the Company were deemed to be a PFIC, then a U.S.
taxpayer who disposes or is deemed to dispose of Shares at a gain generally
would be required to treat such gain as ordinary income and pay an interest
charge on a portion of the gain unless the U.S. taxpayer makes a timely
election (a "QEF election") to have the Company treated as a "qualified
electing fund".
A U.S. taxpayer who makes a QEF election generally must report on a current
basis his share of any ordinary earnings and net capital gain of the Company
for any taxable year in which the Company is a PFIC. A QEF election generally
must be made for the first taxable year of the U.S. taxpayer's ownership of
Shares during which the Company is a PFIC, provided that the Company complies
with certain reporting requirements. The Company intends to comply with all
reporting requirements necessary for U.S. investors to make QEF elections with
respect to the Company and will upon request provide to U.S. investors such
information as may be required to make such QEF elections effective. For
taxable years beginning after December 31, 1997, a U.S. investor who owns
marketable stock in a PFIC may elect to recognize gain or loss on a mark-to-
market basis in lieu of making a QEF election. For a further discussion, see
"Taxation--United States Federal Income Taxation--Passive Foreign Investment
Company Considerations".
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements, other than statements of historical facts,
included in this Prospectus that address activities, events or developments
that the Company expects, believes, intends or anticipates will or may occur
in the future, including such matters as future investments in existing
development projects and the acquisition of new mineral properties (including
the amount and nature thereof), the use of proceeds of the Offerings, business
strategies and the future need for additional funds from outside sources, are
forward-looking statements. Forward-looking statements are inherently subject
to risks and uncertainties, many of which cannot be predicted with accuracy
and some of which might not even be anticipated. Future events and actual
results, financial and otherwise, could differ materially from those set forth
in or contemplated by the forward-looking statements herein.
15
<PAGE>
CONCURRENT OFFERING
Concurrent with the Ordinary Shares offered hereby in the initial public
offering, the Company intends to sell to a shareholder of the Company, Moore
Global Investments Ltd./Remington Investment Strategies, L.P. (the "Concurrent
Purchaser"), 1,100,000 Ordinary Shares at a price equal to the initial public
offering price. See "Principal Shareholders." The consummation of the
Concurrent Offering and the initial public offering are conditioned upon each
other. The Concurrent Offering will not be consummated with respect to more
than 1,100,000 Ordinary Shares. To the extent the Concurrent Purchaser
purchases less than the maximum 1,100,000 Ordinary Shares to be sold pursuant
to the Concurrent Offering, the number of Ordinary Shares available to be sold
to the general public by the U.S. Underwriters will be increased accordingly.
All proceeds of the Concurrent Offering will be paid directly to the Company.
Salomon Brothers Inc, PaineWebber Incorporated, Scotia Capital Markets (USA)
Inc. and Smith Barney Inc. are acting as the placement agents (the "Placement
Agents") in connection with the Concurrent Offering. The Placement Agents will
receive a fee of $ per Ordinary Share sold in the Concurrent Offering,
which fee is equal to the underwriting discount payable in connection with the
initial public offering. The Placement Agents will be indemnified by the
Company against certain liabilities, including liabilities under the
Securities Act. See "Shares Eligible for Future Sale" and "Underwriting."
USE OF PROCEEDS
The aggregate net proceeds to the Company from the sale of Shares offered
hereby are estimated to be approximately $ (or approximately $ if the U.S.
Underwriters' and the International Underwriters' over-allotment options are
exercised in full) after deducting the underwriting discount, the Placement
Agents' fee and estimated fees and expenses payable by the Company in
connection with the Offerings. The Company intends to use the net proceeds for
one or more of the following purposes: (i) feasibility studies, financing, and
construction and development of the San Cristobal Project, (ii) exploration
and development activities at any of the other properties within the Company's
existing portfolio, (iii) maintenance of control or ownership of the Company's
existing mineral properties by making ongoing lease payments, and paying
royalties and other maintenance and registration fees, and (iv) acquisition of
additional properties or businesses that are complementary to those of the
Company. In addition, the Company may use the net proceeds for working capital
and other general corporate purposes. Apex Limited will contribute the gross
proceeds from the Offerings, and all associated expenses, to Apex LDC in
exchange for an equal number of Apex LDC shares.
Although the Company has not determined a specific allocation of proceeds
among the various uses described above, the Company currently estimates that
it will spend $10 million in 1998 in connection with the second phase
feasibility study, and an additional $10 million and $15 million,
respectively, for exploration activities at the San Cristobal Project and the
Company's other mineral properties over the next three years performing
reconnaissance, field mapping and sampling, including drilling. The Company
expects to incur approximately $5 million per annum in general and
administrative expenses. The amounts actually expended on each of the uses
described above will vary depending upon, among other factors, the results of
the second phase feasibility study and the success of the Company's
exploration and development activities. Additional financing will be required
to fund future development activities and there can be no assurance that such
financing will be available at all, or on terms acceptable or favorable to the
Company and its shareholders. See "Risk Factors--Discretion as to Use of
Proceeds" and "--Requirement of Additional Financing".
DIVIDEND POLICY
The Company has never paid any dividends on its Ordinary Shares and expects
for the foreseeable future to retain all of its earnings from operations for
use in expanding and developing its business. Any future decision as to the
payment of dividends will be at the discretion of the Company's board of
directors and will depend upon the Company's earnings, receipt of dividends
from its subsidiaries, financial position, capital requirements, plans for
expansion and such other factors as the board of directors deems relevant. See
"Risk Factors--Absence of Dividends".
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, and such capitalization as adjusted to reflect (i) the
sale of 9,000,000 Shares offered hereby at an assumed initial public offering
price of $14.00 per Share, after deduction of the underwriting discount, the
Placement Agents' fee and estimated expenses payable by the Company in
connection with the Offerings, and (ii) the application of the estimated net
proceeds of the Offerings. See "Certain Transactions" and "Underwriting". This
table should be read in conjunction with the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in the Prospectus. See
"Use of Proceeds".
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Ordinary Shares, $0.01 par value, 75,000,000 Ordinary
Shares authorized, 13,601,544 Ordinary Shares issued
and outstanding prior to the Offerings, 22,601,544
Ordinary Shares issued and outstanding upon
consummation of the Offerings......................... $ 136 $ 226
Contributed Surplus.................................... 44,444 160,184
Accumulated Deficit.................................... (30,796) (30,796)
-------- --------
Total Shareholders' Equity............................. 13,784 129,614
-------- --------
Total Capitalization................................. $ 13,784 $129,614
======== ========
</TABLE>
17
<PAGE>
DILUTION
As of September 30, 1997, the net tangible book value of the Company was
$12,390,612 or $0.91 per share outstanding. After giving effect to the sale of
the 9,000,000 Shares offered hereby at an assumed initial public offering
price of $14.00 per Share, the issuance of approximately 7,077,007 Ordinary
Shares in exchange for approximately 7,077,007 shares of Apex LDC pursuant to
the Buy-Sell Agreement, deduction of the underwriting discount, the Placement
Agents' fee and estimated expenses of the Offerings payable by the Company and
the application of the net proceeds therefrom as set forth under "Use of
Proceeds", the pro forma net tangible book value of the Company as of
September 30, 1997 would have been $128,220,612 or $4.32 per share. This
change represents an immediate increase in net tangible book value of $3.41
per share to existing shareholders and an immediate dilution of $9.68 per
share to purchasers of the shares of the Company's share capital at the
initial public offering price. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Initial public offering price............................... $14.00
Net tangible book value per share at September 30,
1997(1)................................................... $0.91
Increase attributable to the sale by the Company of
9,000,000 Ordinary Shares(2).............................. 3.41
-----
Pro forma net tangible book value per share after the
Offerings(2)(3)........................................ 4.32
------
Dilution to new investors................................... $ 9.68
======
</TABLE>
The following table sets forth as of September 30, 1997, the difference
between the number of Shares purchased, the total consideration paid and the
average price per share paid by the existing shareholders and to be paid by
new investors in the Offerings:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders... 13,601,544 60.2% $ 43,979,906 25.9% $ 3.23
New investors in initial
public offering........ 7,900,000 34.9% 110,600,000 65.0 $14.00
Investors in Concurrent
Offering............... 1,100,000 4.9% 15,400,000 9.1 $14.00
---------- ----- ------------ -----
Total................. 22,601,544 100.0% $169,979,906 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) Net tangible book value per share is determined by dividing total net
tangible assets (assets less deferred organizational costs, deferred
financing costs and liabilities) by the number of Ordinary Shares
outstanding prior to the Offerings.
(2) Excludes (i) up to an aggregate 1,185,000 additional Ordinary Shares
subject to over-allotment options granted to the U.S. Underwriters and the
International Underwriters, and (ii) 453,125 Ordinary Shares subject to
options granted under the Employee Share Option Plan and the Non-employee
Director Share Option Plan, and includes the issuance of approximately
7,077,007 Ordinary Shares in exchange for approximately 7,077,007 shares
of Apex LDC, pursuant to the Buy-Sell Agreement. See "Incentive
Compensation", "Certain Transactions" and "Underwriting".
(3) Pro forma net tangible book value per share is determined by dividing the
number of Ordinary Shares outstanding after giving effect to the Offerings
into the net tangible book value of the Company after application of the
net proceeds of the Offerings. Dilution is determined by substituting pro
forma net tangible value per share after the Offerings from the initial
public offering price per share to be paid by new investors for each
Share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the Company for the years ended
December 31, 1996 and 1995, and the period from December 22, 1994 (inception)
through December 31, 1994 are derived from the audited consolidated financial
statements of the Company. The selected consolidated financial data as of and
for the nine month periods ended September 30, 1997 and 1996 have been derived
from the Company's unaudited financial statements which, in the opinion of
management, include all significant normal and recurring adjustments necessary
for a fair presentation of the financial position and results of operations
for such unaudited period. The selected financial data not been presented
herein as it was immaterial. The following table should be read in conjunction
with the Consolidated Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22,
NINE MONTHS 1994
ENDED (INCEPTION)
SEPTEMBER 30, YEAR ENDED DECEMBER 31, THROUGH
----------------- ------------------------- DECEMBER 31,
1997 1996 1996 1995 1994
-------- ------- ------------ ----------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Interest income......... $ 607 $ 255 $ 575 $ 462 $ 15
-------- ------- ------------ ----------- ------
Total income............ 607 255 575 462 15
-------- ------- ------------ ----------- ------
Expenses
Exploration............ 10,129 5,917 9,591 1,560 105
Administrative......... 5,332 603 1,924 982 148
Consulting............. 1,862 1,443 2,506 560 145
Professional fees...... 227 827 1,096 657 20
Amortization and depre-
ciation............... 55 28 57 57 --
-------- ------- ------------ ----------- ------
Total expenses.......... 17,605 8,818 15,174 3,816 418
-------- ------- ------------ ----------- ------
Loss before minority
interest............... (16,998) (8,563) (14,599) (3,354) (403)
Minority interest....... -- -- 2,876 1,493 190
-------- ------- ------------ ----------- ------
Net loss for the
period................. $(16,998) $(8,563) $ (11,723) $ (1,861) $ (213)
======== ======= ============ =========== ======
Net loss per Ordinary
Share.................. $ (1.05) $ (0.66) $ (0.85) $ (0.16) $(0.02)
======== ======= ============ =========== ======
Weighted average number
of Ordinary Shares
outstanding ........... 16,232 12,921 13,749 11,975 11,975
CASH FLOW DATA:
Net cash provided by
(used in) financing
activities ............ $ (1,095) $28,735 $ 35,269 $ 6,430 $ 686
Net cash used in
operating activities... (15,879) (6,214) (12,092) (3,491) (329)
Net cash used in
investing activities... (169) -- (524) -- --
-------- ------- ------------ ----------- ------
Net increase (decrease)
in cash................ $(17,143) $22,521 $ 22,653 $ 2,939 $ 357
======== ======= ============ =========== ======
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------------------------------
1997 1996 1996 1995 1994
-------- ------- ------------ ----------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $ 15,140 $28,089 $ 26,797 $ 6,820 $9,929
Total liabilities....... 1,356 1,455 2,486 359 114
Minority interest....... -- 210 -- 2,876 4,369
Shareholders' equity.... 13,784 26,424 24,311 3,585 5,446
</TABLE>
19
<PAGE>
CORPORATE STRUCTURE
HISTORY OF THE COMPANY
Beginning in 1993, the Company and its founders embarked on a program of
acquiring silver exploration properties throughout the world. In December of
1994, in connection with an investment by Silver Holdings, the Company
reorganized as a Cayman Islands holding company with subsidiaries based on
regional operations. See "Certain Transactions". Following this reorganization
and new investment, Apex LDC accelerated its program of acquiring silver
exploration properties. In March of 1996, in connection with the 1996 Private
Placement, Apex Silver Mines Limited was organized. The 1996 Private
Placement, which was completed as of August 6, 1996, raised gross proceeds of
$34.1 million for an approximately 21 percent interest (on a fully diluted
basis) in the Company. See "Certain Transactions".
As an "exempted" company under the laws of the Cayman Islands, the Company
may not carry on business in the Cayman Islands, except in furtherance of the
business of the Company carried on outside the Cayman Islands. Substantially
all of Apex Limited's assets consist of shares of Apex LDC. Currently, Apex
Limited owns approximately 66 percent of Apex LDC. Upon completion of the
Offerings (assuming the over-allotment options granted to the U.S.
Underwriters and the International Underwriters are not exercised), Apex
Limited will own 76.2 percent of the outstanding share capital of Apex LDC.
The Minority Shareholders are entitled to sell their shares of Apex LDC to
Apex Limited for, at Apex Limited's sole option, Ordinary Shares on a one-for-
one basis, cash, or a combination of cash and Ordinary Shares. The Company
currently expects that any future purchases by Apex Limited of shares of Apex
LDC from the Minority Shareholders will involve only Ordinary Shares of Apex
Limited. Any such transactions will not affect the beneficial and economic
interest in Apex LDC attributable to shareholders of Apex Limited. Currently,
Apex Limited has approximately 13,601,544 Ordinary Shares outstanding and
approximately 7,077,007 Ordinary Shares reserved for issuance for
approximately 7,077,007 shares of Apex LDC owned by the Minority Shareholders.
If all such shares of Apex LDC were issued, Apex Limited would have 20,678,551
Ordinary Shares outstanding, excluding the Shares to be sold in the Offerings.
See "Principal Shareholders" and "Certain Transactions". Apex LDC conducts its
business primarily through a series of directly and indirectly owned
subsidiaries. The Company has approximately 33 full-time employees.
Apex LDC's, and hence the Company's, principal operating subsidiaries are
(i) Andean Silver Corporation LDC ("Andean"), which is indirectly engaged in
exploration and development activities in South America; (ii) Apex Asia LDC
("Apex Asia"), which is engaged, directly and indirectly, in exploration
activities in Asia; (iii) Apex Corporation, which serves as the principal
management services provider to the Company pursuant to the terms of a
Management Services Agreement executed in connection with Apex Corporation's
formation in the fall of 1996; (iv) Minera de Cordilleras (Honduras), S. de
R.L. ("Cordilleras Honduras"), which is engaged in exploration and development
activities in Honduras; (v) Cordilleras Silver Mines Ltd. ("Cordilleras
Bahamas"), which is indirectly engaged in exploration and development
activities in Honduras; and (vi) Compania Minerales de Zacatecas, S. de R.L.
de C.V. ("CMZ"), which is indirectly engaged in exploration activities in
Mexico. See "Certain Transactions".
Apex LDC is the sole beneficial owner of Andean, with a 99 percent interest;
the remaining one percent interest is held by Apex Partners LDC ("Apex
Partners"), which is wholly beneficially owned by Apex LDC. Apex LDC is the
sole beneficial owner of ASC Bolivia LDC ("ASC Bolivia"), with a 2.5 percent
interest; the remaining 97.5 percent is held by Andean. Apex LDC is the sole
beneficial owner of ASC Peru LDC ("ASC Peru"); Andean holds a 99 percent
interest in ASC Peru, and ASC Partners LDC ("ASC Partners"), which is wholly
and beneficially owned by Apex LDC, holds the remaining one percent interest.
The Company anticipates that individual properties will be contributed to new
special purpose holding companies prior to the commencement of production at
such properties. The formation of such additional subsidiaries will not
involve any dilution to the Company's beneficial ownership of the underlying
properties.
20
<PAGE>
Apex Asia, which is wholly beneficially owned by Apex LDC, has formed joint
venture entities to own or otherwise hold interests in silver resource
properties in Kyrgyzstan and Mongolia, and is in the process of doing so in
Tajikistan. In Kyrgyzstan, Apex Asia holds a 50 percent interest in " "JSC'
Kumushtak" ("Kumushtak Mining"). The remaining 50 percent interest in
Kumushtak Mining is held by the North Kyrgyz Geological Expedition, a
government mining enterprise which operates in the Kumushtak region in
northwestern Kyrgyzstan. Apex Asia owns 99 percent of Kumushtak Management
Company; Apex Partners holds the remaining one percent. In Mongolia, Apex Asia
has organized "Asgatmongu' Company, Ltd. ("Asgat Mining"). Apex Asia holds
approximately one half of the total interests in Asgat Mining and has
appointed two individuals, including the chairman, of Asgat Mining's four
member board of managers. Mongolrostvetmet, a joint association owned by the
government of Mongolia and Zarubeshvetmet, a recently privatized company
organized under the laws of the Russian Federation, holds the remaining
interest in Asgat Mining. In Tajikistan, Apex Asia has entered into an
agreement with the Adrasman Mining Venture ("Adrasman Mining"), an agency of
the government of Tajikistan, to form "Kanimansur Ltd." Joint Mining Venture
("Kanimansur Mining"). Kanimansur Mining will be 49 percent owned by Apex
Asia.
In Mexico, CMZ serves as the holding company for Compania Metalurgica Largo,
S. de R.L. de C.V. ("Largo"), Compania Metalurgica Barones, S. de R.L. de C.V.
("Barones") and Minera de Cordilleras, S. de R.L. de C.V. ("Cordilleras
Mexico"). Apex LDC is the sole beneficial owner of CMZ, with a 99 percent
interest; Apex Partners holds the remaining one percent interest. Apex LDC is
the sole beneficial owner of Cordilleras Mexico; CMZ holds a 99 percent
interest and Apex Partners holds the remaining one percent interest. Barones
and Largo are each owned 75 percent by CMZ and 25 percent by Minera Dolore
Anguatias y Anexas, S.A. de C.V., an unaffiliated Mexican company.
Apex LDC is the sole owner of each of Cordilleras Bahamas and Apex
Corporation. Apex LDC is the sole beneficial owner of Cordilleras Caymans with
a 20 percent interest; the remaining 80 percent interest is held by
Cordilleras Bahamas. Apex LDC is the sole beneficial owner of Cordilleras
Honduras, with a 99 percent interest; the remaining one percent interest is
held by Apex Partners.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and related notes thereto which appear
elsewhere in this Prospectus.
The Company is a mining exploration and development company that holds a
portfolio of silver exploration and development properties in South America,
Central America and Central Asia. None of these properties are in production
and, consequently, the Company has no current operating income or cash flow.
BACKGROUND
In mid-1993, Apex Silver Mines Ltd. ("Apex Bermuda") was established to
acquire and develop silver exploration properties throughout the world.
On December 22, 1994, Apex Bermuda contributed substantially all of its
assets to Apex LDC, a limited duration company formed under the laws of the
Cayman Islands.
In March of 1996, Apex Limited, a limited liability company formed under the
laws of the Cayman Islands, was incorporated in order to facilitate the 1996
Private Placement. In connection with the 1996 Private Placement, Apex Limited
issued Ordinary Shares to certain of the non-U.S. investors in Apex LDC in
exchange for their interests in Apex LDC. These transactions, and the 1996
Private Placement were completed effective as of August 6, 1996. Currently,
Apex Limited owns approximately 66 percent of Apex LDC. Upon the completion of
the Offerings (assuming the over-allotment options granted to U.S.
Underwriters and the International Underwriters are not exercised) Apex
Limited will own 76.2 percent of the outstanding share capital of Apex LDC.
The Minority Shareholders are entitled to sell their shares of Apex LDC to the
Company for, at Apex Limited's sole option, Ordinary Shares of Apex Limited on
a one for one basis, cash, or a combination of cash and Ordinary Shares. The
Company currently expects that any future purchases by Apex Limited of shares
of Apex LDC from the Minority Shareholders will involve only Ordinary Shares.
Any such transactions will not affect the beneficial and economic interest in
Apex LDC attributable to shareholders of Apex Limited. See "Certain
Transactions". Currently, Apex Limited has approximately 13,601,544 Ordinary
Shares outstanding and approximately 7,077,007 Ordinary Shares reserved for
issuance for approximately 7,077,007 shares of Apex LDC owned by the Minority
Shareholders. If all such shares of Apex LDC were issued, Apex Limited would
have 20,678,551 Ordinary Shares outstanding, excluding the Shares to be sold
in the Offerings.
For United States investors, ownership of the Shares may have certain tax
consequences. See "Tax Considerations".
THE SAN CRISTOBAL PROJECT
From 1994 to 1996, the properties comprising the San Cristobal Project were
acquired in a series of transactions. See "Properties--Development Project--
San Cristobal Project." In 1996, the Company began exploring these properties,
and discovered the presence of a significant silver zinc and lead deposit with
the potential to be developed as a large scale open-pit mining project. In the
fall of 1996, an in-fill drilling program using reverse circulation ("RC") and
diamond core drilling was continued in order to delineate the deposit and the
amount of reserves. In addition, an expanded exploration effort at the San
Cristobal Project resulted in the discovery of additional silver and base
metal anomalies.
Based on the San Cristobal Study, the San Cristobal Project is forecast to
produce annually an average of 14 million ounces of silver, 132,700 tonnes of
zinc and 39,500 tonnes of lead during an expected minimum life of 11.5 years.
The San Cristobal Project is expected to consist of two large
22
<PAGE>
scale, open pit mining operations using conventional mining and processing
technologies capable of producing and processing an aggregate 30,000 tonnes
per day ("tpd") of ore. The average cash production cost over the life of the
San Cristobal Project is forecast to be $2.66 per silver equivalent ounce. See
"Glossary". Capital expenditures are estimated to total $327 million for pre-
production development and construction to complete the San Cristobal Project.
Based on the favorable results of the San Cristobal Study, the Company is
targeting the completion of a second phase feasibility study of the San
Cristobal Project by the third quarter of 1998 with a goal of securing
committed financing by late 1998. Subject to the completion of a second phase
feasibility study and committed financing, the Company anticipates beginning
construction at the San Cristobal Project in early 1999, with silver, zinc and
lead production commencing in early 2001.
The Company plans to commission this second phase feasibility study in the
fall of 1997, immediately after the completion of the Offerings. The Company
also intends to continue an extensive drilling program in order to (i) further
define the existing ore bodies, (ii) increase the San Cristobal Project's
proven and probable reserves and (iii) evaluate other areas of potential
mineralization. At the same time, contracts for power supply, transportation,
and smelting and refining of metal concentrates will be negotiated.
If the results of this second phase feasibility study confirm the economic
feasibility of the San Cristobal Project, and if no new properties emerge in
the interim that are considered to be more attractive development
opportunities, the Company expects to devote the majority of the proceeds from
the Offerings to financing its equity portion of the construction and
development costs of the San Cristobal Project. See "Use of Proceeds".
The Company has retained Rothschild Natural Resources LLC and Barclays Bank
PLC as the Company's financial advisor and arranger, respectively, in
connection with the anticipated project financing of the San Cristobal
Project. The Company anticipates that project financing activities will
commence on a preliminary basis in late 1997 and then accelerate with the
delivery of the a second phase feasibility study in mid-1998 with financing to
be secured by late 1998. If this timetable is achieved, project construction
could commence in early 1999 and, after an approximate two-year construction
and development program, production could commence in early 2001.
OTHER PROJECTS
The Company is also assessing the economic viability of (i) the Cobrizos
property in Bolivia, which may be developed in conjunction with the San
Cristobal Project; (ii) the El Ocote project in Honduras; (iii) the San Juan
de Lucanas project in Peru; and (iv) the Choroma property in Bolivia.
The Cobrizos property is located approximately 12 kilometers north of the
San Cristobal Project. Recent drilling by the Company suggests the presence of
approximately 10.8 million tonnes of mineralized material containing 4.3
ounces of silver per tonne and 0.2 percent copper. This mineralized material
estimate has been reviewed and verified by MRA, an independent mine geology
consulting firm. The mineralized body is amenable to open pit mining and is
being considered as a satellite mining operation that could provide additional
feed to the proposed mill to be constructed at the San Cristobal Project,
thereby enhancing the silver grade of the ore processed by the mill after the
early years of operation at the San Cristobal Project.
The El Ocote property is located in southeast Honduras. Behre Dolbear
reviewed the Company's estimate that the property contains approximately 2.1
million tonnes of mineralized material averaging 9.9 ounces of silver per
tonne and prepared a conceptual study of this property for the Company in
1996. On the basis of this initial study, the Company conducted further field
work and a second conceptual study. This latest study, which was performed by
Davy, utilized the earlier resource estimates, and estimated new capital and
operating costs and production schedules based on underground mining and heap
leach processing. The Company expects to conduct an additional round
23
<PAGE>
of field work and to undertake metallurgical sampling and heap leach tests. If
warranted, these analyses will be followed by additional drilling to establish
proven and probable reserves.
In June of 1995, PAH prepared a conceptual study for the rehabilitation of
an idled mine at the San Juan de Lucanas property. The results indicated that
approximately $10 million in capital expenditures would be required to
rehabilitate the mine to a 500 tpd capacity operation. The Company believes
that the identification of additional reserves at the site would be required
to justify such an investment. In addition, the Company has experienced
lengthy delays in its effort to register its title to the properties
comprising the San Juan de Lucanas property. While the Company believes its
legal position is secure, it is not currently possible to estimate when this
registration process will be completed. The Company expects to begin
exploration and commission a first phase feasibility study of the property
after its title thereto has been perfected.
The Choroma property is located in the Bolivian silver-lead belt, 600
kilometers south of La Paz and 80 kilometers north of the Argentine border
near the town of Tupiza at an elevation of approximately 3,300 meters. During
early 1996, the Company channel-sampled many of the rock outcrops and
identified several anomalies 44 to 86 meters long with average grades between
1.8 and 4.0 ounces of silver per tonne. These anomalies will be drilled and
sampled to test for bulk mineable mineralization. In addition, the Company
will gain access to existing underground workings to sample these structures,
and to test further for bulk mineralization.
RESULTS OF OPERATIONS
Loss Before Minority Interest. The Company does not produce silver or any
other mineral products and has no revenues from product sales. The only source
of revenue is interest income. The loss before minority interest for the nine-
month period ended September 30, 1997 was $16,998,237 compared to a loss
before minority interest of $8,562,749 for the nine-month period ended
September 30, 1996, and the loss before minority interest for the year ended
December 31, 1996 was $14,599,240 compared to a loss before minority interest
of $3,354,160 in 1995 and a net loss before minority interest of $403,149 in
1994. The Company's expenses for the year ended December 31, 1996 were
substantially higher than 1995 and 1994 due to increased exploration activity
and higher general and administrative expenses.
Exploration. Mineral exploration expenditures are expensed as incurred prior
to the determination of the feasibility of mining operations. Once it has been
determined that a mineral property has proven and probable ore reserves,
subsequent development and exploration expenses are capitalized. Through
September 30, 1997, all acquisition and exploration costs have been expensed
as incurred. The Company will capitalize future exploration and development
costs associated with the San Cristobal Project commencing with the start-up
of the second phase feasibility study.
Exploration expenses were $10,128,698 for the nine-month period ended
September 30, 1997 compared to $5,916,535 for the nine-month period ended
September 30, 1996, and were $9,590,632 for the year ended December 31, 1996,
compared to $1,559,874 in 1995 and $105,185 in 1994. The increased exploration
expenses from 1995 to 1996 were due to an increase in exploration activity at
the San Cristobal Project. Total cumulative exploration expense at the San
Cristobal Project was $13,116,302 through September 30, 1997.
Administrative. Administrative expenses were $5,332,473 for the nine-month
period ended September 30, 1997, compared to $602,539 for the nine-month
period ended September 30, 1996, and totaled $1,923,165 for the year ended
December 31, 1996, compared to $982,261 in 1995 and $147,780 in 1994. The
increased expenditures were primarily due to the hiring of key management
personnel during the second half of 1996 and the opening of Apex Corporation's
Denver office in 1996,
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and stock option compensation expenses associated with the granting of stock
options to directors and officers in the nine-month period ended September 30,
1997.
Consulting. Consulting fees were $1,862,201 for the nine-month period ended
September 30, 1997 compared to $1,443,275 for the nine-month period ended
September 30, 1996, and were $2,506,250 for the year ended December 31, 1996,
compared to $560,060 in 1995 and $144,840 in 1994. The increase in 1996 over
1995 is primarily due to expenses associated with retaining third party
consultants to prepare technical studies on various properties and executive
recruiters to identify and hire key personnel.
Professional Fees. Professional fees were $226,591 for the nine-month period
ended September 30, 1997, compared to $827,066 for the nine-month period ended
September 30, 1996, and totaled $1,096,271 for the year ended December 31,
1996, compared to $657,621 in 1995 and $20,600 in 1994. The increase in 1996
over 1995 was primarily due to higher legal and accounting fees. The decrease
from 1996 to 1997 was primarily due to the Company's policy to capitalization
of costs associated with the offering as deferred financing costs.
Amortization and Depreciation. Amortization and depreciation expense was
$55,346 for the nine-month period ended September 30, 1997, compared to
$28,296 for the nine-month period ended September 30, 1996, and totaled
$57,392 for the year ended December 31, 1996, compared to $56,591 in 1995 and
$-0- in 1994. Costs incurred in the organization of the Company and its
subsidiaries were capitalized and are being amortized on a straight-line basis
over five years.
Interest Income. The primary source of income for the Company since
inception is interest income. Interest income for the nine-month period ended
September 30, 1997 was $607,072 compared to $254,962 for the nine-month period
ended September 30, 1996, and totaled $574,470 for the year ended December 31,
1996, compared to $462,247 in 1995 and $15,256 in 1994. The Company's policy
is to invest all excess cash in liquid, high credit quality, short term
financial instruments. The increase in interest income for the comparative
periods was due to the additional cash raised in the 1996 Private Placement.
Income Taxes. Apex Corporation, the Company's U.S. management services
company, is subject to U.S. income taxes. Otherwise the Company pays no income
tax in the U.S. since the Company is incorporated in the Cayman Islands and
conducts no business that currently generates U.S. taxable income. There is
currently no corporate taxation imposed by the Cayman Islands. If any form of
taxation were to be enacted in the Cayman Islands, the Company has been
granted exemption until January 16, 2015. See "Tax Considerations".
EMPLOYEE BENEFITS
The Company does not provide any post-retirement or post-employment benefits
to its employees and therefore does not accrue for such expenses. In 1997,
Apex Corporation instituted a 401(k) Plan for its U.S. employees. Apex
Corporation makes monthly contributions to this 401(k) Plan, and currently
matches 50 percent of each employee's contribution up to an employee
contribution of six percent of base salary. Employees vest in the Company's
contribution at 50 percent after one year of service and 100 percent after two
years of service. Although the Company does not currently have a formal bonus
or incentive plan for any of its employees, it anticipates instituting a bonus
plan in the future. See "Executive Compensation--Other Plans".
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had cash and short-term investments of
$8,806,284 compared to $25,949,771 at December 31, 1996 compared with
$3,296,618 at December 31, 1995
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and $356,942 at December 31, 1994. The increase in 1996 relative to 1995 was
due primarily to the receipt of net proceeds from the 1996 Private Placement
and the payment of the Silver Holdings demand note discussed below.
On December 22, 1994, the Company received, in consideration for the
issuance of shares of Apex LDC to Silver Holdings, a $10,000,000 non-
negotiable demand note, with interest accrued thereon at an interest rate
equal to the one month London Interbank Offered Rate for U.S. dollar deposits.
The principal outstanding under this demand note was $2,819,718 on December
31, 1995 and $9,250,000 on December 31, 1994. On February 5, 1996, the
remaining balance was fully paid. See "Certain Transactions".
In connection with the 1996 Private Placement, which closed effective August
6, 1996, the Company issued 4,256,700 Ordinary Shares at a price of $8.00 per
share and received net proceeds of $32,449,350.
The net cash used in operating activities for the nine-month period ended
September 30, 1997 was $15,879,239 compared with $6,214,312 for the nine-month
period ended September 30, 1996, and was $12,091,580 for the year ended
December 31, 1996, compared with $3,490,631 in 1995 and $328,586 in 1994. The
variance in the net cash used in operating activities between the comparative
periods was due to the increased exploration activity and the San Cristobal
Study. The net cash used in financing activities was $1,094,756 for the nine-
month period ended September 30, 1997, compared with net cash provided by
financing activities of $28,734,745 for the nine-month period ended September
30, 1996, and $35,269,068 for the year ended December 31, 1996, compared with
$6,430,307 in 1995 and $685,528 in 1994.
The Company is subject to a series of obligations with respect to its
mineral properties; the failure to meet any of these commitments could result
in the loss or forfeiture of one or more of the Company's properties. These
obligations consist of government mineral patent fees and commissions, work
commitments, lease payments and advance royalties. In addition, a number of
the Company's property interests derive from contractual purchase options. In
order to acquire such properties, the Company will be obliged to make certain
payments to the registered concession holders and others who have interests in
the properties. See "Notes to the Consolidated Financial Statements".
The Company does not currently have a line of credit with any financial
institution.
The Company's future revenues and earnings will be influenced by currency
exchange rates and by world market prices for silver, zinc, lead, copper and
gold, which fluctuate and over which the Company has no control. See "Metals
Market Overview". Depending upon market conditions for currency exchange and
metal prices, the Company may from time to time hedge its metal or currency
exposure in order to decrease fluctuations in revenues and earnings. The
Company does not currently have a set of policies or guidelines for hedging
foreign currency, interest rate or metals price exposure. See "Risk Factors--
Volatility of Metals Prices".
The Company does not know of any trends, demands, commitments, events or
incidents that may result in the Company's liquidity either materially
increasing or decreasing at present or in the foreseeable future other than
the Offerings.
It is anticipated that the Company will devote the majority of the net
proceeds from the Offerings to financing its equity portion of the San
Cristobal Project's construction and development. In addition, it is
anticipated that significant expenditures will be made for other continuing
exploration, property acquisition, property evaluation and general corporate
expenses.
The development program at the San Cristobal Project will require
significant additional financing. Sources of financing may include bank
borrowings and future additional debt or equity financings.
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There can be no assurance that any such financing will be obtainable on terms
that are attractive to the Company, or at all. The Company has retained
Rothschild Natural Resources LLC and Barclays Bank PLC to act as the Company's
financial advisor and arranger, respectively, in connection with the
anticipated project financing for the San Cristobal Project.
As of the date hereof, the Company does not plan to declare or pay a
dividend.
ENVIRONMENTAL COMPLIANCE
The Company's current and future mining and processing operations and
exploration activities will be subject to various federal, state and local
laws in the countries in which it conducts its activities, which govern the
protection of the environment, prospecting, development, production, taxes,
labor standards, occupational health, mine safety, toxic substances and other
matters. Management does not believe that compliance with such regulations
will have a material adverse effect on its competitive position. The Company
intends to obtain all licenses and permits required by all applicable
regulatory agencies in connection with its mining operations and exploration
activities. The Company's preliminary analysis of the previous and temporarily
continuing leaching operations at the Toldos mine operated by the current
owner and operator indicates that some effluents from the site may be draining
into a seasonal stream which flows into the Rio Grande and, ultimately, into
the Salar de Uyuni, a salt lake to the north of the San Cristobal Project.
Under Bolivian law the Company is not obliged to remediate known pre-existing
environmental conditions. Nonetheless, if the Company acquires the Toldos
property from its current owner, the Company expects to improve the
environmental situation which may currently exist at the Toldos property. The
Company does not expect any such program to have a material adverse effect on
the Company's proposed operations at the San Cristobal Project. The Company
intends to maintain standards of environmental compliance consistent with
World Bank environmental guidelines. See "Properties--Development Property--
San Cristobal Project".
METALS PRICE AND CURRENCY HEDGING ACTIVITIES
Currently, the Company's major principal cash balances are held in U.S.
dollars. Subsidiary cash balances in foreign currencies are held to minimum
balances and therefore have a minimum risk to currency fluctuations. There are
currently no hedge positions against foreign currencies. The Company currently
does not hedge commodity and base metals price risks. However, the Company
anticipates that as its mineral properties are brought into production and it
begins to derive revenue from the production, sale and exchange of commodity
and base metals, the Company may utilize various price hedging techniques to
lock in forward delivery prices on a portion of its production, and thereby
mitigate some of the risks associated with fluctuations in the prices of the
metals it produces. The Company may also engage in hedging activities to hedge
the risk of exposure to currency fluctuations as a result of its operations in
several foreign countries. There can be no assurance that the use of hedging
techniques will always benefit the Company.
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THE COMPANY
The Company is engaged in the exploration and development of silver
properties in South America, Central America and Central Asia. The Company
believes it has accumulated one of the largest privately controlled portfolios
of silver exploration properties in the world. Since 1993, the Company has
acquired the rights to or gained control of 27 non-producing silver properties
located in or near the traditional silver producing regions of Bolivia, Peru,
Chile, Honduras, Mexico, Kyrgyzstan, Mongolia and Tajikistan. Exploration
efforts since 1993 have successfully produced the Company's first development
project, the San Cristobal Project located in southern Bolivia, where regular
and close spaced drilling and analysis has delineated substantial proven and
probable reserves of silver, zinc and lead. In addition, exploration
activities at the Company's other properties in Bolivia, Peru and Honduras
indicate the presence of significant quantities of mineralized material
containing silver and other metals.
The San Cristobal Study was completed in August of 1997 with respect to the
San Cristobal Project, which is located in the Potosi department in southern
Bolivia, a region that has historically produced a significant portion of the
world's silver supply.
BUSINESS STRATEGY
The Company was founded in 1993 to acquire and develop attractive silver
properties throughout the world. Since 1993, the Company has acquired a
portfolio of silver properties covering approximately two million acres in
eight countries. These acquisitions were premised on several factors,
including (i) the low price of silver relative to the price of other precious
metals, (ii) a perception that silver supply and demand fundamentals were
stronger than the then-prevailing price of silver suggested, (iii) the general
scarcity of attractive publicly-traded silver companies, and (iv) the
perception of negative sentiment within the traditional silver mining
community. As a consequence of a prolonged depressed price for silver, which
culminated in a low of $3.56 per ounce in 1993, many marginal silver producers
around the world were forced to scale back, and in some cases shut down, their
silver mining operations. The resultant mine closures, bankruptcies and low
prices contributed to a generally depressed market for silver mining
properties around the world. Competition for the purchase of silver properties
was further dampened by the fact that many of the silver mining companies that
maintained operations became less aggressive in their search for new silver
properties and/or attempted to diversify into other metals in order to
mitigate their exposure to low silver prices. Negative sentiment among silver
producers was reflected in reduced exploration expenditures. The Company's
founders believed that these market conditions provided the Company with
compelling opportunities to purchase silver exploration properties at
attractive prices.
While this "bear market" psychology resulted in a soft market for silver
properties, the Company believed that the fundamental outlook for silver was
improving. The trend of large annual surpluses in silver supply relative to
demand, which had peaked in the early 1980s, began to reverse by the early
1990s, when rising industrial demand for silver, combined with declining
production profiles, caused substantial supply deficits. The Company believed
that the disequilibrium in supply and demand suggested that the "bear market"
in silver was nearing an end. Encouraged by what it considered a discrepancy
between market perceptions and improving fundamentals, the Company embarked on
a program of acquiring silver exploration properties globally and recruiting a
professional management team with a proven track record of developing and
operating mining properties worldwide.
The Company believes that it has successfully achieved the objectives of its
initial acquisition program by assembling a portfolio comprised of
approximately 27 non-producing silver properties covering more than two
million acres of land located in or near traditional silver mining regions of
South America, Central America and Central Asia. Moreover, the Company has
recruited an experienced management team with significant experience in the
identification, exploration and development of mineral properties, as well as
the construction and operation of large-scale mining projects. Finally, the
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Company has successfully enlisted the support of major financial institutions
and investors through two private placements: a $10 million offering in
December of 1994, and a $34.1 million offering in August of 1996.
Upon completion of the Offerings, the Company will focus on achieving the
following five objectives: (i) to complete a second phase feasibility study of
a large scale open pit mining operation at the San Cristobal Project; (ii) to
secure the financing required to develop the San Cristobal Project; (iii) to
proceed to develop the San Cristobal Project into a large scale open pit
mining operation; (iv) to continue exploration and evaluation activities at
the Cobrizos property in southern Bolivia, the El Ocote property in
southwestern Honduras, the San Juan de Lucanas property in southern Peru, and
to commence drilling and underground sampling of the Choroma property in
southern Bolivia; (v) to evaluate other properties in the Company's portfolio
of silver exploration properties, focusing the Company's exploration and
development efforts on those properties which are most likely to contain
significant silver mineralization and divesting itself of those properties
that are not of continuing interest to the Company; and (vi) to identify and
acquire additional mining and mineral properties that the Company believes
contain significant amounts of silver or have exploration potential.
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PROPERTIES
The Company's portfolio of silver properties in Bolivia, Peru, Chile,
Honduras, Mexico, Kyrgyzstan, Mongolia and Tajikistan, which cover an area in
excess of two million acres, contain identified silver mineralization or offer
significant exploration potential. These mineral properties consist of (i)
mining concessions which the Company has acquired, or is in the process of
acquiring, directly; (ii) concessions which the Company has leased, generally
with an option to purchase; (iii) concessions which the Company has agreed to
explore and develop and, if feasible, bring into production, in concert with
local joint venture partners; and (iv) new claims, principally to mineral
properties which the Company believes offer significant exploration
opportunities and which the Company has staked on its own behalf.
The Company's exploration and development activities are currently focused
on five properties: the San Cristobal Project and the Cobrizos property in
southern Bolivia, the El Ocote property in southwestern Honduras, the San Juan
de Lucanas property in southern Peru, and the Choroma property in southern
Bolivia. All five of these properties remain subject to various stages of
exploration, analysis and development. The Company has completed a first phase
feasibility study with respect to the San Cristobal Project. Based on the
favorable results of the San Cristobal Study, the Company is targeting the
completion of a second phase feasibility study of the San Cristobal Project by
late 1998. The Company expects to commission a conceptual study with respect
to the Cobrizos property in the second half of 1997, and expects to commission
a drilling and underground sampling program of the Choroma property. The
Company has completed conceptual studies with respect to the El Ocote and San
Juan de Lucanas properties. Although the San Cristobal Project remains the
Company's top development priority, the initial analysis from the Cobrizos, El
Ocote, San Juan de Lucanas and Choroma properties have been promising and the
Company believes that these properties may be economic development and
production candidates.
In addition to the aforementioned properties, the Company controls a
portfolio of silver exploration properties located in eight countries in South
America, Central America and Central Asia. The Company generally seeks to
structure its acquisitions of mineral rights so that individual properties can
be explored without significant expense and acquired if significant
development opportunities are identified. Properties which the Company
determines do not warrant further exploration or development expenditures will
be sold or otherwise relinquished, typically without further financial
obligation to the Company. Although the Company believes that its exploration
properties may contain significant silver mineralization, the Company's
analysis of such properties is at a preliminary stage. The activities
performed to date at these properties often have involved the analysis of data
from previous exploration undertaken with respect to a property, as
supplemented by the Company's own field work and sampling programs. See "Risk
Factors -- Reserve and Other Mineralization Estimates".
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DEVELOPMENT PROJECT
SAN CRISTOBAL PROJECT
Location and Access
The San Cristobal Project is located in the San Cristobal district of Nor
Lipez province in the Potosi department in southern Bolivia, approximately 500
kilometers south of La Paz and 90 kilometers south of the town of Uyuni. The
San Cristobal Project is named after the town of San Cristobal which is
situated in the midst of the project area. The San Cristobal Project is
comprised of 12 separate identified mineralized anomalies, including the
Toldos deposit, which has been recently mined.
The town of San Cristobal is accessible by a gravel road which runs
approximately 50 kilometers north to the railroad at Rio Grande and a further
60 kilometers northeast to Uyuni. A small unpaved airstrip is also located
approximately six kilometers from the Toldos deposit. The Company has
constructed unpaved roads to access the individual deposits at the site. The
Company anticipates that prior to the commencement of operations at the San
Cristobal Project it will be necessary to construct an approximately 53
kilometer rail spur and road linking the site to the existing main rail line
siding located 40 kilometers north of the property. The Company also expects
(i) to construct a 110 kilometer electric line to supply power to the San
Cristobal Project, and (ii) to pump water approximately ten kilometers to the
site from wells which will be drilled near the Rio Grande river.
The property is largely undisturbed, except for the Toldos deposit, which
has been mined by underground block caving and open pit mining. At present,
there is no significant plant or equipment on site. There is an active mining
camp at the Toldos deposit. A small river, the Rio Grande, passes
approximately 11 kilometers south of the site. Due to the remote location and
small size of the town of San Cristobal, the Company expects that it will have
to recruit skilled and unskilled labor from neighboring areas.
Operating History
Silver was discovered in what is now the San Cristobal district in the early
seventeenth century, and mining has occurred intermittently in the area ever
since. Although no records from the Spanish colonial era mines have survived,
and few records exist with respect to production in the district during the
nineteenth and twentieth centuries, the Company estimates that the district
has produced in excess of 60 million ounces of silver. The Toldos mine was
operated as a block caving underground operation between 1985 and 1988, and
was operated as an open pit mine between 1989 and 1995. Empresa Minera Yana
Mallcu, S.A. ("Yana Mallcu"), a Bolivian mining corporation, continues to
operate a remnant heap leaching operation at Toldos, reprocessing the tailings
from the former mining operation.
Title and Ownership Rights
Since commencing its acquisition program in the San Cristobal district, the
Company has secured contract rights over, outright ownership of or the first
claim of all of the mineral properties that it has identified to be of
interest within a radius of approximately 50 kilometers from the San Cristobal
Project.
In October of 1994, the Company, acting through its agent Mineria Tecnica
Consultores Asociados ("Mintec"), entered into lease and option agreements
with the owner of ten mining concessions pertaining to approximately 1,134
acres of mineral rights including the mineralized areas known as Jayula and
Tesorera. In September of 1997, the Company exercised its option to purchase
these mining rights. The exercise price was $600,000, plus $12,000 per month
for the first 81 months, and $8,000 for the 82nd month, following exercise.
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In August of 1995, the Company, again acting through its agent Mintec,
acquired a two-year purchase option for the mining concessions containing the
Animas deposit from Cooperativa Minera Litoral Ltda. ("Litoral"), a Bolivian
mining cooperative. In July of 1997, the Company exercised its option to
purchase these mining concessions. The acquisition price was $150,000, less 50
percent of the aggregate prior monthly payments to Litoral.
In February of 1996, the Company, again acting through its agent Mintec,
acquired from Yana Mallcu an option to acquire mining concessions controlling
approximately 4,692 acres of mineral rights in the San Cristobal district,
including the entire Toldos mineralized dome. Under the terms of this option
agreement, which expires in February of 1998, the Company has agreed to pay
$6,000 per month to Yana Mallcu for the duration of the contract or until such
time as the Company exercises its option to purchase the concessions. The
Company is entitled to purchase the concessions for the sum of $500,000 and
the assumption of up to $5,750,000 of Yana Mallcu's indebtedness.
Geology and Mineralization
The San Cristobal Project occupies the central portion of a volcanic
depression probably resulting from the collapse of a Miocene age volcanic
peak. The collapse resulted in the formation of a four kilometer diameter
depression, which was subsequently filled with fine to coarse-grained
volcaniclastic sedimentary rocks (shale, conglomerate, sandstone, landslide
debris, talus, etc.).
In the late Miocene age, after sedimentation had nearly filled the
depression, a series of dacite and andesite porphyry sills and domes intruded
into the volcaniclastics, with disseminated and stockwork silver-lead-zinc
mineralization forming both within the volcaniclastics and in the intrusions
themselves. As a result, mineralization occurs in the San Cristobal district
in shallow intrusive dacite sills and domes, intrusive breccia bodies and
volcaniclastics. The disseminated mineralization has not been mined in the
past except for some areas of the Toldos mine. Previous workings were only on
mineralized veins. Company studies indicate the presence of at least 12
mineralized intrusive bodies, all located in close proximity to one another.
Most of the identified mineralized intrusive bodies are hydrothermally altered
and all have been found to be strongly mineralized. Eight of these intrusive
bodies have been drilled by the Company. To date, drilling has been conducted
in sufficient detail to allow estimates of proven and probable reserves at the
Tesorera and Jayula domes and additional mineralized material at Tesorera,
Jayula, Animas and Toldos domes. As previously noted, the Company currently
controls the mineral rights to all of these intrusive bodies.
The following paragraphs describe the geology and mineralization of the more
intensely drilled areas of the San Cristobal district. The two largest
identified areas of mineralization, the Jayula and Tesorera deposits, appear
to be portions of one single mineralized body, and even though they will be
identified separately below, recent drilling results suggest that the two
bodies may be connected with ore grade mineralization. The Company intends to
analyze these and other areas in conjunction with the overall exploration and
development plans for the San Cristobal Project.
Jayula. The Jayula deposit consists of a dacite porphyry sill intruded into
volcaniclastics that filled the depression. Both the dacite intrusion and the
adjacent sediments have been cut by numerous narrow veins and veinlets,
forming a mineralized stockwork over large areas. Mineralization in the
stockwork consists of iron oxides, clays, galena, barite, sphalerite, pyrite,
tetrahedrite, and acanthite. Veins and veinlets are most common in the dacite
sill, near its contact with the sedimentary rocks. Within the volcaniclastics
rocks themselves, and locally within the intrusive sill, is a second form of
mineralization, characterized by disseminated galena, sphalerite and
acanthite. This disseminated mineralization is predominately confined to
coarser-grained sedimentary beds, usually conglomerates and coarse sandstones.
As the extent of ore grade mineralization is confined to the limits of the
planar beds of coarse-grained units, the mineral zones within the sediments
are both stratiform and
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stratibound, forming gently-dipping planar bodies of mineralization which
parallel the bedding of the sediments.
Oxidation of the mineralized zone in the Jayula deposit has occurred to a
depth averaging 40 meters. In this oxide zone, zinc has been nearly completely
leached out; silver values, however, are greatly enhanced due to secondary
enrichment processes. In the oxide zone, the dominant minerals are iron
oxides, clays, native silver, and secondary acanthite.
Based on the assay results of samples taken from old small scale underground
workings, surface exposures, and seven diamond core and 50 RC holes drilled by
the Company, the Company believes that the dacite porphyry intrusion hosts
approximately 75 percent of the mineralization identified at Jayula, with the
volcaniclastics hosting the remainder. The mineralized zone at Jayula covers
an area no less than 500 meters by 600 meters on the surface, and ore grade
mineralization extends to at least 200 meters below the surface. Of the 57
holes drilled at Jayula, approximately one-half had ore-grade mineralization
at their lowest depth. The mineralized zone has not been fully delineated by
the drilling, with ore grade mineralization over significant widths being
found at the southeast, west and northwest perimeters of the drilled area and
at depth. The exploration program has delineated the boundaries of the deposit
only at the northeast corner of the deposit.
Tesorera. The Tesorera deposit is 1,300 meters southwest of the Jayula
deposit, and both appear to be part of the same large mineralized system. The
geology and mineralization at Tesorera are nearly identical to Jayula. At
Tesorera, the west side of the deposit consists of a dacite porphyry sill
intruded into the caldera-fill sediments, and, as at Jayula, disseminated
mineralization occurs within certain coarse-grained sedimentary beds and in
the intrusion itself. This mineralization is similarly stratabound and
stratiform, forming several subparallel, gently-dipping horizons parallel to
the bedding of the volcaniclastics. The mineralogy is identical to that at
Jayula, consisting of pyrite, iron oxides, barite, clays, galena, sphalerite,
tetrahedrite, and acanthite.
Oxidation has affected the Tesorera deposit to a greater depth than at the
nearby Jayula deposit, typically extending to a depth of 75 meters. The oxide
zone mineralogy of Tesorera, like that at Jayula, is dominated by iron oxides,
clays, native silver, and secondary acanthite.
The Tesorera deposit has been drilled by 139 RC and ten diamond core holes
have been drilled at the Tesorera deposit. The assays indicate that the
mineralization is present over an area of 950 meters by 450 meters. As at
Jayula, the deposit is open to depth and in three directions but it is closed
to the west, as the dacite intrusion appears to have received minimal
mineralization. Approximately 40 percent of the holes had ore-grade
mineralization at their lowest depth, which was usually in excess of 200
meters below the surface.
Animas. The Animas deposit, located two kilometers west of Tesorera, is
hosted by a subvertical breccia pipe adjacent to a stockwork-veined rhyolite
porphyry dike. The volcaniclastic rocks are not present at Animas, and thus
stratibound mineralization is absent.
The breccia pipe occurs along the eastern margin of a north-trending
rhyolite dike. The pipe follows the margin for a distance of 400 meters, and
varies from 20 meters to 200 meters wide. It has been drilled to a depth of
200 meters, and is found to be shaped in cross section like an inverted cone
that is narrower at depth. Mineralization is primarily sulfide and consists of
massive galena and sphalerite as a matrix around the breccia fragments. Silver
is present as acanthite and minor tetrahedrite. The Company has drilled 33
reverse circulation holes at Animas.
Toldos. The Toldos deposit consists of a series of a parallel, high-angle
veins. These veins were mined to a depth of approximately 100 meters below the
surface. These veins averaged approximately 15 ounces of silver per tonne. The
wall rock adjacent to the veins also contained disseminated
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and veinlet mineralization. The Company believes that the wall rock and lower
grade ore has not been systematically mined.
Yana Mallcu converted its operations at the Toldos dome from underground
narrow vein mining to bulk mining methods, principally block caving in 1985
and open pit mining in 1989. Beginning in 1985, ore was processed through a
conventional heap leaching circuit at a rate of 3,000 tonnes per day. With the
exception of some minor leaching of the mine tailings undertaken by the former
owner of the Toldos mine, mining activities at the Toldos deposit were
discontinued in 1995.
Drilling Program
The Company has been engaged in a comprehensive delineation and in-fill
drilling program at the San Cristobal Project since October of 1996. This
program was designed to substantiate initial positive drill results at several
of the numerous intrusive dacite or breccia domes located in the district and
has concentrated on the Tesorera, Jayula, and Animas mineralized dome
complexes. The Company has drilled 278 reverse circulation drill holes and 17
diamond core drill holes for a total of 64,554 meters of reverse circulation
RC drilling and 4,752 meters of diamond core drilling at the San Cristobal
Project. These drill holes were generally spaced at intervals from 25 up to
150 meters. Although this drilling is sufficient to establish the presence of
proven and probable ore reserves at the Tesorera and Jayula deposits, drilling
has been too widely spaced to establish proven and probable reserves at the
Animas deposit. The following table summarizes the Company's drilling
activities at San Cristobal.
<TABLE>
<CAPTION>
DIAMOND DRILL HOLES RC DRILL HOLES
-------------------- -------------------
# OF AVG. # OF AVG.
HOLES DEPTH SPACING HOLES DEPTH SPACING
----- ----- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Dome Complex
Jayula............................... 7 250m 100-150m 50 225m 60-150m
Tesorera............................. 10 250m 50-150m 139 225m 25-70m
Animas............................... 0 -- -- 33 200m 40-120m
--- ---
Subtotal........................... 17 -- -- 222 -- --
Surrounding Anomalies.................. 0 NA NA 56 250m random
--- ---
Total Drilling..................... 17 278
=== ===
</TABLE>
First Phase Feasibility Study
In early 1997, the Company commissioned Kvaerner Metals, Davy Nonferrous
Division ("Davy") to conduct the San Cristobal Study. This first phase
feasibility study was completed in August of 1997 and has estimated accuracies
ranging from plus or minus 25 to 30 percent. Davy is a leading mining and
processing engineering firm. Davy has completed more than 50 precious metal
projects during the past 10 years. Davy's expertise covers all aspects of
mining projects from feasibility studies and audits to construction of mines,
processing plants and smelters and refineries. Davy served as lead engineers,
and reviewed the efforts and contributions of the other independent San
Cristobal Study consultants. MRA performed ore reserve estimates using kriging
estimating methods and prepared mine production schedules, and estimated
capital and operating costs. PAH developed an independent resource grade model
using the same database used by MRA which checked closely with the MRA reserve
estimates. Mineral Resource Development Inc. ("MRDI") conducted the
metallurgical test work and developed the process flow sheet. Knight Piesold
LLC was contracted to perform the preliminary environmental assessment and
geotechnical estimates, including mill tailings pond design. The firm of Behre
Dolbear was hired by the Company to conduct and oversee a technical audit of
Davy's procedures and analyses as well as the work of the technical
subcontractors. CPM Group ("CPM") was retained by the Company to provide an
independent analysis of the silver, lead and zinc markets. The Company
purchased published studies from Brook Hunt & Associates and the International
Lead Zinc Study Group regarding the lead and zinc markets.
Proven and probable reserve estimates are based on regularly spaced drilling
at the Tesorera and Jayula mineralized domes. Proven and probable reserves
were calculated using (i) the cost
34
<PAGE>
assumptions delineated in the San Cristobal Study (see below) and (ii) the
market price assumptions of $5.00 per ounce of silver, $0.55 per pound of zinc
and $0.30 per pound of lead. The equivalent cut-off grade was 1.0 ounce of
silver per tonne. The ore reserve estimation method used was kriging, a method
which automatically moderates exceptionally high grades consistent with the
geostatistical character of its mineralization. The following table summarizes
the estimated proven and probable reserves and mineralized material at the San
Cristobal Project, as indicated by the drilling completed to date. The reserve
estimates for the Tesorera and Jayula deposits were prepared by the San
Cristobal Study consultants, and check closely with an independent resource
grade model developed by PAH. The additional mineralized material which occurs
proximate to the San Cristobal Project was estimated by MRA for the Tesorera
and Jayula deposits and the others were estimated by the Company. The
Company's Mineralized Material estimates with respect to the Cobrizos deposit
were confirmed by MRA.
<TABLE>
<CAPTION>
AVERAGE GRADE CONTAINED METALS
----------------------- ---------------------
TONNAGE SILVER ZINC LEAD SILVER ZINC LEAD
(000S GRADE GRADE GRADE OUNCES TONNES TONNES
TONNES) (OZ./TONNE) (%) (%) (000S) (000S) (000S)
------- ----------- ----- ----- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROVEN AND PROBABLE
RESERVES
Tesorera.............. 42,113 1.88 2.00 0.67 79,384 842 282
Jayula................ 80,778 1.73 1.23 0.43 140,088 994 347
------- ---- ---- ---- ------- ----- ---
Total Proven and
Probable Reserves.. 122,891 1.79 1.49 0.51 219,472 1,836 629
======= ==== ==== ==== ======= ===== ===
Stripping ratio for the combined open pit operations is 1.66 tonnes of waste
for each tonne of ore.
ADDITIONAL MINERALIZED
MATERIAL
Tesorera.............. 2,611 0.77 1.37 0.37
Jayula................ 32,122 1.22 0.91 0.22
Animas................ 8,600 1.67 1.71 0.76
------- ---- ---- ----
Subtotal............ 43,333 1.28 1.10 0.34
------- ---- ---- ----
Toldos................ 3,000 3.86 -- --
Cobrizos.............. 10,800 4.31 -- --
------- ---- ---- ----
Total Additional
Mineralized Materi-
al................. 57,133 1.99 -- --
======= ==== ==== ====
</TABLE>
Sampling Procedures
The approximate 30 kilograms of RC drill cuttings from every two meters of
drill depth were sampled at the drill site by splitting the drill chips
ejected from the drill in a Vezin Sampler. This splitting process and the
moisture content of the ejected material results in approximately one-half of
the sample being collected in plastic buckets placed in series. The pulp is
allowed to settle and the excess water decanted off the sample. The sample is
then reslurried and split in half using a Jones type riffle sample splitter.
Each half is then placed in a sample bag and most of the remaining water is
allowed to drain for one to two days. One sample is sent to an assay
laboratory for sample preparation and analysis; the second sample is stored
for later reference and possible confirmatory testing. Drill core samples are
prepared by first sawing the core in half with a rock saw. Half of the core is
bagged for assay and the other half is used for geological logging and then
saved. These samples are also taken at intervals of approximately every two
meters of the drill core, depending upon rock type changes.
The six-kilogram RC drilling samples and the half core samples received at
the lab are first dried in an oven at a temperature not to exceed 85 degrees
centigrade. After drying, the samples are first crushed to minus ten (-10)
mesh (1.68 millimeters) and split in half. One of these samples is pulverized
to minus 65 mesh and again this is mixed and split down to 250 to 500 grams
using Jones type riffles. The remaining sample is bagged as a reserve. The
sample is then pulverized in a ring and puck pulverizer to minus 200 mesh
(0.074 millimeters).
35
<PAGE>
The minus 200 mesh sample is analyzed for silver using standard fire assay
procedures using a one assay tonne sample size. Samples with low silver values
are finished by atomic adsorption while samples with high silver values are
finished gravimetrically. Assay results are reported in parts per million
(grams per tonne). The sample is also analyzed for lead and zinc using
standard total wet analytical methods using a four acid digestion and atomic
adsorption. Results are reported in parts per million or percent, depending
upon the values encountered.
Davy conducted its own independent drilling sampling and assay analysis of a
representative sample of four drill holes using the services of a registered
professional geologist and an independent commercial analytical laboratory.
Davy independently determined how many holes and their positioning and managed
the drilling of these four "twin" holes, the collection of the resultant drill
samples, and maintained custody of the samples from the drill site to the
independent commercial analytical laboratory in the United States. This
independent test program confirmed the Company's drilling results.
First Phase Feasibility Study Results
The San Cristobal Study was based on field work involving extensive drilling
with typically evenly spaced drill holes designed to establish the presence
and dimensions of measurable mineralization. The Company's field work was
conducted in accordance with generally accepted mining industry procedures. In
addition, bench scale metallurgical test work was conducted. A fair and
accurate summary of key conclusions from the San Cristobal Study is provided
below.
Production Rates
The first phase feasibility study utilized a base case incorporating an ore
production rate of 30,000 tonnes per day (10.8 million tonnes per year)
resulting in a minimum mine life of 11.5 years based on current reserves. An
average waste to ore strip ratio of 1:66:1 is indicated with the ratio varying
from approximately 2.0:1 in the early years to 0.5:1 in the later years of the
mine life. The ore is near the surface and outcrops in some areas and the
study estimates 30 million tonnes of pre-production waste stripping will be
required. Production will utilize conventional large scale open pit mining
methods and equipment.
Processing
The bench scale metallurgical tests and analysis indicate successful use of
conventional flotation separation of waste rock from minerals and separate
collection of silver rich zinc and lead concentrates for both oxide and
sulfide ores. Test results indicate average metallurgical recovery rates of 77
percent for silver, 85 percent for zinc and 75 percent for lead in the
sulphide ores, and 60 percent for silver and 55 percent for lead in the oxide
ores. These concentrates are expected to have metal content well within the
norms of downstream smelting and refining processes. Consequently, the process
selected by the study includes conventional primary crushing, followed by
semi-autogenous-grinding (SAG) milling, followed by differential flotation
which will produce separate zinc and lead concentrates each containing
approximately half of the silver produced.
Metal in Concentrate Production
The profile of the production of metals contained in concentrate is
estimated below.
<TABLE>
<CAPTION>
YEARS 1 TO AVERAGE
METAL 5 YEARS 6 TO 12 PER YEAR
----- ---------- ------------- ----------
<S> <C> <C> <C>
Silver (ounces)............................ 15,400,000 13,000,000 14,000,000
Zinc (tonnes).............................. 114,600 146,500 132,700
Lead (tonnes).............................. 44,209 35,890 39,507
</TABLE>
36
<PAGE>
Cost Estimates
Mine site cash production costs for mining, including stripping waste,
processing, overhead, reclamation, and general and administration costs are
estimated to be $6.33 per tonne of ore mined. These estimates assume the use
of a large scale mining contractor who will drill, blast, and transport the
ore and waste rock from the mine to the process plant and waste rock piles.
Average transport costs for concentrate produced to the market is estimated to
be $70 per tonne of concentrate from the mine gate. Treatment charges for
smelting and refining are estimated to be $175 per tonne of lead and zinc
concentrates.
Stripping ratio for the combined open pit operation is 1.66 tonnes of waste
for each tonne of ore. The cash production cost is estimated to be $2.66 per
equivalent ounce of silver.
Capital cost estimates for the completion of the second phase feasibility
study and financing, which the Company anticipates will be completed in late
1998, as well as the development and construction of mining, processing and
infrastructure and the inclusion of working capital, which the Company
anticipates will be completed in late 2000, total $327 million. This amount
includes $15 million of working capital, $24 million of pre-construction
capital, $26 million pre-production waste stripping, $262 million for the
construction of the process plant and necessary infrastructure. The process
plant and infrastructure estimates include a 20 percent contingency. These
estimates include the construction of transportation facilities and other
requisite infrastructure, but exclude the cost of mobile mining equipment
which will be provided by a mining contractor.
Proposed Development Program
In the event no new properties emerge in the interim which represent more
attractive development opportunities, it is anticipated that the Company will
devote the majority of the proceeds from the Offerings to develop the San
Cristobal Project.
Part of the continuing development of the San Cristobal Project will be the
completion of a second-phase feasibility study. This study, and the field work
required in connection with it will involve:
. Additional in-fill and extension drilling intended to delineate
significant additional proven and probable reserves;
. Sterilization drilling to confirm surface plant and infrastructure
siting;
. Collection of bulk and composite samples for additional bench scale and
pilot plant scale metallurgical test work;
. Comprehensive environmental sampling and monitoring including the
preparation of an environmental impact study;
. Discussions and negotiations with national and international service
providers with respect to power supply and transportation, and
negotiations with smelters and refiners of metal concentrates;
. Collection of detailed and extensive cost information from national and
international sources;
. Preliminary engineering for mine, plant, and infrastructure to be
advanced to approximately ten percent of final engineering so as to
provide capital and operating cost estimates within an accuracy range of
plus or minus ten percent; and
. Continuing updates of metal markets dynamics and forecasts.
The Company has retained Rothschild Natural Resources LLC and Barclays Bank
PLC as the Company's financial advisor and arranger, respectively, in
connection with the anticipated project
37
<PAGE>
financing of the San Cristobal Project. The Company anticipates that project
financing activities will commence on a preliminary basis in late 1997 and
then accelerate with the delivery of the second phase feasibility study in
mid-1998 with financing to be secured by late 1998. If this timetable is
achieved, project construction could commence in early 1999 and, after an
approximate two-year construction and development program, production could
commence in early 2001.
Exploration and Development
Jayula. The Company plans to continue drilling the Jayula deposit in order
to determine the limits of economic mineralization. As the deposit is open in
most directions, and at depth, such drilling is required to determine the full
size of the deposit for pit design and mine planning. Preliminary drilling
west of the Jayula deposit indicates that the deposit may converge with the
Tesorera deposit, thus this probability will be tested by numerous closely
spaced drill holes.
Tesorera. The Company intends to continue drilling the Tesorera deposit in
order to determine the full extent of the mineralization. A primary goal is to
determine the extent of mineralization, particularly toward the Jayula
deposit, to test the probability that the ore-grade mineralization at the
Tesorera deposit is indeed connected to that at the Jayula deposit, 1,300
meters to the northeast. Additional deep drilling will be conducted to
determine the depth of the mineralization at Tesorera, as many of the holes
have bottomed in ore grade mineralization.
Animas. The Animas deposit is relatively small in comparison to the Tesorera
and Jayula deposits. Therefore, although much additional drilling is necessary
to put the mineralized material into a proven and probable category, drilling
at the site will likely take a lower priority than drilling at the other,
larger deposits. There is good exploration potential at the Animas deposit,
especially to the west of the rhyodocite dike, and to the north on strike of
the known breccia pipe. During routine district-wide exploration, these
potential areas will be tested.
Cobrizos. Cobrizos is a joint venture between the Company and the
Corporacion Minera de Bolivia S.A. ("Comibol"), a government mining company,
and is described in more detail below. Nevertheless, it is included under this
heading as its proximity to the San Cristobal Project makes it likely that it
will be developed in conjunction with the San Cristobal Project. Therefore,
future work will include drilling along strike beyond the currently defined
zone of mineralization, and diamond drilling to confirm the results of
reserve-circulation drilling as well as gather samples for metallurgical
testing. See "Advanced Exploration Properties--Cobrizos".
Toldos. The Company has started drilling reconnaissance holes in the area at
the Toldos deposit. Several of these holes show favorable results, and
additional drilling will be conducted to test the mineralized material for
proven and probable reserves.
Satellite Deposits, including Inca, Colon, Cerillos and Delgado. In addition
to the above, the Company has additional anomalous zones in this area that it
will explore during the second phase feasibility study.
Environmental and Other Issues
The Company's preliminary analysis of the existing tailings operations at
the Toldos deposit at the San Cristobal Project indicates that some effluents
from the Toldos deposit may be draining into a seasonal stream which drains
into the Rio Grande and, ultimately, flows into the Salar de Uyuni, a salt
lake to the north of the San Cristobal Project. If the Company exercises its
option to acquire the Toldos property from its current owner, the Company
expects to improve the environmental situation which may currently exist at
the mine. The Company does not expect any such program to have a material
adverse effect on the Company's proposed operations at the San Cristobal
Project. See "Risk Factors--Government Regulation and Environmental Matters".
38
<PAGE>
The Company has determined that the town of San Cristobal, its church, and
its cemetery are located in close proximity to the planned Jayula and Tesorera
pits. The Company's efficiency when mining the deposits may be limited without
the resettlement of the residents of the town and the possible replacement of
its church. The Company is currently working with the residents of the town,
which it estimates has approximately 350 inhabitants, to develop an
economically feasible relocation plan sensitive to the interests of the
residents and the traditions of the town. See "Risk Factors--San Cristobal
Project Risks".
39
<PAGE>
ADVANCED EXPLORATION PROPERTIES
COBRIZOS
Location and Access
The Cobrizos property is located on level terrain 12 kilometers north of the
San Cristobal Project in southern Bolivia. The proximity to the San Cristobal
Project affords significant potential operating efficiencies. The former
railroad maintenance town of Uyuni lies 70 kilometers to the northeast and the
railroad to the Chilean port of Antofagasta, 460 kilometers distant, passes 20
kilometers to the north. The Bolivian commercial centers of Oruro and La Paz,
respectively, are located 350 kilometers and 500 kilometers to the north.
Operating History
Green and blue colored copper carbonate minerals were produced from the
deposit for use as pigment during pre-Columbian times and Spanish miners
subsequently engaged in small scale native copper and copper sulfate mining.
Between 1892 and 1906 Compania Arenal sank shafts as deep as 60 meters and
produced copper from approximately 100,000 tonnes of material extracted from
shallow underground and open cast workings. A combination of flooding and
carbon dioxide build-up in the workings ultimately forced a cessation of
operations.
Title and Ownership Rights
The Company acquired the right to enter into a joint venture with Comibol on
its approximately 4,178 acres of mining rights at the Cobrizos property
through public tender in August of 1996. An agreement defining the joint
venture was signed on September 11, 1996. Pursuant to this agreement, the
Company must complete certain payments and work commitments in order for its
rights to vest in this joint venture at the Cobrizos property, to which
Comibol contributes only the mining rights. These obligations are summarized
below.
<TABLE>
<CAPTION>
PAYMENT
PER MINIMUM WORK
PERIOD ACRE COMMITMENT
------ ------- ------------
<S> <C> <C>
0-24 months.......................................... $ 1.44 $625,000
25-48 months......................................... $ 48.28 No minimum
49-60 months......................................... $240.89 No minimum
</TABLE>
Comibol will receive five percent of the operating cash flow, as defined
below, from production at the Cobrizos property until the Company has
recovered its entire capital investment; thereafter, Comibol will receive 15
percent of operating cash flow. The Company has the right, in its discretion,
to reduce the acreage subject to the joint venture agreement prior to
commencement of the third year thereof and again prior to the commencement of
the fifth year thereof. Operating cash flow is defined in the agreement as the
gross revenues less the cost of transportation, smelting and refining,
marketing commissions, production costs and administrative expenses. Financing
costs and depreciation are not deductible from gross revenues.
Geology
The Cobrizos property hosts an oxidized copper-silver deposit of the red
bed-type composed of narrow (less than ten centimeters thick) veins in a
stockwork cutting shale and sandstone of the Jurassic Potoco Formation, which
dips steeply to the east.
Mineralized Material
In November and December of 1995, prior to entering into the aforementioned
joint venture agreement with Comibol, the Company conducted initial field
studies including geologic mapping and
40
<PAGE>
the collection of 108 samples for geochemical analysis of gold, silver, and
copper. After successfully bidding for and acquiring the Cobrizos property,
the Company conducted a mercury vapor survey over the greater mineralized area
in August of 1996. In October of 1996, the Company drilled 11 inclined (-60
degrees) RC holes. Four of the holes drilled in a row 700 meters long and
spaced no less than 150 meters apart tested a single stratigraphic horizon and
intersected silver and copper mineralization.
These drill results precipitated a follow-up drilling phase focused on this
single stratographic horizon during which eight additional holes were drilled
over a strike length of 850 meters which, together with the four earlier
holes, resulted in all the drill holes being spaced approximately 75 meters
apart. The results indicate a steeply dipping mineralized zone with an average
width of 55 meters over the 855 meters of strike length. The indicated depth
from surface or near surface is at least 100 meters. The Cobrizos property
contains mineralized material of 10.8 million tonnes at an average grade of
4.3 ounces of silver per tonne and approximately 0.22 percent of copper. These
estimates were confirmed by MRA.
Exploration and Development
The Company intends to commission a conceptual study of the property in the
fall of 1997. Further drilling will be conducted in order to increase the
reliability of current data, to determine the limits of the mineralization at
the site, and to establish proven and probable reserves. The Company believes
that the proximity of the Cobrizos property to the San Cristobal Project may
result in significant operating efficiencies. Open pit mining with processing
either at the deposit site or at the proposed milling and processing facility
at the San Cristobal Project will be evaluated, and metallurgical test work
will be conducted.
EL OCOTE
Location and Access
The El Ocote property in southwestern Honduras is located near the town of
Santa Lucia in the municipality of La Labor, department of Ocotepeque,
approximately 150 kilometers south of the major city of San Pedro Sula and
approximately 30 kilometers east of the Guatemalan border. The property is
accessible by means of the paved Pan-American Highway which passes within one
kilometer of the deposit. Power, water and labor are available within two
kilometers of the property. The site is largely unimproved with no equipment
on site; some underground development has occurred, and it is possible to
inspect the mineral body from four adits.
Operating History
A portion of the El Ocote property was first explored and put into
production in the late nineteenth century. Rosario Resources ("Rosario"), a
New York-based company, subsequently acquired the property and in 1963 drilled
four diamond drill holes. According to Rosario's geologists responsible for
the project, Rosario decided against further development due to difficult
logistics and what was perceived to be unfavorable metallurgy. Rosario's
metallurgical studies at the time indicated that the mineralized material at
the site was best processed by flotation.
Title and Ownership Rights
In 1983, a Honduran entity, Compania Minera Ocote, S. de R.L. ("Minera
Ocote") acquired the property. In June of 1994, the Company, acting through an
agent, acquired an exclusive five-year exploitation concession and purchase
option for the El Ocote property from Minera Ocote totaling 986 acres. Minera
Ocote's rights to the property derive from a 40-year mining concession granted
by the government of Honduras in March of 1983, which may be extended for an
additional 20-year term.
41
<PAGE>
Pursuant to the contract with Minera Ocote, the Company has committed to
undertake a five-year, $1,000,000 exploration and development program on the
property, and to advance production royalties of $50,000 and $75,000 to Minera
Ocote on the fourth and fifth anniversaries, respectively, of the agreement.
The Company is also responsible for maintaining Minera Ocote's concession
until such time as title has been formally transferred to the Company. Minera
Ocote has agreed to transfer the title to the property on the fifth
anniversary of the aforementioned contract, assuming the property is in
production, or at such earlier time as the Company may request. Upon the
commencement of commercial production at the property, the Company will pay
Minera Ocote a five percent NSR royalty.
In addition to the aforementioned concession at the El Ocote property, the
Company has also contracted with Minera Ocote to acquire an exploration
permit, the Ocote Exploration Zone, covering approximately 17,414 acres of
adjacent territory. Minera Ocote's title to this exploration permit was
formally granted in March of 1996. This exploration permit will have a life of
four years, extendable for an additional two years before converting into an
exploitation concession. The Company expects that if it elects to acquire this
permit outright from Minera Ocote, title to the property will be assigned to
Cordilleras Honduras. The Company also holds a right of first refusal with
respect to another property contiguous to the El Ocote property and is in the
process of negotiating for an option to buy such property.
Geology
The major geological feature of the El Ocote property is a zone of
mineralized breccia rock contained in a near vertical pipe-shaped structure.
This pipe is located at an altitude of approximately 1,600 meters on the side
of the very steep eastern slopes of Cordillera Del Merendo. The deposit is
hosted by a thin package of Tertiary andesitic volcanics, which overlie
Tertiary sediments and volcaniclastics, as well as Cretaceous Yojoa Group
limestones. Although faults are believed to be present immediately east and
northeast of the structure, it does not appear to have been subjected to any
significant post-mineral faulting.
The deposit consists of a near vertical column of brecciated diorite,
roughly oval in plan section, in which silver and copper minerals, plus
fluorite, and quartz form the cement around the breccia fragments. This
structure in plan has dimensions of 150 meters (north-south) by 90 meters
(east-west). Within the mineralized structure, the fragments comprise angular
to rounded diorite and diorite porphyry. The degree of brecciation decreases
with depth, such that at a depth of less than approximately 50 meters below
the 1,200 level, there is no longer significant brecciation and the rock is
merely weakly jointed.
The bulk of the silver mineralization is in one massive block of breccia
near the surface, with the grade diminishing rapidly below the 1,200 meter
level. Below that level, most of the higher grade material takes the form of
several arcuate bands, concave upward, which extend downward from the west
side of the structure and which terminate with depth toward the east.
Mineralized Material
In 1995, the Company began a process of evaluating the exploration and
development potential of the identified mineralized zone at the El Ocote
property. Specifically, the Company resampled four preexisting mine levels,
mapped the geology of the area, prepared topographic maps of the site, and
drilled 16 RC drill holes into the pipe-like structure and two RC holes into
the surrounding host rock. A total of 3,422 meters of drilling was completed
during this program and a total of 2,258 samples from these holes were sent
for assay. Using this drill assay data and the data from 313 samples from the
underground mine workings, the Company estimated that the deposit contains
approximately 2.1 million tonnes of mineralized material containing 9.9 ounces
of silver per tonne at a cut-off grade of 2.0 ounces of silver per tonne.
42
<PAGE>
Conceptual Study
The Company commissioned Davy to prepare a conceptual study in order to
estimate the potential and timing of undertaking rapid exploitation of the
property via rapid bulk underground mining and heap leach extraction methods.
This study utilized the Company's estimate of mineralized material mentioned
above.
This study was completed in July of 1997 and concluded as follows:
. The project's economics are sensitive to metallurgical recovery and metal
prices. Assuming a 50 percent heap leach recovery, the project's internal
rate of return is positive with silver prices of approximately $6.00 per
ounce, or at a 75 percent recovery, a positive rate of return begins at
prices above $4.00 per ounce of silver.
. Metallurgical test work should be undertaken to determine cyanide
consumption and silver recovery rates.
. Upside potential lies in lower cyanide consumption rates and the
discovery of ore reserves to improve the return on capital invested in
the mining and processing facilities.
Exploration and Development
The Company plans to commission an extensive metallurgical sampling and
testing program as the next step in its continuing evaluation of this
property. The Company believes that there is little likelihood of discovering
additional resources within the pipe structure itself. Nonetheless, as part of
the appraisal of the mineral potential of the El Ocote property, a regional
stream sediment survey was conducted over an area of 80 square kilometers. The
stream draining the mineralized area at the El Ocote property assayed 0.6
parts per million ("ppm") silver. Most other streams in the immediate area
assayed under 0.5 ppm silver. However, a large number of streams draining an
area 4.5 kilometers southwest of the mineralized structure assayed from 0.6 to
2.6 ppm silver. As numerous streams draining this area are strongly anomalous
in silver, the Company believes it is likely that additional silver
mineralization may occur in the headwaters of those sampled streams. The
Company plans to conduct further reconnaissance field work in this anomalous
area until the source of the silver is discovered.
SAN JUAN DE LUCANAS
Location and Access
The San Juan de Lucanas property is located 147 kilometers east of the town
of Nazca in the San Juan district of the Lucanas province in the department of
Ayacucho in southern Peru, approximately 500 kilometers south of Lima. The
property is accessible by means of a partly-paved, well-maintained highway
from Nazca which extends to within ten kilometers of the property and is
connected to the mine and mill site by well-established gravel roads. Water
and labor are available on site while power must be generated at the site.
Operating History
Mineralization was discovered in the San Juan district in colonial times.
Documented mining has occurred intermittently in the area since 1938. Empresa
Minera San Juan de Lucanas S.A. ("EMSJ") operated the San Juan de Lucanas mine
from 1966 until 1990, at which time operations were discontinued due to
operating losses. Between 1990 and early 1996, a small mining cooperative
43
<PAGE>
intermittently ran the San Juan de Lucanas mine at a low production level.
Since 1951, the three mined veins at San Juan de Lucanas property have
produced approximately 3,000,000 tonnes of ore grading an average of 13.8
ounces of silver per tonne and 0.061 ounces of gold per tonne. Mill recoveries
of 84 percent silver and 91 percent gold resulted in district production of
approximately 35,830,000 ounces of silver and 170,400 ounces of gold.
Title and Ownership Rights
Through its new claims and the acquisition of mining concessions and certain
contract rights entitling it to explore and develop mining concessions in the
district, the Company has acquired title to, or otherwise controls, mineral
rights to more than 52,000 acres of properties dispersed over an area of
approximately 150 square miles in the San Juan district of the Lucanas
province of Peru. The Company has contracted to acquire 38 existing mining
concessions relating to 42,071 acres of land, including the aforementioned
pre-existing mining complex, and has staked new claims covering more than
10,131 acres. The Company believes that it controls all known mineralized
structures in the San Juan district.
The registered holders of title to the 38 mining concessions include EMSJ
and Banco Minero del Peru, S.A. ("Banco Minero"), a Peruvian state bank which
is in liquidation. Among EMSJ's creditors were Banco Minero, which became
EMSJ's sole shareholder, and EMSJ's former employees, who where the
beneficiaries of certain statutory labor liens on EMSJ's assets. As a result,
these mining assets, although primarily registered in the name of EMSJ, also
included certain properties registered in the name of Banco Minero which are
now registered in the name of ASC Peru, a subsidiary of the Company. In June
of 1993, Banco Minero agreed to transfer ownership of the San Juan de Lucanas
mining complex to EMSJ's former workers in exchange for a release of all
claims by such workers against EMSJ and its successor in interest, Banco
Minero. The Banco Minero settlement agreement was subject to (i) a two-step
court approval process and (ii) subsequent registration with the Peruvian
Registry of Mines. The approval process has been completed and the
registration of the settlement agreement has been ordered by the Labor Court
in Lima. The registration of the settlement agreement, transfer of title to
the Company and the raising to public deed of the Company's rights to acquire
the concessions, however, remain pending.
The Company has contracted with more than 90 percent in interest of the
beneficiaries of the Banco Minero settlement agreement to acquire all of their
rights in the San Juan de Lucanas mining complex (such contracts, the "San
Juan Contracts"). The Company has obtained the opinion of local counsel
attesting to the validity and enforceability of the San Juan Contracts. In
order for the Company to perfect its title to the San Juan de Lucanas mining
complex, the Banco Minero settlement agreement must be duly registered with
the Peruvian Registry of Mines. Since Peruvian law does not provide for
fractional interests in mining properties as an administrative procedure, a
special purpose mining entity, to be named SMRL Dorita I de Ica ("SMRL"),
which will be beneficially owned by the workers party to the settlement
agreement, will become the holder of the title to the San Juan de Lucanas
property. The SMRL is broadly analogous to a Peruvian limited liability
corporation. Pursuant to the San Juan Contracts, the Company will become the
holder of at least 90 percent of the participating interests in SMRL. The
Company expects that pursuant to the San Juan Contracts, SMRL will be
compelled to sell the San Juan de Lucanas property to the Company or its
designee upon the registration of the settlement agreement.
As several of the former workers party to the Banco Minero settlement either
are not party to the San Juan Contracts, or have sought or may be expected to
seek to opt out of the San Juan Contracts, the Company's interest in
particular properties comprising the San Juan de Lucanas mining complex may be
subject to a small amount of dilution. Management does not believe that any
such dilution will have a material adverse effect on its interests or
activities in the San Juan district. The Company is
44
<PAGE>
pursuing the rapid resolution of all title disputes and is committed to an
amicable settlement with all parties involved.
Concurrent with the resolution of outstanding administrative legal issues,
the Company has taken steps to maintain an orderly physical presence in the
San Juan district. Of the 337 surviving ex-workers, approximately 60 continue
to live at the mining camp while the others no longer live in the district.
Those at the camp are living at a subsistence level. The Company provides
periodic truckloads of food and other supplies and has provided some
assistance to the local school and sports teams. The Company has two
representatives at the camp who periodically report to management, and the
Company's engineering personnel have made numerous uneventful visits to the
camp. However, the situation is unstable and is likely to remain so until such
time as the Company is able to make purchase payments on the SMRL properties.
The Company expects to make such payments as soon as the registration of the
settlement agreements have been completed and the San Juan Contracts have been
raised to public deed.
Geology
The mineral deposits at the San Juan de Lucanas property are epithermal,
with mineralization occurring in a number of steeply dipping veins, running
along two well defined orientations. The north-south veins include the veins
known as Santa Rosa, Saramarca, Yanarumi, Ventanilla and Rosaura; the
northeast-southwest vein is known as Concepcion-Raquel. The outcrops of the
Ventanilla and Concepcion-Raquel structures can be followed on the surface for
over one kilometer. The rocks hosting the veins consist of lava flows and tuff
flows with conglomerate.
There are several systems of veins on the property. The Concepcion-Raquel
vein forms the most important structure in the district and is comprised of
two sets of three parallel structures each. The width of the veins varies
between two and four meters, although in some sections of the mine, widths
over 20 meters can be found. The Santa Rosa vein and another associated vein,
Alfa Romeo, form the second most important vein system; with vein widths
varying from one to seven meters. The third most important vein system is the
Saramarca system which is comprised of a series of veins and mineralization
occurring in lenses.
All three vein systems are mineralized with gold, chalcopyrite, sphalerite,
galena, argentite and ruby silvers. Successive processes of leaching and
oxidation led to the formation of an enriched zone which constitutes the most
readily mineable portion of the deposit. The main minerals at the surface are
oxides extending to a depth of approximately 100 meters. The oxides contain
significant grades of silver and gold in some areas. Below this level, an
enriched zone with a vertical interval of 200 to 250 meters is present in most
of the known veins.
Mineralized Material
Underground mineralized material is estimated at 139,000 tonnes with an
average silver grade of 9.27 ounces per tonne and gold grade of 0.086 ounces
per tonne.
During January and February of 1995, the Company engaged independent
contractors to survey and drill, under the supervision of Company geologists,
the two tailings dumps using impact casing methods. Twenty holes were drilled,
and 149 samples obtained. Approximately 85 percent of the tailings area was
sampled, and there is no reason to believe that the remaining 15 percent would
yield significantly different results.
Based on the work described above, the Company estimates that the two
tailings dumps contain at least 1.75 million tonnes of mineralized material
with an average silver grade of 1.74 ounces per tonne and gold grade of 0.006
ounces per tonne. The Company sent a 60 pound (30 kilogram) sample to the
University of Cardiff, Wales, for metallurgical testing to estimate
recoveries, material balances
45
<PAGE>
for various throughputs for processing the tailings, reagent consumption and
preliminary equipment and capital specifications. PAH found that these test
results support the concept of reprocessing the tailings profitably, assuming
a tailings reclaim agglomerate and heap leach process for a new or refurbished
underground mine combined operation. The tailings component would contribute a
net cash margin (before tax) of $1.99 per ounce of silver at an assumed price
of $5.15 per ounce of silver.
Conceptual Study
In June of 1995, PAH performed a conceptual study evaluating the
rehabilitation of the idled San Juan de Lucanas mine complex. PAH concluded
that rehabilitation would be feasible, and require approximately $10 million
to return the mine to a 500 tpd underground mining operation. Operating cash
costs of a rehabilitated and developed mine were estimated by PAH to be
approximately $2.40 per ounce of silver when fully operational. PAH outlined a
mine and power rehabilitation program and also defined requirements for
replacement of the crushing and grinding sections, a new flotation plant,
thickening section and cyanidation section, and repairs to the Merrill-Crowe
precipitation section. All ancillary structures would have to be rebuilt. The
Company believes additional reserves, which could result from such proposed
exploration, would be required to justify such investment.
Exploration and Development
The Company has defined a two stage, 5,500 meter core drilling program with
the goal of delineating an additional two million tonnes of reserves within
the known vein system. The first stage would consist of 12 core holes drilled
into eight veins to depths averaging 250 meters, for a total of 2,875 meters.
The second stage would consist of another 10 holes in the same veins, for a
total of 2,625 meters. If successful, a third phase consisting of additional
drilling and underground drifting will be conducted, the results of which will
be used to justify the rehabilitation and development of the mine, as well as
further exploration on other parts of the property.
CHOROMA
Location and Access
The Choroma property is located in the Bolivian silver-tin belt, 600
kilometers south of La Paz and 80 kilometers north of the border with
Argentina. It is 15 kilometers northeast of the small regional commercial
center of Tupiza, which is served by the railroad connecting Salta, Argentina
with Antofagasta, Chile and La Paz. Elevations in the prospect area range from
3,100 to 3,500 meters above mean sea level.
Title and Ownership Rights
The property is covered by approximately 310 acres of mining rights owned by
Comibol. The right to joint venture with Comibol was acquired through public
tender and contracted in July of 1996. The terms of the 40-year renewable
agreement provide for an initial five-year exploration period during which the
Company must make the following payments and investments in the property in
order to maintain the joint venture:
<TABLE>
<CAPTION>
PAYMENT MINIMUM WORK
PERIOD PER ACRE COMMITMENT
------ --------- ------------
<S> <C> <C>
0-24 months.......................................... $ 1.44 $213,000
25-48 months.......................................... $ 48.18 No minimum
49-60 months.......................................... $240.89 No minimum
</TABLE>
46
<PAGE>
Comibol will receive five percent of the operating cash flow, as defined
below, from production at the Choroma property until the Company has recovered
its entire capital investment; thereafter, Comibol will receive 15 percent of
operating cash flow. The Company has the right, in its discretion, to reduce
the acreage subject to the joint venture agreement prior to commencement of
the third year thereof and again prior to the commencement of the fifth year
thereof. Operating cash flow is defined in the agreement as the gross revenues
less the cost of transportation, smelting and refining, marketing commissions,
production costs and administrative expenses. Financing costs and depreciation
are not deductible from gross revenues.
Operating History
Production records are not available for the Choroma property. Pods of high-
grade lead-silver oxide ores were mined from veins during the Spanish Colonial
era. During the first half of the twentieth century, the deposit belonged to
Simon I. Patino until it was nationalized in 1952, when the property became
part of Comibol. Comibol leased the property to Messrs. H. Berinduague and A.
Levy, and finally to a miners' cooperative. Between 1976 and 1985, Comibol
rehabilitated several mine workings, carried out 526 meters of development on
several veins, and drilled 3,336 meters of core in 15 holes. The results of
this work are not in the Company's possession and reportedly have been lost by
Comibol. The mine was inactive when the United Nations Development Program
(UNDP) issued its report in December of 1990, following a 15-day field study.
UNDP concluded that the deposit had potential for the discovery of bulk
mineable material in fractured or brecciated rock as well as for traditional
vein ore bodies.
During the first quarter of 1996, geologists for the Company channel sampled
many of the outcrops at the Choroma property. This work defined several lines
44 to 86 meters long which each averaged between 1.8 ounces of silver per
tonne and 4.0 ounces of silver per tonne. The Company acquired the property on
the basis of this work and the earlier reports.
Geology
The deposit is located near the southern end of the Bolivian silver-tin belt
in a sequence of dark colored shales of Ordovician age that have been intruded
by one or more porphyry domes of quartz dacitic to rhyolitic composition.
Veins and associated hydrothermal breccias occupy steep fractures trending
northwest. Hydrothermal alteration in rocks flanking the mineralized
structures consists of locally intense silification overprinted on more
broadly distributed propyllitic dominated by chlorite. Vein filling consists
of quartz, siderite, pyrite, chalcopyrite, arsenopyrite, galena, sphalerite,
tetrahedrite, tenantite and argentite with local concentrations of canfieldite
and agyrodite. Gold grades of up to 0.064 ounces per tonne are present in at
least one vein.
Exploration
Sampling of outcrops has defined several anomalies, which the Company
intends to drill in order to test for bulk mineable mineralization. In
addition, access will be gained to underground workings for sampling of
structures and wallrocks to further test for bulk mineable mineralization as
well as ore hosted by veins.
47
<PAGE>
OTHER MINERAL PROPERTIES
In addition to the aforementioned development project and advanced
exploration properties, the Company has a portfolio of more than two million
acres of exploration properties located in the traditional silver producing
regions of the world or otherwise identified by the Company as areas which
warrant exploration. The Company generally seeks to structure its acquisitions
of mineral properties in order to allow the Company to engage in phased
exploration of individual properties at a relatively low cost and to acquire
those properties that it regards as presenting significant development
opportunities. Properties which the Company determines do not warrant further
exploration or development will be sold or otherwise relinquished, typically
without further cost obligations to the Company. The Company currently holds,
controls or has options to acquire 22 major groups of exploration properties
located in eight countries. The distribution of these holdings is summarized
in the table below.
LOCATION AND DISTRIBUTION OF EXPLORATION PROPERTIES
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
COUNTRY PROPERTIES ACREAGE(1) TOTAL ACREAGE(1)
------- ---------- ---------- ----------------
<S> <C> <C> <C>
SOUTH AMERICA
Bolivia................................ 4 949,607 47.1%
Chile.................................. 3 53,127 2.6
Peru................................... 3 87,908 4.4
--- --------- -----
Subtotal............................. 10 1,090,642 54.1
--- --------- -----
CENTRAL AMERICA
Honduras............................... 5 344,556 17.1
Mexico................................. 3 26,275 1.3
--- --------- -----
Subtotal............................. 8 370,831 18.4
--- --------- -----
CENTRAL ASIA
Kyrgyzstan............................. 1 534,477 26.6
Mongolia............................... 1 4,201 0.2
Tajikistan............................. 2 14,332 0.7
--- --------- -----
Subtotal............................. 4 553,010 27.5
--- --------- -----
Total................................ 22 2,014,483 100.0%
=== ========= =====
</TABLE>
- --------
/(1)/ Acreage and percent of total acreage figures do not include land
considered part of the San Cristobal Project, El Ocote, San Juan de
Lucanas, Cobrizos and Choroma properties. These five properties consist
of claims and concessions comprising approximately 6,518 acres, 988
acres, 52,200 acres, 4,178 acres and 309 acres, respectively.
While the Company in the near term expects to focus primarily on the
development of the San Cristobal Project, the acquisition, exploration and
evaluation of properties will be vigorously pursued in order to unlock the
potential value of the Company's existing exploration property portfolio as
well as to sustain continuing corporate growth objectives.
Drilling and geophysical engineering services are frequently subcontracted
to regional and/or international firms. Chemical analysis generally is
performed in laboratories located in the same regions as the specific
property, with metallurgical testing and analysis conducted in the U.S. When
using core drilling, the Company uses conventional split core sampling in its
testing, retaining one half of all drill cores for reference and confirmatory
testing processes. Similarly, representative portions of chip samples from
rotary percussion, reverse circulation drilling are processed leaving
substantial quantities of the chip sample material for reexamination and other
future test work.
The Company's international exploration activities are described on a
country-by-country basis below. Due to the limited nature of the available
information regarding these properties, the general exploration portfolio is
addressed below in a summary manner only.
48
<PAGE>
BOLIVIA
The Company has continued its aggressive land acquisition program throughout
Bolivia, making the Company one of this country's largest private owners of
mineral rights. The Company's holdings and joint ventures, excluding the
Cobrizos property, the Choroma property and the San Cristobal Project, now
total almost 950,000 acres, including its existing joint venture interests for
the historic Pulacayo mine and options on several properties being explored
presently. The Company expects to pursue aggressively its exploration program
in Bolivia.
CHILE
The Company has been systematically staking concessions in northern Chile.
This program, which is based on efforts to identify promising silver
exploration zones, has resulted in the staking of 22 claims over an area of
more than 53,000 acres. The Company's exploration of its Chilean property
holdings are at an early stage.
PERU
In addition to its San Juan de Lucanas property, the Company has undertaken
numerous activities in Peru, including: (i) the acquisition and preliminary
evaluation of the Otuzco property located in northern Peru which has been
leased and is subject to a purchase option held by the Company; and (ii)
technical evaluation of a number of the mining properties being sold by
Centromin, the Peruvian state-owned mining company. The Company is presently
engaged in land acquisition programs in several districts.
MEXICO
Exploratory work in Mexico has successfully secured a significant land
position in the vicinity of Zacatecas, historically Mexico's largest silver
producing district. An initial exploration program was completed in March of
1997. The Company's continuing program is evaluating the potential for several
underground silver operations. Additional exploration targets throughout
Mexico are being analyzed by the Company's Zacatecas office.
HONDURAS
In addition to its El Ocote property, the Company has acquired an extensive
land position in Honduras, encompassing more than 396,000 acres of exploration
and exploitation concessions. The Company's analysis of these properties
remains preliminary. Over the course of the next 12 to 18 months, the Company
expects to conduct additional field reconnaissance in order to determine
further drill targets at these properties.
KYRGYZSTAN
On March 26, 1996, the Company established Kumushtak Mining, a 50/50 joint
venture with North-Kyrgyz Geological Expedition, a state enterprise organized
under the laws of the Kyrgyz Republic. Kumushtak Mining holds concessions
located in a belt of silver occurrences which extends for several hundred
kilometers in the Kumushtak river valley in western Kyrgyzstan. The area
encompasses several historic mining districts.
The Company recently completed its first round of drilling at one
significant silver anomaly situated in Kumushtak. The results of such drilling
indicate insufficient grades to sustain economic production at prevailing
silver prices. However, due to Kumushtak Mining's large property holdings and
exploration potential, the Company intends to preserve a strategic position in
this region and continue with its interest in Kumushtak Mining. The Company
believes that Kumushtak Mining's extraordinarily large concession offers the
possibility of numerous occurrences of silver and gold.
49
<PAGE>
MONGOLIA
On March 26, 1996, the Company established Asgat Mining, a 50/50 joint
venture with Mongolrostvetmet, a joint association owned by the Mongolian
government and Zarubeshvetmet, a privatized company formed under the laws of
the Russian Federation. Asgat Mining is involved in the evaluation of the
Asgat silver deposits in northwestern Mongolia (the "Asgat Silver Property").
Work on the Asgat Silver Property, which already contains some underground
development, has principally involved data preparation for a feasibility
study. Recently, metallurgical bench scale test work has been conducted with
mixed results. While recoveries of silver and copper were high, the results
indicated large amounts of arsenic and antimony. The Company regards the Asgat
Silver Property as a strategic property position with potential long term
development prospects. Asgat Mining is presently assessing other precious
metal prospects based on its detailed knowledge of information and conditions
in Mongolia.
TAJIKISTAN
The Company is in the process of obtaining an exclusive, irrevocable license
to exploit the Bolshoi Kanimansur and the Western Kanimansur silver deposits
in northern Tajikistan, through the formation of Kanimansur Mining, which will
be 49 percent owned by Apex Asia and 51 percent by Adrasman Mining. The
Company is considering entering into a joint venture with respect to the
property with Zarabeshtsvetmet, a Russian mining company.
50
<PAGE>
METALS MARKET OVERVIEW
SILVER MARKET
Silver has traditionally served as a medium of exchange, much like gold.
While silver continues to be used for currency, the principal uses of silver
can be divided into three main categories: (i) industrial uses, primarily
electrical and electronic components; (ii) photography; and (iii) jewelry and
silverware. According to the Silver Institute, in 1996, approximately 720
million ounces of silver were consumed for these and other industrial
purposes.
Silver's strength, malleability, ductility, thermal and electrical
conductivity, sensitivity to light and ability to endure extreme changes in
temperature combine to make silver a widely-used industrial metal.
Specifically, it is used in batteries, computer chips, electrical contacts,
and high-technology printing. Silver's anti-bacterial properties also make it
valuable for use in medicine and in water purification.
Most silver production is obtained from mining operations for which silver
is not the principal or primary product. Approximately 83 percent of mined
silver is produced as a by-product of mining of lead, zinc, gold or copper
deposits. According to the Silver Institute, approximately 400 million ounces
of silver were mined in 1996. CPM estimates that recycled or secondary
production accounts for a decreasing proportion of total silver supply,
approximately 29 percent of total silver production in 1996, compared to an
average of 36 percent of aggregate silver production between 1980 and 1990.
CPM further estimates that total silver supply (from mine production,
recycling and estimated dishoarding and government stockpile sales) has been
insufficient to meet industrial demand since 1989, and stockpiles have been
diminishing. CPM studies indicate that approximately 576 million ounces of
silver were supplied from all sources in 1996.
The following table sets forth the London Silver Market's annual average
(except for 1997), high and low spot price of silver in U.S. dollars per troy
ounce since 1977.
<TABLE>
<CAPTION>
YEAR AVERAGE HIGH LOW
---- ------- ------ ------
(DOLLARS PER TROY
OUNCE)
<S> <C> <C> <C> <C> <C>
1977....................................... $ 4.63 $ 4.97 $ 4.31
1978....................................... 5.42 6.26 4.82
1979....................................... 11.06 32.20 5.94
1980....................................... 20.98 49.45 10.89
1981....................................... 10.49 16.30 8.03
1982....................................... 7.92 11.11 4.90
1983....................................... 11.43 14.67 8.37
1984....................................... 8.14 10.11 6.22
1985....................................... 6.13 6.75 5.45
1986....................................... 5.46 6.31 4.85
1987....................................... 7.01 10.93 5.36
1988....................................... 6.53 7.82 6.05
1989....................................... 5.50 6.21 5.04
1990....................................... 4.83 5.36 3.95
1991....................................... 4.06 4.57 3.55
1992....................................... 3.95 4.34 3.65
1993....................................... 4.31 5.42 3.56
1994....................................... 5.28 5.75 4.64
1995....................................... 5.19 6.04 4.41
1996....................................... 5.19 5.83 4.71
1997 (to September 30)..................... 4.76 5.31 4.22
</TABLE>
- --------
Source: Silver Institute
51
<PAGE>
ZINC AND LEAD MARKETS
The Company anticipates that the San Cristobal Project will, and that other
future projects may, involve the production of economically significant
quantities of metals other than silver. The Company expects that production
from the San Cristobal Project will include the extraction, processing and
sale of significant quantities of zinc and lead.
Zinc is utilized for its resistance to corrosion, and, in the form of steel
coating, is widely used in construction of infrastructure, housing and office
buildings. In the automotive industry, zinc is used for steel coating, and die
casting, and is an important component of tires and motor oil. Smaller
quantities of various forms of zinc are used in fertilizers, food supplements
and cosmetics, and in specialty electronic applications such as satellite
receivers. Industrial consumption of zinc in 1996 was estimated by the
International Lead Zinc Study Group (the "ILZSG") at 6.28 million tonnes.
Recycled zinc accounts for about 30 percent of the zinc consumed on an annual
basis. According to the ILZSG, 5.94 million tonnes of zinc were produced in
1996.
The primary use of lead is in motor vehicle batteries, but it is also used
in cable sheathing, shot for ammunition and alloying, and in chemical form for
use in alloys, glass and plastics. Industrial consumption of lead in 1996 is
estimated by the ILZSG at 5.08 million tonnes. Lead is widely recycled with
secondary production accounting for a steady 54 percent of total supply.
According to the ILZSG, 5 million tonnes of lead were produced in 1996.
The following table sets forth the annual average (except for 1997) spot
prices for zinc and lead on the London Metals Exchange since 1977.
<TABLE>
<CAPTION>
YEAR ZINC LEAD
---- ----- -----
(U.S. CENTS
PER POUND)
<S> <C> <C>
1977................................................... 34.4c 30.7c
1978................................................... 31.0 33.7
1979................................................... 33.5 52.6
1980................................................... 34.4 41.4
1981................................................... 38.3 33.5
1982................................................... 33.7 24.7
1983................................................... 34.6 19.3
1984................................................... 41.7 20.1
1985................................................... 35.5 17.7
1986................................................... 34.1 18.4
1987................................................... 36.2 27.0
1988................................................... 56.3 29.7
1989................................................... 77.6 30.5
1990................................................... 68.9 36.7
1991................................................... 50.7 25.3
1992................................................... 56.2 24.6
1993................................................... 43.6 18.4
1994................................................... 45.3 24.9
1995................................................... 46.8 28.6
1996................................................... 46.5 35.1
1997 (to September 30)................................. 62.0 29.0
</TABLE>
- --------
Source: Flemings Global Mining Group
52
<PAGE>
REPUBLIC OF BOLIVIA
The following information has been compiled by the Company from governmental
and private publications.
GENERAL INFORMATION
Bolivia is situated in central South America and is bordered by Peru,
Brazil, Paraguay, Argentina and Chile. It has an area of 1,098,581 square
kilometers and a population of approximately 7.7 million people. Bolivia's
official and most widely spoken language is Spanish, but over 70 percent of
the population is either native Aymara or Quechua Indian. Sucre is the capital
city of Bolivia. La Paz is the seat of government and, with a population of
over one million people, the largest city in Bolivia. La Paz is situated on
the Altiplano, the high plateau which separates the eastern and western ranges
of the Andes. The land in this part of the country is largely semi-desert
plains bordered by steep, rugged mountains. The eastern portion of the country
consists of sparsely populated low-lands bordering the Brazilian Amazon basin
where temperate and tropical forest dominate. Santa Cruz is the principal city
of the low country with a population of approximately 700,000.
The government of Bolivia consists of a directly elected president and a
bicameral congress. Since the military government stepped down in 1982,
Bolivia has maintained a stable democratic system with elections every four
years. The current president, Hugo Banzer, was elected by the Congress on
August 5, 1997, after no presidential candidate succeeded in winning a
majority of the votes in the general election held in June of 1997.
ECONOMY
The Bolivian economy has experienced continuous growth and relatively low,
stable inflation in recent years. This economic performance is generally
ascribed to the deregulation of key sectors of the economy, including oil and
gas, communications, transport and finance, and to foreign direct investment
which has occurred as part of the recent privatization of formerly government-
owned electricity, telecommunications, railways, aviation and oil and gas
companies. The country's privatization program has involved (i) the sale of
shares in government-owned entities in exchange for capital contributions to
the privatized entities, and (ii) the contribution of government-owned shares
in such privatized entities to trust funds established on behalf of all
Bolivians over the age of 21 at the end of 1995. In connection with this
program, the Company has entered into joint venture agreements with the
government mining company, Comibol, with respect to two properties. Summary
information on the Bolivian economy is set forth in the table below.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
GDP Growth............................ 1.6% 4.7% 5.0% 3.7% 4.0%
GDP per Capita........................ $ 764 $ 791 $ 756 $ 812 $ 860
Inflation............................. 10.5% 9.3% 8.5% 12.6% 7.9%
Public Sector Deficit (non-financial)
as % of GDP.......................... 4.6% 6.5% 3.2% 2.3% 2.1%
Exports FOB (in millions)............. $ 774 $ 809 $1,124 $1,181 $1,326
Imports CIF (in millions)............. $1,131 $1,177 $1,196 $1,433 $1,635
Current Account Balance (% GDP)....... 7.8% 8.4% 3.6% 5.0% 5.2%
Total Investment (in millions)........ $ 794 $ 760 $ 794 $ 898 $1,173
Share of GDP (%)...................... 14.1% 13.3% 13.3% 13.7% 16.5%
Public Investment (in millions)....... $ 532 $ 481 $ 505 $ 524 $ 540
Share of GDP (%)...................... 9.4% 8.4% 8.5% 8.0% 7.6%
Private Investment (in millions)...... $ 262 $ 279 $ 288 $ 373 $ 632
Share of GDP (%)...................... 4.6% 4.9% 4.8% 5.7% 8.9%
</TABLE>
- --------
Source: Latin Finance
53
<PAGE>
The official monetary unit of Bolivia is the boliviano, which was introduced
in January of 1987 following the adoption in 1985 of a broad based reform
program known as the "New Economic Policy". In the mid-1980s, prior to the New
Economic Policy, Bolivia suffered from hyperinflation, declining foreign
investment, growing balance of payments deficits and a foreign exchange
shortage fueled in part by an increasing disparity between the official and
unofficial exchange rates. The New Economic Policy removed restrictions on
exports and imports, ended most price controls and subsidies, instituted a
freeze on public sector wages and subjected the public sector to rigorous cost
cutting. By 1986, inflation was under control and the International Monetary
Fund resumed stand-by assistance. During the period of the New Economic
Policy, the gap between the official exchange rate and the parallel unofficial
rate was bridged. On December 31, 1996, the exchange rate was 5.19 bolivianos
to one U.S. dollar compared to the exchange rate on December 31, 1995 of 4.94
bolivianos to one U.S. dollar. On September 30, 1997, the exchange rate was
5.30 bolivianos to one U.S. dollar; over the past year the boliviano has shown
a tendency to depreciate approximately US$0.01 every 15 days.
The boliviano is freely convertible in Bolivia at a single, public exchange
rate established by twice-weekly auctions held by the Bolivian Central Bank.
FOREIGN INVESTMENT AND TAX
Since the New Economic Policy, most restrictions on trade have been removed
or are in the process of being phased out. Currently, import levies stand at
ten percent for all items except capital goods, which are subject to a five
percent levy. In March of 1991, a new export code introduced further measures
to liberalize trade. In order to prevent transfer pricing and other tax
avoidance mechanisms, almost all foreign trade transactions require the filing
of an aviso de conformidad describing the terms of the underlying
transactions.
The 1990 Investment Law provides for unrestricted repatriation of capital,
freedom to import goods and services, equality under the law between foreign
and domestic companies, and the creation of "free trade zones".
Mining companies in Bolivia are subject to a 25 percent income tax. Taxable
income is determined in accordance with Bolivian generally accepted accounting
principles. However, earnings reinvested (for specified purposes) in Bolivia
are deductible in computing taxable profits. If the reinvested capital exceeds
retained profits, the excess may not be carried forward. Income from the
export of derivative products from precious metals which include Bolivian
added value is exempt from taxes under the Bolivian Mining Code.
Under the new Bolivian Mining Code, which came into effect on March 17,
1997, there is Complementary Mining Tax applicable to whomever carries out
mining activities, which would be payable if greater than the Bolivian income
tax. Mining activities are defined to include: prospecting and exploration;
mining or extracting minerals or metals; concentrating mine products; smelting
and refining; marketing of minerals and metals. The Complementary Mining Tax
is calculated by applying an aliquot to the taxable base. The aliquot of the
Complementary Mining Tax is a variable percentage (which fluctuates between
three percent and seven percent for precious stones and metals and between one
percent and five percent for other metallic minerals) indexed to the official
U.S. dollar market price for the relevant metal or mineral. The taxable base
is construed as the amount that results from multiplying the weight of the
fine content of the mineral or metal by its official U.S. dollar market price.
This tax is creditable against corporate income and is, in effect, a minimum
tax on mining companies. Manufacturing or processing involving minerals is not
subject to the Complementary Mining Tax.
Bolivian source income, including dividends, interest, management fees and
expenses charged to a Bolivian company by foreign affiliates is subject to a
withholding tax of 12.5 percent.
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Operating losses (as adjusted for inflation) may be carried forward and
deducted from taxable income indefinitely. However, if accrued losses exceed
50 percent of capital (including that of a branch) the capital must be
increased.
Bolivia assesses a 12.5 percent tax on profits of a branch of a foreign
corporation operating in Bolivia. The branch tax is calculated on the book
profits of the branch regardless of remittances or reinvestment of profits in
the branch. Book profits are deemed remitted 120 days after the end of the
fiscal year.
There is a 13 percent value added tax ("VAT") on all sales, including
mineral commodities, a five percent import duty on machinery and equipment and
a ten percent duty on imported raw materials and components. The VAT paid on
purchases is recoverable against VAT collected on Bolivian sales. Exports are
not subject to VAT. The exporter can offset the VAT credit arising from
purchases with domestic sales or can apply for a refund of import duties and
VAT paid on inputs and raw materials included in the cost of exported goods.
However, the refund of credits arising from imports is limited to 13 percent
of the total value of the exports and therefore is not recoverable during the
exploration phase.
MINING INDUSTRY
Bolivia produces a number of mineral commodities including tin, gold,
silver, lead, zinc, antimony, tungsten, copper and bismuth. The country has
long been a leading mineral and precious metals producer. Bolivia was
colonized in the early sixteenth century by Spaniards who arrived in search of
silver and gold. The extensive silver mining operations in Potosi which
developed under Spanish rule led to the region being described as the
"treasury of the Spanish empire". In the early Twentieth Century, tin became
the country's leading mineral export although in recent years the focus has
returned to gold, silver, lead and zinc. The country's principal mining
regions are the eastern part of Bolivia along the Brazilian border, and the
traditional mining areas of the Altiplano and Cordillera.
Recent regulatory reforms have resulted in increased exploration activities,
particularly with respect to precious metals. In the early 1990s, the
government reformed the land tenure system, reduced taxes on mining
operations, established equal treatment under the law between Comibol and
foreign companies in obtaining mineral concessions, and created a national
Mining Inventory Service which will maintain up-to-date information, including
maps, for exploration and mining exploration concessions.
MINING CONCESSIONS
Pursuant to the Bolivian constitution, all mineral deposits are the property
of the State. Mining concessions, which may be awarded by the government,
grant the holder, subject to the payment of patents, the real and exclusive
right to carry out prospecting, exploration, exploitation, concentration,
smelting, refining and marketing activities with respect to all mineral
substances located within a given concession. Individual mineral claims
consist of indivisible squares shaped like an inverted pyramid, whose lower
vertex is the center of the earth and whose surface area covers a total area
of 25 hectares. Mining concessions are comprised of no fewer than one and no
more than 2,500 adjacent squares. Mining concessions are distinct from the
surface rights which comprise traditional land ownership; holders of mining
concessions are entitled to explore and exploit a property and to use the
water found at the property. Expropriation or the establishment of easements
may not be legally carried out if the water supplies for a population are
interrupted or negatively affected.
Holders of mining concessions are obliged to pay an annual mining patent.
Co-owners are jointly and severally responsible for the patent payment. The
patent is progressive and fees are based on the number of years of existence
of the concession. Concessions established before the enactment of the new
Mining Code, which comprise an area of up to 1,000 mining claims, pay the
equivalent of
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$1.00 per claim per year. Concessions established before the enactment of the
new Mining Code which comprise an area of more than 1,000 mining claims pay
the equivalent of $1.00 per claim per year for the first five years of the
existence of the concession; thereafter, the patent increases to the
equivalent of $2.00 per claim per year. Concessions established under the new
Mining Code pay the following: for the first five years of the existence of a
concession, the owner is required to pay the equivalent of $25.00 per square
per year; thereafter the patent increases to the equivalent of $50.00 per
square per year. All of the Company's Bolivian concessions were established
prior to enactment of the new Mining Code.
Mining concessions are liable to forfeiture when the corresponding annual
patent fails to be paid. Forfeiture is governed by law and does not require
any administrative or judicial declaration. When a concession has been
forfeited, the mining concession reverts to the State.
The Mining Code requires concession holders to minimize damage to surface
rights, to neighboring concessions and to the environment. Concession holders
are liable for damage or injury caused by their operations. Concession holders
are not obliged to remediate environmental damage caused prior to the
effectiveness of the Environmental Law or the date on which the mining
concession was obtained, if the concession was granted at a later date. On
becoming the owner of a concession, the concession holder must carry out an
environmental audit to determine the extent of any environmental damage. If an
environmental audit is not performed, the concession holder assumes the
responsibility to mitigate all environmental damage. Environmental liabilities
incurred under this new regime survive the existence or ownership of the
relevant concession.
In 1992, the Bolivian government passed environmental legislation that
establishes a comprehensive scheme for the initiation of a national
environmental policy to protect the environment, promote sustainable
development, promote the preservation of biological diversity and promote
environmental education. Few environmental regulations specifically applicable
to mineral exploration companies in Bolivia have been proclaimed to date. At
present, concession holders must maintain waterways running through their
concessions in their unspoiled state and concession holders must employ
exploration and development techniques that will minimize environmental
damage. Under Bolivia's environmental regulations, environmental impact
assessments are required. In practice, foreign mining companies operating in
Bolivia generally adhere to U.S. and European environmental standards for
mining and exploration.
LABOR MARKET
Bolivia has a large pool of unskilled and, in the mining sector, semi-
skilled labor, but a relative shortage of skilled labor and managerial
expertise overall. One percent of the payroll tax is used for worker training.
A large portion of the labor force that is engaged in wage employment is also
unionized, although union participation is not mandatory. Strikes, which have
decreased greatly since the early 1980s, are not forbidden. However, before a
strike may be called, all legally-mandated alternatives, such as negotiation,
mediation and conciliation, must have been exhausted. Collective agreements
are very rare, as negotiations are generally carried out between an individual
company's union and management.
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MANAGEMENT
DIRECTORS
Set forth below are the names, ages, positions with the Company, business
experience and directorships in other companies of the directors of the
Company. Apex Limited has no executive officers. Under the Companies Law (1995
Revision) of the Cayman Islands, directors are authorized to bind the
corporation that they represent.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael Comninos......................................... 66 Director
Harry M. Conger.......................................... 67 Director
Eduardo S. Elsztain...................................... 37 Director
David Sean Hanna......................................... 37 Director
Ove Hoegh................................................ 58 Director
Keith R. Hulley.......................................... 57 Director
Thomas S. Kaplan......................................... 35 Chairman, Director
Richard Katz............................................. 55 Director
Paul Soros............................................... 70 Director
</TABLE>
Michael Comninos. Mr. Comninos has been a director of the Company since
April of 1997. An international financier, Mr. Comninos joined N.M. Rothschild
& Sons in 1954, becoming a Partner in its corporate finance group in 1965,
and, later, upon the firm's incorporation as N.M. Rothschild & Sons Limited in
1970, a director. Prior to his retirement in 1991, Mr. Comninos served as the
head of the firm's investment management division, its credit division and for
ten years served as the chairman of N.M. Rothschild & Sons (C.I.) Ltd., the
firm's merchant banking affiliate in Guernsey. Mr. Comninos has served as a
director of numerous listed real estate and investment funds and is currently
a member of the investment committee of the East European Food Fund, a
Luxembourg investment fund managed by Jupiter Asset Management Bermuda
Limited. Mr. Comninos is a member of the Institute of Investment Management
and Research, The Institute of Bankers, The Institute of Chartered Secretaries
and Administrators and the Association of Corporate Treasurers.
Harry M. Conger. Mr. Conger has been a director of the Company since April
of 1997. A leading figure in the international mining community, Mr. Conger
has 42 years of industry experience, rising from a position as shift boss to
Chairman and Chief Executive Officer of Homestake Mining Company
("Homestake"), a New York Stock Exchange listed-company. He served as Chairman
of Homestake from 1982 and retired from the Chief Executive Officer position
in May 1986, remaining as Chairman. Over the course of his career, Mr. Conger
has been involved in gold, silver, lead, zinc, uranium, sulfur, coal, iron ore
and copper mining. He has been extensively involved in numerous major project
developments, with both on-site and broader supervisory responsibility,
including the expansion, at a cost of $170 million, of an iron ore mine to 25
million tons of material mined per year, greenfield development of a large
surface coal mine moving 20 million tonnes per year at a cost of $165 million,
and development of a new gold mine with new technology at a cost of $165
million. Mr. Conger is a former Chairman of the American Mining Congress, the
World Gold Council and is a member of the National Academy of Engineering. He
currently serves on the boards of directors of ASA Limited, a closed-end
portfolio of gold stocks listed on the New York Stock Exchange, and Pacific
Gas and Electric Company (PG&E), a San Francisco based utility company. He
recently retired from Baker Hughes Inc., an oil and mining services company
based in Houston, Texas under their ten year tenure rule; and Cal Mat Company
of Los Angeles, an integrated producer of cement, construction aggregates,
pre-mixed concrete and asphalt mixes, and real estate developer. Mr. Conger
retired as Chairman of Homestake in February of 1997.
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Eduardo S. Elsztain. Mr. Elsztain has been a director of the Company since
its inception in March of 1996 and until the Offerings was a director of Apex
LDC. He is also a director of, and an indirect shareholder in, Silver
Holdings. See "Principal Shareholders". Mr. Elsztain is the founder of
Consultores Asset Management S.A. ("Consultores"), a leading securities
portfolio management firm in Buenos Aires, Argentina formerly known as
Consultores de Inversiones Bursatiles y Financiera S.A. He has served as the
President of Consultores since 1989. Mr. Elsztain is currently the Chairman of
the board of directors of IRSA Inversiones y Representaciones S.A., an
Argentine real estate company listed on the Buenos Aires stock exchange, the
New York Stock Exchange and the Mexico Stock Exchange. He is also the Chairman
of the board of directors of Cresud S.A.C.I.F. y A. and of SAMAP Sociedad
Anonima Mercado de Abasto Proveedor, companies listed on the Buenos Aires
Stock Exchange. Mr. Elsztain studied Economics at the University of Buenos
Aires.
David Sean Hanna. Mr. Hanna has been a director of the Company since its
inception in March of 1996 and until the Offerings was a director of Apex LDC.
See "Principal Shareholders" and "Certain Transactions". Mr. Hanna is a
specialist in corporate law with the Bahamas law firm of Arthur D. Hanna &
Co., of which he is a Partner. Mr. Hanna is also a director of each of (i)
Andean, (ii) ASC Peru, (iii) ASC Partners and (iv) Cordilleras Bahamas. He is
also a director of two shareholders of the Company, Litani Capital Management
LDC ("Litani") and Consolidated Commodities, Ltd. ("Consolidated"). See
"Corporate Structure". Mr. Hanna was called to the Bar of England and Wales in
1983. He holds an LLB (Honours) from the University of Buckingham, England.
Ove Hoegh. Mr. Hoegh has been a director of the Company since April of 1997.
A member of the board of directors until July of 1997 of Leif Hoegh & Co. A/S,
a family owned shipping business with more than $1 billion in assets, Mr.
Hoegh has more than 30 years of experience in the international shipping
industry. Mr. Hoegh began his career in commercial fishing, and joined the
board of directors of Leif Hoegh & Co. in 1966. From 1970 to 1982, he served
as Chief Operating Officer and Chief Executive Officer of Leif Hoegh & Co.
Since 1982, he has served as the senior partner of Hoegh Invest, a family
investment company with a diversified portfolio of technology, oil and gas and
real estate holdings. In addition, Mr. Hoegh served for eight years as a
member of the board of directors and executive committee of Brown Boveri
(Norway), and also has served on the shareholders' councils of Esso Norway,
Den Norske Creditbank, and Det Norske Veritas. A member of the board of the
Energy Policy Foundation of Norway, Mr. Hoegh is a former member of the
steering committee of the International Maritime Industry Forum, a former Vice
Chairman of the executive committee of the Independent Tanker Owners'
Association, and served for five years as a member of the Harvard Business
School Visiting Committee. Mr. Hoegh is a graduate of the Royal Norwegian
Naval Academy and holds an M.B.A. from Harvard University.
Keith R. Hulley. Mr. Hulley has been a director of the Company since April
of 1997 and, upon consummation of the Offerings, will become a director of
Apex LDC. A mining engineer with more than 30 years experience, Mr. Hulley has
served as the Executive Vice President and Chief Operating Officer of Apex
Corporation since its formation in October of 1996. From early 1991 until he
joined the Company, he served as a member of the board of directors and the
Director of Operations at Western Mining Holdings Limited Corporation
("Western Mining"), a publicly-traded international nickel, gold and copper
producer. At Western Mining, Mr. Hulley's responsibilities included
supervising on a global basis strategic planning, mine production,
concentrating, smelting, refining and sales. During this period, Western
Mining produced on an annual basis approximately 90,000 tonnes of nickel,
700,000 ounces of gold, 80,000 tonnes of refined copper and 1,500 tonnes of
uranium oxide. Mr. Hulley also supervised the development and operation of
Western Mining's Mount Keith open-pit nickel mine, a $450 million mining
project. Prior to joining Western Mining, Mr. Hulley was the President, Chief
Executive Officer and Chairman of the board of directors of USMX Inc., a
publicly-traded precious-metals exploration company. Mr. Hulley has also
served as the President of the minerals division and Senior Vice President for
Operations of Atlas Corporation, where he was in charge of mining
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exploration, development and production. Previously he was Vice President of
Mining and Development of the U.S. division of BP Minerals, Inc. Over the
course of his career, Mr. Hulley has worked as a miner and shift supervisor in
the gold mines of South Africa, Mine Operation Superintendent of Kennecott
Corporation's Bingham Canyon mine which processed 100,000 tonnes of ore per
day, and project manager of the early phase of the Ok Tedi exploration and
development projects in Papua New Guinea. A member of the American Institute
of Mining and Metallurgical Engineers and a Fellow of the Australian Institute
of Mining and Metallurgy, Mr. Hulley holds a B.S. in Mining Engineering from
the University of Witwatersrand and an M.S. in Mineral Economics from Stanford
University.
Thomas S. Kaplan. Mr. Kaplan has been the Chairman of the board of directors
of the Company since its inception in March of 1996 and is a director and was
the founder of Apex LDC and its predecessor, Apex Bermuda, which contributed
substantially all of its assets to Apex LDC in December of 1994. Mr. Kaplan is
a director of Litani LDC and a principal shareholder in Consolidated.
Consolidated is a shareholder of Apex Limited, and Litani LDC is a shareholder
of both Apex Limited and Apex LDC. See "Principal Shareholders". Mr. Kaplan
also serves as a director of each of the Company's subsidiary entities, except
for Cordilleras Bahamas, Asgat Mining, Kumushtak Mining and Kumushtak
Management Company. For the past ten years, Mr. Kaplan has served as an
advisor to private clients, trusts and fund managers in the field of strategic
forecasting, an analytical method which seeks to identify and assess global
trends in politics and economics and the way in which such trends relate to
international financial markets, particularly in the developing markets of
Asia, Latin America, the Middle East and Africa. Mr. Kaplan has managed
numerous venture capital investments and portfolio investment accounts, and is
a principal of several entities specializing in direct and portfolio
investments, including Feder Information Services Corporation, Tigris
Financial Group Ltd., FMS Partners L.P. and Bridge Capital Group L.P. Mr.
Kaplan also serves as a director of African Plantations Corporation LDC, a
Cayman Islands limited duration company which owns and operates coffee and tea
plantations in eastern and southern Africa. Mr. Kaplan was educated in
Switzerland and England and holds B.A., M.A., and D. Phil. degrees in History
from the University of Oxford.
Richard Katz. Mr. Katz has been a director of the Company since April of
1997. An investment banker specializing in international finance, Mr. Katz was
a director of N.M. Rothschild & Sons Limited, London, England from 1977 until
March 1993, having joined them in 1969; he was also a managing director of
Rothschild Italia S.p.A., Milan, Italy from its inception in 1989 until
December 1993. Mr. Katz has been a supervisory director of Quantum Fund N.V.,
a Netherlands Antilles investment fund, or one of its subsidiaries, since
1986. He is also a member of the board of supervisory directors of a number of
other investment funds affiliated with Mr. George Soros, including Quasar
International Fund N.V. and Quantum Emerging Growth Fund N.V., and is the
Chairman of the board of supervisory directors of Quota Fund N.V., and the
Chairman of the boards of advisors of Quantum Realty Fund Limited, Asian
Infrastructure Development Fund Ltd., and Quantum Industrial Holdings Ltd., an
indirect shareholder of the Company. See "Principal Shareholders".
Paul Soros. Mr. Soros has been a director of the Company since its inception
in March of 1996 and, until the Offerings, was a director of Apex LDC.
Principally involved in private investment activities during the past five
years, Mr. Soros is a director of, and an indirect shareholder in Silver
Holdings through his 100% ownership of VDM, Inc. (a shareholder of Silver
Holdings). Mr. Soros is a member of the Investment Advisory Committee of
Quantum Industrial. Quantum Industrial is the largest shareholder in Silver
Holdings. See "Principal Shareholders" and "Certain Transactions". Mr. Soros
is involved in the monitoring of the Quantum Group of Fund's shareholding in
Companhia Vale do Rio Doce S.A. ("CVRD") of Brazil, its participation in
Global Power Investments, L.P., a joint venture with the International Finance
Corporation and GE Capital Corporation to develop power projects in emerging
economies, serves on the Board of Directors of TVX Gold Inc., and is an active
advisor to the Company. Mr. Soros is the founder and former president of Soros
Associates, an international
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engineering firm specializing in port development, offshore terminal and
material handling projects for the mining industry and other basic industries.
Soros Associates was involved in projects in more than 80 countries, acting on
behalf of consortia including USX Corporation, The Broken Hill Proprietary
Company Limited, Alcan Aluminium Limited and Aluminum Company of America, and
was involved in projects in a majority of the largest mineral ports in the
world. Mr. Soros has served on the Review Panel of the President's Office of
Science and Technology and the U.S.-Japan Natural Resources Commission. He
received the Outstanding Engineering Achievement Award of the National Society
of Professional Engineers in 1989. Mr. Soros holds a Masters of Mechanical
Engineering degree from the Polytechnic Institute of Brooklyn and is a
licensed professional engineer in New York and numerous other states. In
addition, he holds several patents in material handling and offshore
technology, and is the author of over 100 technical articles.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established an Audit Committee of its board of directors.
The Audit Committee will review the accounting and auditing principles and
procedures of the Company with a view to providing for the safeguard of the
Company's assets and the reliability of its financial records, recommending to
the board of directors the engagement of the Company's independent
accountants, reviewing with the independent accountants the plans and results
of the auditing engagement, and considering the independence of the Company's
accountants. Messrs. Comninos, Katz and Hoegh currently serve on the Audit
Committee.
A Compensation Committee has also been established to review the Company's
compensation policies and supervise the Company's Share Option Plans. See
"Executive Compensation--Share Option Plans". Messrs. Conger and Soros
currently serve on the Compensation Committee.
The Company's board of directors is divided into three classes designated
Class I, Class II and Class III. Each class of directors consists of one-third
of the total number of directors constituting the entire board and
approximately one-third of the members of the board are elected at each annual
meeting of stockholders. The Class I directors are Messrs. Conger, Katz and
Comninos; the Class II directors are Messrs. Hulley, Soros and Hoegh; and the
Class III directors are Messrs. Kaplan, Elsztain and Hanna. The term of the
Class I directors will end on the date of the 1998 annual meeting of
stockholders. The term of the Class II directors will end on the date of the
1999 annual meeting of stockholders. The term of the Class III directors will
end on the date of the 2000 annual meeting of stockholders. If the number of
directors is changed, any increase or decrease in the number of directors will
be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional directors of any
class elected to fill a vacancy resulting from an increase in such class will
hold office for a term that coincides with the remaining term of that class.
Each director will hold office until the annual meeting for the year in which
his term expires and until his successor shall be elected, subject, however,
to his prior death, resignation, retirement or removal from office. Any
vacancy occurring in the board for any reason will be filled by a vote of the
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy will hold
office for a term that coincides with the term of the class to which such
director was elected.
EXECUTIVES AND KEY PERSONNEL
Apex Corporation
As discussed above, the Company has no executive officers. The Company has
entered into a Management Services Agreement dated as of October 22, 1996,
pursuant to which the Company has
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engaged Apex Corporation to provide a broad range of corporate management and
advisory services. See "Certain Transactions".
Thomas S. Kaplan. Mr. Kaplan serves as the Chairman of the board of
directors of the Company and President and Chief Executive Officer of Apex
Corporation. See "Management--Directors".
Keith R. Hulley. Mr. Hulley serves as the Executive Vice President and Chief
Operating Officer of Apex Corporation and as a director of Andean Silver
Corporation LDC. See "Management--Directors".
Marcel F. DeGuire. Mr. DeGuire serves as Vice President of Development of
Apex Corporation and as a director of Apex Asia. Prior to joining Apex in
August of 1996, he served as Vice President of Project Development and
Regional Director for the jurisdictions formerly part of the Soviet Union of
Newmont Gold Company. During this period, Mr. DeGuire acted as Project Leader
of Newmont Gold's Muruntau large scale open pit heap leach gold project in
Uzbekistan. This facility processes 37,800 tonnes of ore per day and was built
at a cost of $225 million. Mr. DeGuire was directly involved in the joint
venture negotiations leading up to the project, the subsequent feasibility
studies, completion of construction and the commencement of mining operations.
In addition to his work in Central Asia, Mr. DeGuire has been responsible for
numerous feasibility analyses, including the Yanacocha gold project in Peru,
on behalf of Newmont Mining Corp. During his almost 20 years with Newmont
Mining, Mr. DeGuire worked as resident manager of a uranium mine and rose to
President of several of Newmont Mining's subsidiaries and became a leading
expert in environmental management and mine reclamation, serving as Newmont
Mining's Vice President of Environmental Affairs and Research and Development
as well as other senior executive positions. Mr. DeGuire is a member of the
American Institute of Mining, Metallurgical and Petroleum Engineers, the
Canadian Institute of Metallurgy, the Mining and Metallurgical Society of
America and has published numerous articles on mineral processing and
environmental matters. Mr. DeGuire holds a B.S. in Metallurgical Engineering
from Michigan Technological University and M.S. in Metallurgical Engineering
from the University of Nevada, Reno.
Gregory G. Marlier. Mr. Marlier serves as the Vice President of Finance and
Chief Financial Officer of Apex Corporation. From August of 1991 until
November of 1996, when he joined Apex Corporation, Mr. Marlier was the
Treasurer and Chief Financial Officer of Cambior USA, Inc., the mineral
resources exploration and development subsidiary of Cambior, Inc., an
international mining company based in Montreal, Canada. Mr. Marlier has almost
25 years of mining industry finance experience, serving as Chief Financial
Officer and Corporate Secretary of Westmont Mining, Inc. (a predecessor of
Cambior USA), Controller and Corporate Secretary of New Castle Energy
Corporation and director of administrative services of Dorchester Coal
Company. Mr. Marlier has also worked with Northern Coal Company and
Consolidation Coal Company (Consol). A member of the Association of Mining
Financial Professionals and National Mining Association, Mr. Marlier holds a
B.S. in Business Administration and Accounting from John Carroll University,
Cleveland, Ohio.
Dr. Larry J. Buchanan. Dr. Buchanan serves as Chief Geologist to the Company
and is a principal advisor to its international operations. Dr. Buchanan is a
noted exploration geologist with a reputation as one of the industry's leading
experts on epithermal deposits, on which he has written several definitive
texts. His analysis of such deposits has given rise to the industry paradigm
known as "The Buchanan Model". Dr. Buchanan has published eight geological
texts, played a key role in identifying several multi-million ounce gold
deposits, and developed implementation programs for numerous currently
producing mines. His consulting clients have included Cyprus Minerals Company,
FMC Corporation, Total Resources, Inc. and Fischer-Watt Gold Co. Inc.
("Fischer-Watt"). Dr. Buchanan is a shareholder and director of Begeyge Minera
Ltda. Dr. Buchanan holds a B.Sc. and an M.Sc. in Geological Engineering and
Ph.D in Economic Geology from the Colorado School of Mines.
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Douglas M. Smith, Jr. Mr. Smith serves as Vice President of Exploration for
Apex Corporation. Mr. Smith began his career with Minas de San Luis, S.A.,
where he was District Geologist at the Taylotita mine, one of the largest
epithermal silver-gold deposits in the world, and became Chief Geologist at
the Company. Prior to joining Apex, Mr. Smith was employed for almost 20 years
by ASARCO Incorporated ("ASARCO"), which he joined in 1977. During his tenure
at ASARCO, he held numerous positions including Manager of the Rocky Mountain
Exploration Division and, most recently, Chief Geologist of the Latin American
Exploration Division, where he was responsible for overseeing all aspects of
exploration and project evaluation in Spanish-speaking countries of the
Americas, including Bolivia, Peru, Chile and Mexico. Mr. Smith left ASARCO in
1997 to join Apex Corporation. Mr. Smith holds a B.S. in Geology from the
University of New Mexico.
Leni S. Berliner. Ms. Berliner serves as Commercial Development Manager for
Apex Corporation. Prior to joining the Company in the fall of 1996, Ms.
Berliner was the Chief Administrator-South America for Andean, a position she
had held since Andean's inception in 1994; prior to the formation of Andean,
she represented Andean Bahamas in a similar capacity starting in mid-1993.
Before joining the Company, Ms. Berliner was a private sector development
analyst and management consultant for ten years devising country investment
strategies for, among others, the Inter-American Investment Corporation, the
investment arm of the Inter-American Development Bank. Ms. Berliner is a
specialist in Latin American business and banking, and has worked extensively
throughout the region and in other emerging markets. She holds a B.A. with
honors from the University of Massachusetts, Amherst, and an MPIA in Economic
and Social Development from, and was a Public Service Fellow at, the
University of Pittsburgh.
Latin America
Johnny Delgado Achaval. Mr. Delgado serves as the Chief Executive Officer of
Andean and as a director of ASC Bolivia. Mr. Delgado has over 30 years
experience in the South American mining industry, including 15 years as
President, and principal shareholder, of Mintec, one of Bolivia's leading
mining consulting firms, and the agent for Andean Silver Corporation LDC since
the formation of its Bolivian branch in 1994. Mr. Delgado founded Mintec in
1981. Prior to the formation of Mintec, Mr. Delgado worked with International
Mining Company from 1966 to 1981, where he served initially as Chief of
Exploration and Project Manager and then as Technical Vice President of its
tungsten mining holding company, Estalsa Boliviana S.A. Both before and during
his tenure at Mintec, Mr. Delgado was involved in all aspects of international
mining, including the direction of major exploration efforts in Bolivia, Peru,
Brazil, Ecuador, Argentina and Chile, as well as management of mining
operations in Bolivia. Mr. Delgado has taught mining engineering, mining
finance and mine geology. He is a member of the Geological Society of Bolivia,
the Society of Bolivian Engineers and the Mining Club.
Felipe de Lucio Pezet. Mr. De Lucio serves as the General Manager of ASC
Peru. Mr. de Lucio is a mining engineer with over 30 years experience in the
Peruvian mining industry. Over the course of his career, Mr. de Lucio has been
the Head of Mining Engineering for Cerro De Pasco Corporation, the Deputy
Manager of Operations for the Compania Minera Caylloma S.A., the General
Manager of Compania Minera Colquirrumi S.A., the Manager of Operations for
Sociedad Minera Austria Duvaz S.A., and the Chief Executive Officer of Hierro
Peru, S.A. In addition, he has served on the Board of Directors of Sociedad
Minera Austria Duvaz S.A., the Corporacion Financiera de Desarrollo, S.A.,
Hierro Peru S.A., Banco Minero del Peru, S.A., Compania Mercantil de
Industrial Inga and Empresa Minera del Centro del Peru. In 1990, Mr. de Lucio
served on the Advisory Committee to the Minister of Energy and Mines and acted
as the head of the council responsible for the design and implementation of
the Government of Peru's Mining Development Plan. Mr. de Lucio is a former
President of the Mining Engineers' Association. He holds mining and
engineering degrees from National University of Engineering in Lima, as well
as the University of Arizona and the Michigan Technological University.
62
<PAGE>
Jon Gelvin. Mr. Gelvin serves as Manager of Cordilleras Mexico and as Chief
Geologist for Cordilleras Mexico, Cordilleras Bahamas and Cordilleras
Honduras. Mr. Gelvin is also the Company's chief representative in Central
America. Mr. Gelvin has 30 years experience as a professional
geologist/engineer and mining exploration consultant in South America and
Central America. From 1976 to 1989, Mr. Gelvin served as a mining exploration
consultant in all of Central America and South America, with the exception of
Uruguay and Paraguay. In 1990, Mr. Gelvin joined Fischer-Watt to supervise a
Honduran mining exploration project; he left Fischer-Watt in 1993. He joined
Cordilleras Mexico in 1994 as an explorer, and became Chief Geologist for CMZ
in January of 1997. Mr. Gelvin is a shareholder and director of Begeyge Minera
Ltda. Mr. Gelvin holds a B.Sc. in petroleum engineering from the Colorado
School of Mines.
Asia
Dekel Golan. Mr. Golan serves as the President and a director of Apex Asia.
Mr. Golan is the founder and manager of MADA Holdings and Management Ltd., a
limited liability company organized and existing under the laws of Israel,
engaged in business development operations, including the promotion of
chemicals, mining and agricultural ventures. Mr. Golan served as head of
Competitive Intelligence and Business Development for Dead Sea Bromine Group,
the world's largest bromine producer and a subsidiary of Israel Chemicals
Ltd., Israel's leading mineral exploitation company. Mr. Golan holds a B.Sc.
in General Science from the Tel Aviv University.
Alexander Becker. Mr. Becker serves as Apex Asia's principal advisor with
respect to mining exploration, development and production in Kyrgyzstan. Mr.
Becker is an experienced geologist with extensive mining experience. Prior to
emigrating from Russia to Israel in 1991, where he became a senior scientific
researcher for the Ramon Science Center at Ben Gurion University, Mr. Becker
served as Geologist in Chief of the Northern Kyrgyzstan Geological Expedition
at the Kyrgyzstan Ministry of Geology in Frunze. Mr. Becker has authored
numerous papers and reports on Kyrgyzstani geology, with particular regard to
the Northern Tien Shan region. He holds an M.Sc. in Geology from the Tomsk
State University and a Ph.D. in Geology, specializing in the Northern Tien
Shan region, from the Academy of Science in Frunze, Kyrgyzstan.
Boris Miletsky. Mr. Miletsky serves as Vice President of Apex Asia, and is
Apex Asia's principal advisor with respect to mining exploration, development
and production in Mongolia. Prior to emigrating from Russia to Israel in 1993,
Mr. Miletsky served as the Managing Director of the Russian concern
Geologodzevska, the largest geological entity active in Mongolia, and as the
Soviet Ministry of Geology's representative to Mongolia. At Geologodzevska,
Mr. Miletsky supervised more than 3,000 workers, and served as the company's
chief negotiator with the governments of Mongolia and the Russian Federation.
Mr. Miletsky played a key role in negotiating Apex Asia's joint venture with
Mongolrostvetmet. Mr. Miletsky holds an M.Sc. in Geological and Mineral
Sciences from the Academy for the Geological Sciences in Kazakhstan.
63
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors do not receive any cash compensation from the Company for serving
on the board of directors, although each non-employee director (other than Mr.
Conger) received, in April of 1997 options to purchase 6,250 Ordinary Shares
at a price of $8.00 per share and each non-employee director (including Mr.
Conger) is eligible to receive grants of Options under the Non-employee
Director Share Option Plan. See "Share Option Plans--Non-employee Directors
Share Option Plan". The Company has agreed to reimburse the directors for all
reasonable out-of-pocket costs incurred by them in connection with their
services to the Company. Mr. Conger received options to purchase 25,000
Ordinary Shares for certain consulting services performed for the Company and
options to purchase 3,125 Ordinary Shares for being a member of the Company's
Development Committee, all of which options are exercisable at a price of
$8.00 per share. The options for the 25,000 Ordinary Shares vest ratably over
four years with the first tranche vesting in October 1996.
COMPENSATION OF OFFICERS
The following table sets forth certain information with respect to the
annual compensation paid by the Company during the fiscal year ended December
31, 1996 to the Chief Executive Officer of Apex Corporation and the four other
most highly compensated executive officers and certain other officers of the
Company:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
---------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
--------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Thomas S. Kaplan................ $120,625 -- -- --
Chairman and Chief Executive
Officer, Apex Corporation (1)
Keith R. Hulley................. 56,250 -- 125,000 $93,167
Executive Vice President and
Chief Operating Officer, Apex
Corporation(2)
Marcel F. DeGuire............... 67,500 -- 62,500 --
Vice President of Development,
Apex Corporation(3)
Gregory G. Marlier.............. 20,833 -- 31,250 --
Vice President of Finance and
Chief Financial Officer, Apex
Corporation(4)
Douglas M. Smith Jr. ........... -- -- -- --
Vice President of Exploration,
Apex Corporation(5)
Johnny Delgado Achaval.......... 25,000 -- -- --
Chief Executive Officer, Andean
ASC (6)
Dekel Golan..................... 120,000 -- -- --
President, Apex Asia(7)
Larry J. Buchanan............... 70,700 $10,000 37,500 --
Chief Geologist, Apex
Corporation
Leni S. Berliner................ 80,000 5,000 -- --
Manager Commercial Development,
Apex Corporation(8)
Felipe de Lucio Pezet
Manager ASC Peru(9)............ 66,000 7,500 -- --
Kerry A. McDonald............... 76,000 -- -- --
Manager, Cordilleras Mexico(10)
</TABLE>
- --------
(1) Effective April 1, 1997, Mr. Kaplan's annual base salary is $240,000.
(2) Mr. Hulley joined the Apex group of companies on October 1, 1996. His
annual base salary is $225,000. The $93,167 of other compensation was for
taxable moving expenses and tax reimbursement.
(3) Mr. DeGuire joined the Apex group of companies on August 19, 1996. His
annual base salary is $180,000.
(4) Mr. Marlier joined Apex Corporation on November 1, 1996. His annual base
salary is $125,000.
64
<PAGE>
(5) Mr. Smith joined Apex Corporation on March 7, 1997. His annual base salary
is $120,000.
(6) Mr. Delgado Achaval joined Andean on November 1, 1996. His annual base
salary is $125,000. He also receives an additional $25,000 in annual
compensation in lieu of Company benefits.
(7) Mr. Golan has served as the President of Apex Asia since December 21, 1994.
His annual base salary is $120,000. Mr. Golan is also compensated for his
services to the Company through payments to two companies that he owns or
otherwise controls (i) Mada Limited, and (ii) MADA Holdings & Management
Ltd.
(8) On January 1, 1997, Ms. Berliner became Manager of Commercial Development
for Apex Corporation. Her annual base salary is $80,000.
(9) Mr. de Lucio Pezet joined ASC Peru on March 6, 1995. His annual base salary
is $72,000.
(10) Mr. McDonald resigned from his position as Manager of Cordilleras Honduras
in April of 1997. Currently, Mr. McDonald serves as a consultant to the
Company's subsidiaries in Mexico.
The following table contains further information concerning the share
options grants made to each of the officers of Apex Corporation during the
fiscal year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
SHARE PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(4)
-------------------------------------------- ---------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
GRANTED(1) YEAR(2) ($/SH)(3) DATE 5% 10%
---------- ---------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Hulley......... 125,000 44.44% $8.00 9/2/06 $ 628,895 $ 1,593,742
Marcel F. DeGuire....... 62,500 22.22 8.00 8/5/06 314,447 796,871
Gregory G. Marlier...... 31,250 11.11 8.00 10/2/06 157,224 398,436
Larry J. Buchanan....... 37,500 13.33 8.00 9/1/06 188,668 478,123
</TABLE>
- --------
(1) All options granted in 1996, except for those granted to Dr. Buchanan,
vest ratably over four years, with the first tranche vesting on the date
of grant. The options granted to Dr. Buchanan vest ratably over three
years, with the first tranche vesting on the date of grant.
(2) Based on 281,250 options granted to employees in fiscal 1996.
(3) All share options were granted with exercise prices of $8.00 per share.
(4) These amounts are based on compounded annual rates of share price
appreciation of five and ten percent over the 10-year term of the options,
as mandated by rules of the Securities and Exchange Commission, and are
not indicative of expected share price performance. Actual gains, if any,
on share option exercises are dependent on future performance of the
overall market conditions, as well as the option holders' continued
employment throughout the vesting period. The amounts reflected in this
table may not necessarily be achieved or may be exceeded. The indicated
amounts are net of the option exercise price but before taxes that may be
payable upon exercise.
65
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES
ACQUIRED NUMBER OF VALUE OF
ON VALUE SECURITIES UNDERLYING UNEXERCISED
EXERCISE REALIZED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
NAME (#) ($) FISCAL YEAR-END AT FISCAL YEAR-END *
- ---- -------- -------- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Keith R. Hulley......... -- -- 31,250 93,750 -- --
Marcel F. DeGuire....... -- -- 15,625 46,875 -- --
Gregory G. Marlier...... -- -- 7,813 23,437 -- --
Larry J. Buchanan....... -- -- 12,500 25,000 -- --
</TABLE>
- --------
* Computed based upon a fair market value of $8.00 per share on December 31,
1996 as determined by the Company.
EMPLOYMENT AGREEMENTS
The Company and Keith Hulley, a director of the Company, entered into an
agreement on September 2, 1996 with respect to Mr. Hulley's employment as
Executive Vice President and Chief Operating Officer of Apex Corporation.
Pursuant to such employment agreement, the Company, through Apex Corporation,
will pay Mr. Hulley an annual salary of $225,000, plus a performance-based
bonus starting in 1998. In addition, the employment agreement provides that
Mr. Hulley is eligible to participate in the Company's and Apex Corporation's
employee benefit plans, including the Employee Share Option Plan pursuant to
which Mr. Hulley received options to purchase 125,000 Ordinary Shares. Twenty-
five percent of the options vested on appointment, the remaining 75 percent
vest over the three-year period ending September 2, 1999 at a rate of 25
percent per annum. The employment agreement, which may be terminated for cause
by the Company at any time, contains a severance arrangement that entitles Mr.
Hulley to receive his existing salary and all benefits for one year from the
date of termination if he is terminated, other than for cause, at any time
within three years from the date of the employment agreement. The employment
agreement also contains a non-compete covenant with a term of two years after
the termination of Mr. Hulley's employment.
Marcel DeGuire, Vice President of Project Development of Apex Corporation,
and the Company entered into an employment agreement on August 1, 1996.
Pursuant to such employment agreement the Company, through Apex Corporation,
will pay Mr. DeGuire an annual salary of $180,000. In addition, the employment
agreement provides that Mr. DeGuire is eligible to participate in the
Company's employee benefit plans, including the Employee Share Option Plan
pursuant to which Mr. DeGuire received options to purchase 62,500 Ordinary
Shares. Twenty-five percent of the options vested on appointment, the
remaining 75 percent vest over the three-year period ending August 1, 1999 at
a rate of 25 percent per annum. The employment agreement, which may be
terminated for cause by the Company at any time, contains a severance
arrangement that entitles Mr. DeGuire to receive his existing salary and all
benefits for one year from the date of termination if he is terminated, other
than for cause, at any time within three years from the date of the employment
agreement. The employment agreement also contains a non-compete covenant with
a term of two years after the termination of Mr. DeGuire's employment.
Gregory Marlier, Vice President of Finance and Chief Financial Officer of
Apex Corporation, and the Company entered into an employment agreement on
October 2, 1996. Pursuant to such employment agreement the Company, through
Apex Corporation, will pay Mr. Marlier an annual salary of $125,000, plus a
performance-based bonus starting in 1998. In addition, the employment
agreement provides that Mr. Marlier is eligible to participate in the
Company's employee benefit plans, including the Employee Share Option Plan
pursuant to which Mr. Marlier received options to purchase 31,250
66
<PAGE>
Ordinary Shares. Twenty-five percent of the options vested on appointment, the
remaining 75 percent vest over the three-year period ending July 24, 1999 at a
rate of 25 percent per annum. The employment agreement, which may be
terminated for cause by the Company at any time, contains a severance
arrangement which entitles Mr. Marlier to receive his existing salary and all
benefits for one year from the date of termination if he is terminated, other
than for cause, at any time within three years from the date of the employment
agreement. The employment agreement also contains a non-compete covenant with
a term of two years after the termination of Mr. Marlier's employment.
Douglas Smith, Vice President of Exploration of Apex Corporation, and the
Company entered into an employment agreement on January 23, 1997. Pursuant to
such employment agreement the Company, through Apex Corporation, will pay Mr.
Smith an annual salary of $120,000. In addition, the employment agreement
provides that Mr. Smith is eligible to participate in the Company's employee
benefit plans, including the Employee Share Option Plan pursuant to which Mr.
Smith received options to purchase 31,250 Ordinary Shares. Twenty-five percent
of the options vested on appointment, the remaining 75 percent vest over the
three-year period ending January 23, 2000 at a rate of 25 percent per annum.
The employment agreement also contains a confidentiality covenant with a term
of two years after the termination of Mr. Smith's employment.
SHARE OPTION PLANS
The Company has established two Share option plans; one for officers,
employees, consultants and agents of the Company and its subsidiaries, the
other for non-employee directors of the Company.
Employee Share Option Plan
The Company has established a share option plan for officers, employees,
consultants and agents of the Company and its subsidiaries (the "Employee
Share Option Plan"). The Employee Share Option Plan provides for the grant of
Ordinary Share options (including incentive Ordinary Share options as defined
in Section 422 of the U.S. Internal Revenue Code of 1986, as amended, (the
"Code")), Ordinary Share appreciation rights and other Share awards (including
restricted Ordinary Share awards, contingent Ordinary Share awards and
dividend or equivalent Ordinary Share awards) (collectively "Awards"). The
total number of options outstanding at any time cannot exceed ten percent of
the number of Ordinary Shares outstanding from time to time. Options granted
under the Employee Share Option Plan are non-assignable and exist for a term,
not to exceed ten years, fixed by the Compensation Committee of the board of
directors of the Company (the "Committee"). The exercise price of options
granted on or before the date of the Offerings is $8.00 per share. The
exercise price of options granted after the date of the Offerings is
determined by the Committee at the time the option is granted; provided that
the exercise price shall not be less than 100 percent of the fair market value
of the share on the date of the grant. In the case of an incentive share
option granted to an employee owning (actually or constructively under Section
422(d) of the Code), more than ten percent of the total combined voting power
of all classes of Ordinary Shares of the Company, the price of any such option
shall not be less than 110 percent of the fair market value of the Ordinary
Shares on the date of grant. The aggregate fair market value (determined at
the time the incentive share options are granted) of the Ordinary Shares with
respect to which incentive share options are exercisable for the first time by
any optionee during any calendar year under all plans of the Company shall not
exceed $100,000. Awards may be granted by the Committee on such terms,
including vesting schedules, price, restriction or option period, dividend
rights, post-retirement and termination rights, and payment forms as they deem
appropriate. Unless terminated by the board of directors, the Employee Share
Option Plan continues until August 1, 2006.
Options grants made under the Employee Share Option Plan provide that in the
event of a Change in Control (as defined in the Employee Share Option Plan),
the options whether or not currently vested and exercisable, shall become
immediately vested and exercisable as of the effective date of the Change of
Control.
67
<PAGE>
Under the Employee Share Option Plan, as of the date hereof, options to
purchase an aggregate of 415,000 Ordinary Shares are outstanding. All such
options are exercisable at a price of $8.00 per share. See "Principal
Shareholders".
Non-Employee Director Share Option Plan
The Company has established, a share option plan for non-employee directors
of the Company (the "Non-employee Director Share Option Plan"). The total
number of options outstanding at any time cannot exceed five percent of the
number of Ordinary Shares outstanding from time to time. Options granted under
the Non-employee Director Share Option Plan are non-assignable (except for
approved assignments to immediate family members) and expire at the earlier of
(i) ten years after the date of the grant of the option or (ii) one year after
the director ceases to be a director of the Company. Options shall have an
exercise price of 100 percent of the Fair Market Value (as defined in the Non-
employee Director Share Option Plan) of the Ordinary Shares on the date of the
grant. The Non-employee Director Share Option Plan provides for the automatic
grant of (i) an option to purchase the number of Ordinary Shares equal to
$50,000 divided by the Fair Market Value of the Ordinary Shares on the date of
the grant to each non-employee director at the effective date of their initial
election to the board of directors and, (ii) an option to purchase the number
of Ordinary Shares equal to $50,000 divided by the Fair Market Value of the
Ordinary Shares on the date of the grant at the close of business of each
annual meeting of the shareholders of the Company.
No options have been granted under the Non-employee Director Share Option
Plan. However, non-employee directors have received options pursuant to
individual grants. See "Principal Shareholders".
OTHER PLANS
In 1997, Apex Corporation instituted a 401(k) Plan for its U.S. employees.
Apex Corporation makes monthly contributions to this 401(k) Plan, and
currently matches 50 percent of each employee's contribution up to an employee
contribution of six percent of base salary. Employees vest in the company's
contribution at 50 percent after one year of service and 100 percent after two
years of service. Although the Company does not currently have a formal bonus
or incentive plan for any of its employees, it anticipates instituting a bonus
plan in the future.
68
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Ordinary Shares by (i) each person known by the
Company to beneficially hold five percent or more of the outstanding Ordinary
Shares, (ii) each director of Apex Limited, (iii) each executive officer of
the Company named in the table set forth under "Executive Compensation--
Compensation of Officers", and (iv) all executive officers and directors as a
group. All Ordinary Share numbers set forth in the table have been rounded up
to the nearest whole number. Except as otherwise noted, the Company believes
that all of the persons and groups shown below, based on information furnished
by such owners, have sole voting and investment power with respect to the
shares indicated. See "Certain Transactions".
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP AFTER PRO FORMA
PRIOR TO THE OFFERINGS AS ADJUSTED(1) THE OFFERINGS(2) AS ADJUSTED(3)
--------------------------- --------------------- -------------------- ---------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE NUMBER PERCENTAGE
------------- ------------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND
5% SHAREHOLDERS(4)
Silver Holdings(5)...... 1 * 6,297,321 30.45% 1 * 6,297,321 21.22%
Moore Global Investments
Ltd./Remington
Investment Strategies,
L.P.(6)................ 937,500 6.89% 937,500 4.53% 2,037,500 9.01% 2,037,500 6.88%
C.A. Delaney Capital
Management Limited(7).. 750,000 5.51% 750,000 3.63% 750,000 3.32% 750,000 2.53%
Leni S. Berliner(8)..... 27,346 * 27,346 * 27,346 * 27,346 *
Larry J. Buchanan(9).... 50,000 * 50,000 * 50,000 * 50,000 *
Michael Comninos(10).... 6,250 * 6,250 6,250 * 6,250 *
Harry S. Conger(11)..... 15,625 * 15,625 * 15,625 * 15,625 *
Marcel F. DeGuire(12)... 31,250 * 31,250 * 31,250 * 31,250 *
Johnny Delgado
Achaval(13)............ 407,091 2.99% 394,591 1.97% 394,591 1.80% 394,591 1.37%
Felipe de Lucio
Pezet(14).............. 27,346 * 27,346 * 27,346 * 27,346 *
Eduardo S.
Elsztain(15)........... 31,250 * 6,328,571 30.60% 31,250 * 6,328,571 21.32%
Dekel Golan(16)......... 52,346 * 52,346 * 52,346 * 52,346 *
David Sean Hanna(17).... 6,250 * 6,250 * 6,250 * 6,250 *
Ove Hoegh(18)........... 6,250 * 6,250 * 6,250 * 6,250 *
Keith R. Hulley(19)..... 62,500 * 62,500 * 62,500 * 62,500 *
Thomas S. Kaplan(20).... 6,674,979 49.08% 6,674,979 32.28% 6,674,979 29.53% 6,674,979 22.49%
Richard Katz(21)........ 6,250 * 6,250 * 6,250 * 6,250 *
Gregory G. Marlier(22).. 15,626 * 15,626 * 15,626 * 15,626 *
Kerry A. McDonald(23)... 31,250 * 31,250 * 31,250 * 31,250 *
Douglas M. Smith(24).... 7,813 * 7,813 * 7,813 * 7,813 *
Paul Soros(25).......... 6,250 * 6,303,571 30.48% 6,250 * 6,303,571 21.24%
DIRECTORS AND OFFICERS
AS A GROUP............. 7,465,672 54.02% 13,762,993 65.86% 7,465,672 32.72% 13,762,993 46.03%
</TABLE>
- -------
*The percentage of Ordinary Shares beneficially owned is less than 1%.
(1) Adjusted as if Ordinary Shares were issued in exchange for all shares of
Apex LDC owned by the Minority Shareholders, on a one-for-one basis,
pursuant to the terms of the Buy-Sell Agreement. See "Certain
Transactions".
(2) Reflects the sale of Shares in the Offerings (assuming no exercise of the
U.S. Underwriters and International Underwriters over-allotment options
and, except for the purchase by the Concurrent Purchaser of the maximum
1,100,000 Ordinary Shares in the Concurrent Offering, no purchase of
Shares by any existing shareholder of the Company). See "Concurrent
Offering". Prior to the filing of the Registration Statement, the Company
did not make offers to or solicit indications of interest from any
officers, directors or affiliates of the Company with respect to the
Ordinary Shares to be sold in the Concurrent Offering.
(3) Adjusted as if Ordinary Shares were issued in exchange for all of the
shares of Apex LDC owned by the Minority Shareholders, pursuant to the
terms of the Buy-Sell Agreement.
69
<PAGE>
(4) Unless otherwise specified, the address for directors and officers of the
Company is 1700 Lincoln Street, Suite 3050, Denver, Colorado 80203,
U.S.A.
(5) The address for Silver Holdings is Kaya Flamboyan 9, Willemstad, Curacao,
Netherlands Antilles. Quantum Industrial Partners LDC ("Quantum
Industrial"), an exempted limited duration company formed under the laws
of the Cayman Islands is a 50 percent shareholder in Silver Holdings LDC
("Silver Holdings"), an exempted limited duration company formed under
the laws of the Cayman Islands, the registered owner of 6,297,320 shares
of Apex LDC. QIH Management Investor, L.P. ("QIHMI"), an investment
advisory firm organized as a Delaware limited partnership, is a minority
shareholder of, and is vested with investment discretion with respect to
portfolio assets held for the account of Quantum Industrial. The sole
general partner of QIHMI is QIH Management, Inc. ("QIH Management"), a
corporation formed under the laws of the State of Delaware. Mr. George
Soros, the sole shareholder of QIH Management, has entered into an
agreement with Soros Fund Management LLC ("SFM LLC"), a limited liability
company formed under the laws of the State of Delaware, pursuant to which
Mr. George Soros has, among other things, agreed to use his best efforts
to cause QIH Management to act at the direction of SFM LLC (the "QIP
Contract"). Mr. George Soros is Chairman of SFM LLC, and as a result of
such position and the QIP Contract, may be deemed the beneficial owner of
shares held for the account of Quantum Industrial. Mr. Stanley F.
Druckenmiller, the Lead Portfolio Manager of SFM LLC, by virtue of such
position and the QIP Contract, also may be deemed the beneficial owner of
shares held for the account of Quantum Industrial. Mr. Eduardo Elsztain
is the Chairman and majority shareholder of Consultores Asset Management,
S.A. Emerging Dolphin Limited is a private, open-end investment fund
formed under the laws of the Isle of Man. It is managed by Consultores
Management Company (Isle of Man) Limited, a wholly-owned subsidiary of
Consultores Asset Management, S.A., and holds a 26.5 percent interest in
Silver Holdings. Consultores Asset Management, S.A. owns a one percent
interest in Silver Holdings. Geosor Corporation ("Geosor"), a corporation
formed under the laws of the State of New York which is wholly-owned by
Mr. George Soros, is a 15 percent shareholder of Silver Holdings. VDM,
Inc. which is wholly owned by Paul Soros, holds a five percent interest
in Silver Holdings. See "Certain Transactions".
(6) Assumes the purchase of the maximum 1,100,000 Ordinary Shares in the
Concurrent Offering. See "Concurrent Offering." The address is 1251
Avenue of the Americas, 53rd Floor, New York, New York 10020. Moore
Capital Management, Inc., a Connecticut corporation, is vested with
investment discretion with respect to portfolio assets held for the
account of Moore Global Investments, Ltd. ("MGI"). Moore Capital
Advisors, L.L.C., a New York limited liability company, is the sole
general partner of Remington Investment Strategies, L.P. ("Remington").
Mr. Louis M. Bacon is the majority shareholder of Moore Capital
Management, Inc. and is the majority equity holder of Moore Capital
Advisors, L.L.C. As a result, Mr. Bacon may be deemed to be the indirect
beneficial owner of the aggregate 937,500 shares held by MGI and
Remington.
(7) The address of C.A. Delaney Capital Management Limited ("C.A. Delaney")
is 161 Bay Street, Suite 5100, Toronto, Ontario M5J251. C.A. Delaney
serves as an agent on behalf of Spectrum United Canadian Growth Fund, the
beneficial owners of 750,000 Ordinary Shares.
(8) Ms. Berliner is the registered owner of 25,000 Ordinary Shares and has
vested options to purchase 2,346 Ordinary Shares pursuant to the Employee
Share Option Plan.
(9) Dr. Buchanan is the registered owner of 25,000 Ordinary Shares of the
Company. Pursuant to the Employee Share Option Plan, Dr. Buchanan has
vested options to purchase 25,000 Ordinary Shares.
(10) Mr. Comninos is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 Ordinary
Shares as compensation for becoming a director of the Company.
(11) Pursuant to a grant as of October 8, 1996 and a grant as of April 10,
1997, Mr. Conger has been granted vested options to purchase 15,625
Ordinary Shares.
(12) Mr. DeGuire has been granted vested options to purchase 31,250 Ordinary
Shares pursuant to the Employee Share Option Plan.
(13) Mr. Delgado Achaval is the registered owner of 113,595 Ordinary Shares
and has vested options to purchase 12,500 Ordinary Shares and options to
purchase 12,500 Ordinary Shares which vest on
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January 17, 1998 pursuant to the Employee Share Option Plan. In addition,
Mr. Delgado Achaval has voting and dispositive control with respect to
268,496 Ordinary Shares of the Company owned by Mineria Tecnica
Consultores, S.A.
(14) Mr. de Lucio Pezet is the registered owner of 25,000 Ordinary Shares of
the Company and has vested options to purchase 2,346 Ordinary Shares
pursuant to the Employee Share Option Plan.
(15) Mr. Elsztain, a director of the Company, is the registered owner of 25,000
Ordinary Shares. Pursuant to a grant as of April 10, 1997, Mr. Elsztain
has vested options to purchase 6,250 Ordinary Shares of the Company.
Mr. Elsztain also serves as a director of Silver Holdings, the registered
owner of 6,297,320 shares of Apex LDC which Ordinary Shares are included
in the table. The inclusion of such Ordinary Shares shall not be deemed an
admission that such individual is the beneficial owner of such Ordinary
Shares. He is the Chairman and majority shareholder of Consultores Asset
Management, S.A. which is a one percent shareholder of Silver Holdings and
the sole owner of Consultores Management Company (Isle of Man) Limited
("Consultores Management"). Consultores Management is the manager of
Emerging Dolphin Limited, a private open-end investment fund formed under
the laws of the Isle of Man which owns 26.5 percent of Silver Holdings.
(16) Mr. Golan has voting and dispositive control of Mada Limited which is the
registered owner of 50,000 Ordinary Shares. Mr. Golan has vested options
to purchase 2,346 Ordinary Shares pursuant to the Employee Share Option
Plan.
(17) Mr. Hanna is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 Ordinary
Shares of the Company.
(18) Mr. Hoegh is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, options to purchase 6,250 Ordinary Shares of
the Company.
(19) Mr. Hulley has been granted vested options to purchase 62,500 Ordinary
Shares pursuant to the Employee Share Option Plan.
(20) Pursuant to Voting Trust Agreements, Mr. Kaplan has voting and dispositive
control with respect to 2,739,154 shares of the Company owned by Argentum
LLC and 3,935,825 shares of the Company owned by Consolidated Commodities,
Ltd.
(21) Mr. Katz is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, vested options to purchase 6,250 shares of the
Company.
(22) Mr. Marlier has vested options to acquire 15,626 Ordinary Shares pursuant
to the Employee Share Option Plan.
(23) Mr. McDonald is the indirect owner of 31,250 shares of the Company through
Celtic Group Ltd., an international business corporation organized under
the laws of the British Virgin Islands.
(24) Mr. Smith has vested options to acquire 7,812.50 Ordinary Shares pursuant
to the Employee Share Option Plan.
(25) Mr. Soros is a director of the Company and has received, pursuant to a
grant as of April 10, 1997, options to purchase 6,250 shares of the
Company. Mr. Soros is also a director and indirect five percent
shareholder of Silver Holdings (through his 100% ownership of VDM, Inc., a
five percent shareholder of Silver Holdings), which is the registered
owner of 6,297,320 shares of Apex LDC which Ordinary Shares included in
the table. The inclusion of such Ordinary Shares shall not be deemed an
admission that such individual is the beneficial owner of such Ordinary
Shares. He also serves on the Investment Advisory Committee of Quantum
Industrial, a 50 percent shareholder of Silver Holdings.
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CERTAIN TRANSACTIONS
In December of 1994, Silver Holdings formed by (i) Quantum Industrial
Partners LDC, (ii) Geosor Corporation, (iii) VDM, Inc. (iv) entities
affiliated with Mr. Elsztain, and (v) Jack Nash, purchased a 75 percent
interest in Apex LDC in exchange for a $10 million demand note (the "Note")
payable to Apex LDC. Upon Silver Holdings' investment, Mr. Paul Soros and Mr.
Elsztain were appointed to Apex LDC's board of directors. As part of this
investment, and in consideration of introducing the principals of the Company
and Silver Holdings to each other, Litani Capital Management Ltd. ("Litani
Ltd."), an international business company formed under the laws of the
Bahamas, was granted an option to purchase 35 percent of the issued and
outstanding shares of Apex LDC from Silver Holdings for an amount equal to
Silver Holdings' initial purchase price for such shares, plus interest thereon
calculated at an annual rate of 20 percent.
In connection with the investment by Silver Holdings, Apex LDC agreed to pay
Tigris Financial Group Ltd. ("Tigris"), a corporation formed under the laws of
the State of Delaware, an annual advisory fee of $75,000, plus expenses, in
consideration for Mr. Kaplan's services to Apex LDC and its subsidiaries. Mr.
Kaplan is the sole shareholder of Tigris. This consulting arrangement was
terminated at the end of the first quarter of 1997, following the formation of
Apex Corporation. In addition, Apex LDC agreed to pay Litani Ltd. an annual
advisory fee of $45,000, plus expenses, in consideration for Litani Ltd.'s
services to Apex LDC and its subsidiaries. The right to this fee was
subsequently assigned to LCM Holdings LDC, a limited duration company formed
under the laws of the Bahamas ("LCM Holdings LDC"). This consulting
arrangement was terminated at the end of the first quarter of 1997.
In the first half of 1995, Litani LDC succeeded to Litani Ltd.'s contract
rights with respect to Apex LDC, including the option, but excluding LCM
Holdings LDC's advisory fee. In July of 1995, Litani LDC completed the sale,
in a Private Placement, of 30 percent of its shares to accredited investors
(representing an approximately 10.5 percent beneficial economic interest in
Apex LDC) for approximately $6 million. In early August of 1995, Litani LDC
exercised its option to acquire from Silver Holdings 35 percent of the issued
and outstanding shares of Apex LDC for a price equal to approximately
$5,250,000. Substantially all of Litani LDC's assets consisted of its shares
of Apex LDC.
In January of 1996, the Company delivered to Silver Holdings a capital call
for the amount of the outstanding balance due on the Note. Silver Holdings
made its final payment under the Note, in the amount of just over $2.9
million, effective as of January 31, 1996.
In the first four months of 1996, Apex LDC was restructured in order to
facilitate the 1996 Private Placement which was completed effective August 6,
1996. As part of this restructuring, Apex Limited was formed to serve as the
majority shareholder of Apex LDC. Apex LDC also formed ASM Holdings Limited
("ASM Holdings"), an exempted limited liability company organized and existing
under the laws of the Cayman Islands, and Apex Partners in order to facilitate
the purchase of minority interests in certain of Apex LDC's subsidiaries from
five officers of Apex Corporation. Apex Partners subsequently acquired a one
percent interest in each of Apex Asia, Cordillera Minera de Zacatecas,
Cordilleras Honduras, Andean and ASC Partners. The Company also purchased
certain minority profit interests in Honduran and Mexican properties from the
individual who had represented the Company in connection with the initial
acquisition of such properties.
As part of the 1996 Private Placement, 4,256,700 shares of the Company were
sold at a price of US $8.00 per Ordinary Shares to accredited investors. The
gross proceeds from the 1996 Private Placement were $34,053,600. The Private
Placement agents for the sale included Salomon Brothers Inc and S.G. Warburg &
Co. Inc. In connection with the 1996 Private Placement, Consolidated
contributed its 25 percent interest in Apex LDC to the Company in exchange for
3,935,825 Ordinary Shares (approximately 30% of the Ordinary Shares
outstanding at such time, or 20%, assuming the issuance of the 7,077,007
Ordinary Shares reserved for issuance pursuant to the Buy-Sell Agreement),
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and approximately 84 percent of the shareholders of Litani LDC exchanged their
interests in Apex LDC in exchange for 4,730,468 Ordinary Shares (approximately
36% of the Ordinary Shares outstanding at such time, or 23% assuming the
issuance of the 7,077,007 Ordinary Shares reserved for issuance pursuant to
the Buy-Sell Agreement).
Further in connection with the 1996 Private Placement, Apex LDC, the Company
and the other beneficial owners of Apex LDC entered into a Buy-Sell Agreement
dated as of August 6, 1996 (the Buy-Sell Agreement"). Pursuant to the terms of
the Buy-Sell Agreement, upon a request by a Minority Shareholder, the Company
is required to purchase, at its sole option, for cash, for Ordinary Shares or
for a combination of cash and Ordinary Shares, the shares of Apex LDC owned by
such shareholder. The Company currently expects that any future purchases by
Apex Limited of shares of Apex LDC from the Minority Shareholders will involve
only Ordinary Shares of Apex Limited. Any such transaction will not effect the
beneficial and economic interest in Apex LDC attributable to shareholders of
Apex Limited.
Pursuant to a Shareholders' Agreement dated as of August 6, 1996 (the
"Shareholders' Agreement") by and among Apex LDC, the Company, the other
shareholders of Apex LDC, and each purchaser of Ordinary Shares in the 1996
Private Placement, such shareholders have agreed not to affect any public sale
or distribution (including any sale pursuant to Rule 144 of the Securities
Act) of Ordinary Shares or any securities convertible into, or exchangeable or
exercisable for Ordinary Shares, for seven days prior to and 180 days after
the date of this Prospectus, without the prior written consent of Salomon.
Dr. Larry J. Buchanan and Jon Gelvin, officers of the Company, are
shareholders and directors of Begeyge Minera Ltda. ("Begeyge"), from which the
Company purchased options for three properties in Honduras for a total of
$20,000. The Company declined to exercise its option to purchase two of the
three properties. From the time of entering into the option contracts until
December 31, 1996, the Company spent a total of $182,324 in connection with
the returned properties. During the period January 1, 1997 through September
30, 1997 the Company paid Begeyge $5,000 in lease payments for one of the
returned properties. The Company spent a further $9,619 in connection with
this property during the period. The Company still has an option to purchase
the remaining property for $3,000,000. Begeyge also serves as an associate of
the Company and during the period ended December 31, 1996, total expenditures
charged to the Company by Begeyge amounted to $106,691. During the period
January 1, 1997 through September 30, 1997, Begeyge did not receive any
payment from the Company other than the $5,000 in lease payments.
In 1996, Mr. Harry Conger, a director of the Company, received options to
purchase 25,000 Ordinary Shares at $8.00 per share, which vest ratably over
four years with the first tranche vesting on the date of grant. In addition,
Mr. Conger received, pursuant to a grant as of April 10, 1997, options to
purchase 3,175 Ordinary Shares at $8.00 per share, which options were granted
in consideration of Mr. Conger's consulting services for the Company.
In August of 1997, the Company issued Mada Limited 25,000 shares in
consideration of its services to the Company.
In August of 1997, the Company exchanged 268,496 Ordinary Shares for
Mintec's 2.5 percent interest in ASC Bolivia.
In August of 1997, the Company issued Johnny Delgado Achaval, an officer of
the Company 113,595 Ordinary Shares of the Company in consideration of his
services to the Company.
The Company is negotiating an agreement with Mintec in which the Company
would purchase from Mintec (i) its non-land assets for approximately $757,000
and (ii) concessions with respect to approximately 126,000 acres of land for
approximately $550,000. The closing of such transaction will not occur until
after the Offerings.
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Silver Holdings, the Company, Mr. Kaplan, Argentum LLC, Aurum LLC, and
Consolidated entered into a Board Designation Agreement pursuant to which the
Company, Mr. Kaplan, Argentum LLC, Aurum LLC, and Consolidated will agree to
nominate and support for nomination two individuals designated by Silver
Holdings, for so long as Silver Holdings owns one percent of the outstanding
Ordinary Shares, including Ordinary Shares it may receive pursuant to the Buy-
Sell Agreement.
Silver Holdings, Argentum LLC, Consolidated, Litani LDC, Thomas Kaplan,
Aurum LLC, and the Company entered into a registration rights agreement,
pursuant to which each of Silver Holdings and Argentum LLC are entitled to
demand registration of any Ordinary Shares owned by either of them. Silver
Holdings and Argentum LLC may make such demand up to three times each on Form
S-1 of the Securities Act and up to an additional three times each on Forms S-
2 and S-3, when such form is available for use by the Company. The Company is
not required to effect any demand registration within 120 days after the
effective date of a previous demand registration and may postpone, on one
occasion in any 365-day period, the filing or effectiveness of a registration
statement for a demand registration for up to 120 days under certain
circumstances, including pending material transactions. Silver Holdings,
Argentum LLC, Aurum LLC, Thomas Kaplan, Consolidated and Litani LDC are also
entitled to unlimited piggyback registrations. All such registrations would be
at the Company's expense, exclusive of underwriting discounts and commissions.
The Company and such shareholders have entered into customary indemnification
and contribution provisions.
Apex Corporation provides management, advisory and administrative services
for the Company pursuant to a Management Services Agreement dated October 22,
1996. The services provided by Apex Corporation include identifying and
evaluating investment opportunities, making recommendations to the board of
directors with respect to the Company's exploration and development
activities, staffing employees and providing the necessary expertise to manage
the Company's affairs and monitor its exploration and development activities,
advising the Company with respect to investments, contractual and financing
activities and providing financial services. The Company pays Apex Corporation
a service fee in an amount equal to the direct and indirect costs incurred by
Apex Corporation in providing its services, plus 10 percent of such costs.
In the Concurrent Offering, the Company will sell to a shareholder of the
Company, Moore Global Investment Ltd./Remington Investment Strategies, L.P., a
maximum of 1,100,000 Ordinary Shares at a price equal to the initial public
offering price. See "Concurrent Offering" and "Principal Shareholders."
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DESCRIPTION OF ORDINARY SHARES
The following summarizes certain provisions of the Memorandum of Association
(the "Memorandum") and the Articles of Association, as amended (the
"Articles") of the Company. Such summaries do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Memorandum and the Articles, including the definitions
thereof to certain terms. Copies of the Memorandum and Articles are filed as
exhibits to the Registration Statement of which this Prospectus is part.
GENERAL
The authorized share capital of the Company consists of one class of
75,000,000 ordinary shares, par value $0.01 per share, of which 13,601,544
shares were outstanding as of the date of this Prospectus. Approximately
7,077,007 shares may be issued on a one-for-one basis in exchange for the
Shares of Apex LDC subject to the terms of the Buy-Sell Agreement. See
"Certain Transactions".
SHARES
The Shares offered hereby are validly issued, fully paid and nonassessable.
There are no provisions of Cayman Islands law or the Company's Articles of
Association which impose any limitation on the rights of shareholders to hold
or vote Ordinary Shares by reason of their not being resident of the Cayman
Islands.
Dividend Rights. Holders of Ordinary Shares are entitled to receive
dividends ratably when and as declared by the board of directors out of funds
legally available therefor.
Liquidation. In the event of any dissolution, liquidation or winding up of
the Company, whether voluntary or involuntary, after there shall have been
paid or set aside for payment to the holders of any outstanding shares ranking
senior to the Shares as to distribution on liquidation, distribution or
winding up, the full amount to which they shall be entitled, the holders of
the then outstanding Ordinary Shares shall be entitled to receive, pro rata
according to the number of Ordinary Shares registered in the names of such
shareholders, any remaining assets of the Company available for distribution
to its shareholders; provided, if, at such time, the holder of Ordinary Shares
has any outstanding debts, liabilities or engagements to or with the Company
(whether presently payable or not, either alone or jointly with any other
person, whether a shareholder or not (including, without limitation, any
liability associated with the unpaid purchase price of such Ordinary Shares),
the liquidator appointed to oversee the liquidation of the Company shall
deduct from the amount payable in respect of such Ordinary Shares the
aggregate amount of such debts, liabilities and engagements and apply such
amount to any of such holder's debts, liabilities or engagements to or with
the Company (whether presently payable or not). The liquidator may distribute,
in kind, to the holders of the Ordinary Shares remaining assets of the Company
or may sell, transfer or otherwise dispose of all or any part of such
remaining assets to any other corporation, trust or entity and receive payment
therefor in cash, shares or obligations of such other corporation, trust or
entity or any combination thereof, and may sell all or any part of the
consideration so received, and may distribute the consideration received or
any balance or proceeds thereof to holders of the Ordinary Shares.
Voting Rights. The Articles provide that the quorum required for a general
meeting of the shareholders is not less than one shareholder present in person
or by proxy holding at least 50 percent of the issued and outstanding shares
entitled to vote at such meeting. Subject to applicable law and any provision
of the Articles requiring a greater majority, the Company may from time to
time by special resolution alter or amend the Memorandum or Articles;
voluntarily liquidate, dissolve or wind-up the affairs of the Company; reduce
its share capital or any capital, redemption or reserve funds, or any share
premium account; or change its name or alter its objects.
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Each shareholder is entitled to one vote per share on all matters submitted
to a vote of shareholders at any such meeting. All matters, including the
election of directors, voted upon at any duly held shareholders' meeting shall
be carried by ordinary resolution, except (i) approval of a merger,
consolidation or amalgamation which requires (in addition to any regulatory or
court approvals) the approval of at least seventy-five percent of the
outstanding voting shares, voting together as a single class, (ii) any matter
that must be approved by special resolution, including any amendment of the
Memorandum and Articles, and (iii) as otherwise provided in the Articles. A
special resolution requires the approval of at least two-thirds of the votes
cast by holders of the outstanding voting shares voting together as a single
class represented in person or by proxy at a duly convened meeting. An
ordinary resolution requires the approval of a simple majority of votes cast
at a meeting of shareholders represented in person or by proxy.
The Articles provide that, except as otherwise required by law and subject
to the rights of the holders of any class or series of shares issued by the
Company having a preference over the Ordinary Shares as to dividends or upon
liquidation to elect directors in specified circumstances, extraordinary
general meetings of the shareholders may be called only by (i) the directors
or (ii) at the request in writing of shareholders owning at least 25 percent
of the outstanding shares generally entitled to vote.
The Ordinary Shares have noncumulative voting rights, which means that the
holders of a majority of the Ordinary Shares may elect all of the directors of
the Company and, in such event, the holders of the remaining Ordinary Shares
will not be able to elect any directors. The board of directors of the Company
is presently divided into three classes, of three directors each. At present,
each class is elected for a term of three years, with the result that
shareholders will not vote for the election of a majority of directors in any
single year. See "Management". Pursuant to the Articles, Directors may be
removed by the shareholders only with the vote of 80 percent of the
outstanding shares generally entitled to vote. The classified board provision
and the removal of directors by shareholder provision can only be amended with
the vote of 80 percent of the outstanding shares generally entitled to vote.
This classified board provision could prevent a party who acquires control
of a majority of the outstanding voting power from obtaining control of the
board of directors until the second annual shareholders meeting following the
date the acquirer obtains the controlling share interest. The classified board
provision could have the effect of discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of the Company
and could thus increase the likelihood that incumbent directors will retain
their positions.
Preemption Rights. No holder of shares of the Company shall, by reason of
such holding, have any preemptive right to subscribe to any additional issue
of shares of any class or series nor to any security convertible into such
shares.
Transfer of Shares. The Articles also provide that the board of directors
may suspend the registration of transfers of Ordinary Shares for such periods
as the board of directors may determine, but shall not suspend the
registration of transfers for more than 40 days.
The existing holders of Ordinary Shares have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, or announce
the offering of any Ordinary Shares, including any such Ordinary Shares
beneficially or indirectly owned or controlled by the Company, or any
securities convertible into, or exchangeable or exercisable for Ordinary
Shares, for 180 days from the date of this Prospectus, without the prior
written consent of Salomon.
OTHER CLASS OR SERIES OF SHARES
The Articles authorize the directors to create and issue one or more classes
or series of shares and determine the rights and preferences of each such
class or series, to the extent permitted by the
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Articles and applicable law. Among other rights, the directors may determine:
(i) the number of shares of that class or series and the distinctive
designation thereof; (ii) the voting powers, full or limited, if any, of the
shares of that class or series; (iii) the right in respect of dividends on the
shares of that class or series, whether dividends shall be cumulative and, if
so, from which date or dates and the relative rights or priority, if any, of
payment of dividends on shares of that class or series and any limitations,
restrictions or conditions on the payment of dividends; (iv) the relative
amounts, and the relative rights or priority, if any, of payment in respect of
shares of that class or series, which the holders of the shares of that class
or series shall be entitled to receive upon any liquidation, dissolution or
winding up of the Company; (v) the terms and conditions (including the price
or prices, which may vary under different conditions and at different
redemption dates), if any, upon which all or any part of the shares of that
class or series may be redeemed, and any limitations, restrictions or
conditions on such redemption; (vi) the terms, if any, of any purchase,
retirement or sinking fund to be provided for the shares of that class or
series; (vii) the terms, if any, upon which the shares of that class or series
shall be convertible into or exchangeable for shares of any other class,
classes or series, or other securities, whether or not issued by the Company;
(viii) the restrictions, limitations and conditions, if any, upon issuance of
indebtedness of the Company so long as any shares of that class or series are
outstanding; and (ix) any other preferences and relative, participating,
optional or other rights and limitations not inconsistent with applicable law
or the Articles.
REGISTRATION RIGHTS
Silver Holdings, Argentum LLC, Consolidated, Litani LDC, Aurum LLC, Thomas
Kaplan and the Company entered into a registration rights and voting agreement
pursuant to which each of Silver Holdings and Argentum LLC are entitled to
demand registration of any Ordinary Shares owned by either of them. Silver
Holdings and Argentum LLC may make such demand up to three times each on Form
S-1 of the Securities Act and up to an additional three times each on Forms S-
2 and S-3, when such form is available for use by the Company. The Company is
not required to effect any demand registration within 120 days after the
effective date of a previous demand registration and may postpone, on one
occasion in any 365-day period, the filing or effectiveness of a registration
statement for a demand registration for up to 120 days under certain
circumstances, including pending material transactions. Silver Holdings,
Argentum LLC, Aurum LLC, Consolidated and Litani LDC are also entitled to
unlimited piggyback registrations. All such registrations would be at the
Company's expense, exclusive of underwriting discounts and commissions. The
Company and such shareholders have entered into customary indemnification and
contribution provisions.
TRANSFER AGENT
The Company's registrar and transfer agent for all Ordinary Shares is
American Stock Transfer & Trust Company.
DIFFERENCES IN CORPORATE LAW
The Companies Law (1995 Revision) (the "Companies Law") of the Cayman
Islands is modeled after that of England, and differs in certain respects from
such laws generally applicable to United States corporations and their
shareholders. Set forth below is a summary of certain significant provisions
of the Companies Law (including such modifications thereto adopted pursuant to
the Articles) applicable to the Company which differ from provisions generally
applicable to United States corporations and their shareholders. These
statements are a brief summary of certain significant provisions of the
Companies Law and, as such, do not deal with all aspects of every law that may
be relevant to corporations and their shareholders.
Interested Directors. The Company's Articles provide that any transaction
entered into by the Company in which a director has an interest is not
voidable by the Company nor can such director be liable to the Company for any
profit realized pursuant to such transaction. A director having an interest
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in a transaction is entitled to vote in respect of such transaction provided
the nature of the interest is disclosed at or prior to the vote on such
transaction.
Mergers and Similar Arrangements. The Company may acquire the business of
another company and carry on such business when it is within the objects of
the Memorandum. The approval of the holders of at least 75 percent of the
outstanding shares entitled to vote, voting together as a single class, at a
meeting called for such purpose is required for the Company to (i) merge,
consolidate or amalgamate with another company, (ii) reorganize or reconstruct
itself pursuant to a plan sanctioned by the Cayman Islands courts or (iii)
sell, lease or exchange all or substantially all of its assets, except in the
case of a transaction between the Company and any entity which the Company,
directly or indirectly, controls. In order to merge or amalgamate with another
company or to reorganize and reconstruct itself, as a general rule, the
relevant plan would need to be approved in accordance with the provisions of
the Companies Law by the holders of not less than 75 percent of the votes cast
at a general meeting called for such purpose and thereafter sanctioned by the
Cayman Islands court. In respect of such a court sanctioned reorganization,
while a dissenting shareholder may have the right to express to a Cayman
Islands court his view that the transaction sought to be approved would not
provide the shareholders with the fair value of their shares, (i) the court
ordinarily would not disapprove the transaction on that ground absent other
evidence of fraud or bad faith, and (ii) if the transaction were approved and
consummated, the dissenting shareholder would have no rights comparable to the
appraisal rights (as here defined, rights to receive payment in cash for the
judicially determined value of their shares) ordinarily available to
dissenting shareholders of United States corporations.
Shareholders' Suits. There does not appear to be any history of either a
class action or a derivative action ever having been brought by shareholders
in the Cayman Islands courts. There has, however, until recently been no
official law reporting in the Cayman Islands and actions subject to the
Confidential Relationships (Preservation) Law of 1976, as amended, are held in
closed court. However, in this regard, the Cayman Islands courts ordinarily
would be expected to follow English precedent, which would permit a minority
shareholder to commence an action against or a derivative action in the name
of the corporation only (i) where the act complained of is alleged to be
beyond the corporate power of the corporation or illegal, (ii) where the act
complained of is alleged to constitute a fraud against the minority
perpetrated by those in control of the corporation, (iii) where the act
requires approval by a greater percentage of the corporation's shareholders
than actually approved it, or (iv) where there is an absolute necessity to
waive the general rule that a shareholder may not bring such an action in
order that there not be a denial of justice or a violation of the
corporation's memorandum of association.
Indemnification; Exculpation. Cayman Islands law does not limit the extent
to which a company's Articles of Association may provide for the
indemnification of officers and directors, except to the extent that such
provision may be held by the Cayman Islands courts to be contrary to public
policy (for instance, for purporting to provide indemnification against the
consequences of committing a crime). In addition, an officer or director may
not be indemnified for fraud or wilful default.
The Company's Articles contain provisions providing for the indemnity by the
Company of an officer, director, consultant, employee or agent of the Company
for threatened, pending or contemplated actions, suits or proceedings, whether
civil, criminal, administrative or investigative (including, without
limitation, an action by or the right of the company), brought against such
indemnified person by reason of the fact that such person was an officer,
director, consultant, employee or agent of the Company. In addition, the board
of directors may authorize the Company to purchase and maintain insurance on
behalf of any such person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the company would have the power to indemnify him against such
liability under the provisions of the Articles.
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The Company also purchases directors and officers liability insurance from
third parties for its directors and officers. The Company's Article's provide
that directors and officers of the Company shall have no liability (i) for the
acts, receipts, neglects, defaults or omissions of any other such director or
officer or agent of the Company or (ii) by reason of his having joined in any
receipt for money not received by him personally or (iii) for any loss on
account of defect of title to any property of the Company or (iv) on account
of the insufficiency of any security in or upon which any money of the Company
shall be invested or (v) for any loss incurred through any bank, broker or
other agent or (vi) for any loss occasioned by any negligence, default, breach
of duty, breach of trust, error of judgement or oversight on his part of (vii)
for any loss, damage or misfortune whatsoever which may happen in or arise
from the execution or discharge of the duties, powers, authorities, or
discretions of his office or in relation thereto, unless the same shall happen
through his own dishonesty.
Inspection of Books and Records. Shareholders of a Cayman Islands company
have no general rights to inspect or obtain copies of the list of shareholders
or corporate records of a corporation.
ANTI-TAKEOVER EFFECTS OF ARTICLES OF ASSOCIATION
The Articles contain certain provisions that make more difficult the
acquisition of control of the Company by means of a tender offer, open market
purchase, a proxy fight or otherwise. These provisions are designed to
encourage persons seeking to acquire control of the Company to negotiate with
the directors. The directors believe that, as a general rule, the interests of
the Company's shareholders would be best served if any change in control
results from negotiations with the directors. The directors would negotiate
based upon careful consideration of the proposed terms, such as the price to
be paid to shareholders, the form of consideration to be paid and the
anticipated tax effects of the transaction. However, these provisions could
have the effect of discouraging a prospective acquirer from making a tender
offer or otherwise attempting to obtain control of the Company. To the extent
these provisions discourage takeover attempts, they could deprive shareholders
of opportunities to realize takeover premiums for their shares or could
depress the market price of the shares.
In addition to those provisions of the Articles discussed above, set forth
below is a description of other relevant provisions of the Articles. The
descriptions are intended as a summary only and are qualified in their
entirety by reference to the Articles, which are filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
Shareholder Action by Written Consent. Cayman law permits shareholders to
act by unanimous written consent.
Availability of Ordinary Shares of the Company for Future Issuances. The
availability for issue of shares by the directors of the Company without
further action by shareholders (except as may be required by applicable stock
exchange requirements) could be viewed as enabling the directors to make more
difficult a change in control of the Company, including by issuing warrants or
rights to acquire shares to discourage or defeat unsolicited share
accumulation programs and acquisition proposals and by issuing shares in a
Private Placement or public offering to dilute or deter share ownership of
persons seeking to obtain control of the Company. The Company has no present
plan to issue any shares other than possibly pursuant to employee benefit
plans.
Shareholder Proposals. The Articles provide that if a shareholder desires to
submit a proposal for consideration at an annual general meeting or
extraordinary general meeting, or to nominate persons for election as
directors, written notice of such shareholder's intent to make such a proposal
or nomination must be given and received by the secretary of the Company at
the principal executive offices of the Company not later than (i) with respect
to an annual general meeting, 60 days prior to the anniversary date of the
immediately preceding annual general meeting, and (ii) with respect to an
extraordinary general meeting, the close of business on the tenth day
following the date on which notice of such meeting is first sent or given to
shareholders. The notice must describe the proposal or
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nomination in sufficient detail for a proposal or nomination to be summarized
on the agenda for the meeting and must set forth (i) the name and address of
the shareholder, (ii) a representation that the shareholder is a holder of
record of shares of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to present such proposal or
nomination, and (iii) the class and number of shares of the Company which are
beneficially owned by the shareholder. In addition, the notice must set forth
the reasons for conducting such proposed business at the meeting and any
material interest of the shareholder in such business. In the case of a
nomination of any person for election as a director, the notice shall set
forth: (i) the name and address of any person to be nominated; (ii) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons; (iii) such other information
regarding such nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to Regulation 14A under the
Exchange Act, whether or not the Company is then subject to such Regulation;
and (iv) the consent of each nominee to serve as a director of the Company, if
so elected. The presiding officer of the annual general meeting or
extraordinary general meeting shall, if the facts warrant, refuse to
acknowledge a proposal or nomination not made in compliance with the foregoing
procedure.
The advance notice requirements regulating shareholder nominations and
proposals may have the effect of precluding a contest for the election of
directors or the introduction of a shareholder proposal if the procedures
summarized above are not followed and may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to introduce a proposal.
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SHARES ELIGIBLE FOR FUTURE SALE
After consummation of the Offerings, there will be approximately 15,401,544
Ordinary Shares still owned by the current shareholders of the Company. In
addition, approximately 7,077,007 Ordinary Shares may be issued to the Minority
Shareholders on a one-for-one basis for the shares of Apex LDC subject to the
terms of the Buy-Sell Agreement. See "Certain Transactions". Shareholders will
only be able to sell such Ordinary Shares pursuant to a registration statement
under the Securities Act or an exemption therefrom.
Rule 144 under the Securities Act provides such an exemption for resales of
securities under certain circumstances. Under Rule 144, as currently in effect,
a person (or persons whose shares are aggregated) who beneficially owns
"restricted" shares that have been issued and not held by an affiliate of the
Company for at least one year from the time the shares were fully paid for will
be entitled to sell in "brokers' transactions" or to market makers, within any
three-month period, a number of shares that does not exceed the greater of (i)
one percent of the shares then outstanding or (ii) the average weekly trading
volume of the shares on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain notice requirements, and the availability of current
public information about the Company. Restricted shares held for two years by a
person who is not, at the time of sale and has not been at any time within
three months prior thereto, an affiliate of the Company may be sold without
regard to the volume limitations or manner of sale restrictions under Rule 144.
The foregoing summary of Rule 144 is not intended to be a complete description
thereof.
The existing holders of Ordinary Shares have agreed with the representatives
of the U.S. Underwriters subject to certain exceptions, not to register any
transfer of such shares, without the consent of Salomon until at least the date
180 days from the date of this Prospectus. See "Underwriting".
In addition, after the Offerings approximately 14,352,056 Ordinary Shares
(including all Ordinary Shares issuable pursuant to the Buy-Sell Agreement)
will be entitled to certain rights with respect to registration of such shares
under the Securities Act. See "Description of Ordinary Shares--Registration
Rights".
There has been no public market in the shares prior to the Offerings and no
predictions can be made as to the effect, if any, that additional sales of
Ordinary Shares in the future by any Shareholders or the availability of such
Ordinary Shares for sale will have on the market price prevailing from time to
time. Sales of substantial amounts of additional Ordinary Shares in the public
market, or the perception that such sales could occur, could adversely affect
prevailing market prices and the Company's ability to raise additional equity
capital (although the Company has no current plans to do so).
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the U.S. Underwriters (the "U.S. Underwriting
Agreement"), the Company has agreed to sell to each of the U.S. Underwriters
named below (the "U.S. Underwriters"), and each of the U.S. Underwriters for
whom Salomon Brothers Inc, PaineWebber Incorporated, Scotia Capital Markets
(USA) Inc. and Smith Barney Inc., are acting as the representatives (the "U.S.
Representatives"), has severally agreed to purchase the number of Ordinary
Shares set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITING
U.S. UNDERWRITERS COMMITMENT
- ----------------- ------------
<S> <C>
Salomon Brothers Inc...............................................
PaineWebber Incorporated...........................................
Scotia Capital Markets (USA) Inc. .................................
Smith Barney Inc. .................................................
---------
Total............................................................ 6,100,000
=========
</TABLE>
The Company has been advised by the U.S. Representatives that the several
U.S. Underwriters initially propose to offer such Ordinary Shares to the
public at the Price to Public set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of $
per Share. The U.S. Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per Share to other dealers. After the initial
public offering, the Price to Public and such concessions may be changed.
The Company has granted to the U.S. Underwriters and the International
Underwriters (collectively, the "Underwriters") options, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
1,185,000 additional Ordinary Shares from the Company at the Price to Public
less the Underwriting Discount, solely to cover over-allotments. To the extent
that the U.S. Underwriters and the International Underwriters exercise such
options, each of the U.S. Underwriters and the International Underwriters, as
the case may be, will be committed, subject to certain conditions, to purchase
a number of option Ordinary Shares proportionate to such U.S. Underwriter's or
International Underwriter's initial commitment.
The Company has entered into an International Underwriting Agreement with
the International Underwriters named therein, for whom Salomon Brothers
International Limited, PaineWebber International (U.K.) Limited, ABN AMRO
Rothschild and Smith Barney Inc. are acting as the representatives (the
"International Representatives" and, together with the U.S. Representatives,
the "Representatives"), providing for the concurrent offer and sale of
1,800,000 Ordinary Shares (in addition to the Ordinary Shares covered by the
over-allotment options described above) outside the U.S. and Canada. Both the
U.S. Underwriting Agreement and the International Underwriting Agreement
provide that the obligations of the U.S. Underwriters and the International
Underwriters are such that if any of the Ordinary Shares are purchased by the
U.S. Underwriters pursuant to the U.S.
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Underwriting Agreement, or by the International Underwriters pursuant to the
International Underwriting Agreement, all the Shares agreed to be purchased by
either the U.S. Underwriters or the International Underwriters, as the case
may be, pursuant to their respective agreements must be so purchased. The
Price to Public and Underwriting Discount per Ordinary Share for the U.S.
Offering and International Offering will be identical. The closing of the
International Offering is a condition to the closing of the U.S. Offering and
the closing of the U.S. Offering is a condition to the closing of the
International Offering.
Each U.S. Underwriter has severally agreed that, as part of the distribution
of the 6,100,000 Ordinary Shares offered by the U.S. Underwriters: (i) it is
not purchasing any Ordinary Shares for the account of anyone other than a U.S.
or Canadian Person; (ii) it has not offered or sold, and will not offer or
sell, directly or indirectly, any Ordinary Shares or distribute this
Prospectus to any person outside of the U.S. or Canada, or to anyone other
than a U.S. or Canadian Person; and (iii) any dealer to whom it may sell any
Ordinary Shares will represent that it is not purchasing for the account of
anyone other than a U.S. or Canadian Person and agree that it will not offer
or resell, directly or indirectly, any Ordinary Shares outside of the U.S. or
Canada, or to anyone other than a U.S. or Canadian Person or to any other
dealer who does not so represent and agree. Each International Underwriter has
severally agreed that, as part of the distribution of the 1,800,000 Ordinary
Shares offered by the International Underwriters: (i) it is not purchasing any
Ordinary Shares for the account of any U.S. or Canadian Person; (ii) it has
not offered or sold, and will not offer or sell, directly or indirectly, any
Ordinary Shares or distribute any Prospectus relating to the International
Offering to any person in the U.S. or Canada, or to any U.S. or Canadian
Person; and (iii) any dealer to whom it may sell any Ordinary Shares will
represent that it is not purchasing for the account of any U.S. or Canadian
Person and agree that it will not offer or resell, directly or indirectly, any
Ordinary Shares in the U.S. or Canada, or to any U.S. or Canadian Person or to
any other dealer who does not so represent and agree.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between U.S.
Underwriters and the International Underwriters. "U.S. or Canadian Person"
means any person who is a national or resident of the U.S. or Canada, any
corporation, partnership or other entity created or organized in or under the
laws of the U.S. or Canada or of any political subdivision thereof, and any
estate or trust the income of which is subject to U.S. or Canadian federal
income taxation, regardless of its source (other than any non-U.S. or non-
Canadian branch of any U.S. or Canadian Person), and includes any U.S. or
Canadian branch of a person other than a U.S. or Canadian Person.
Pursuant to the Agreement Between U.S. Underwriters and the International
Underwriters, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of Ordinary Shares as may be
mutually agreed. The price of any Ordinary Shares so sold shall be the Price
to Public, less an amount not greater than the concession to securities
dealers. To the extent that there are sales between the U.S. Underwriters and
the International Underwriters pursuant to the Agreement Between U.S.
Underwriters and the International Underwriters, the number of Ordinary Shares
initially available for sale by the U.S. Underwriters or by the International
Underwriters may be more or less than the amount specified on the cover page
of this Prospectus.
Any offer of the Shares in Canada will be made only pursuant to an exemption
from the prospectus filing requirement and an exemption from the dealer
registration requirement (where such an exemption is not available, offers
shall be made only by a registered dealer) in the relevant Canadian
jurisdiction where such offer is made.
The U.S. Underwriting Agreement provides that the Company will indemnify the
U.S. Underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, or contribute to payments the U.S.
Underwriters may be required to make in respect thereof.
The International Underwriting Agreement provides that the Company will
indemnify the International Underwriters against certain liabilities and
expenses, including contributing to payments the International Underwriters
may be required to make in respect thereof.
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The existing holders of Ordinary Shares have agreed not to affect any public
sale or distribution (including any sale pursuant to Rule 144 of the
Securities Act) of any securities convertible into, or exchangeable or
exercisable for Shares, for 180 days from the date of this Prospectus, without
the prior written consent of Salomon Brothers Inc.
During and after the Offerings, the Underwriters may purchase and sell the
Ordinary Shares in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to
syndicate members of other broker-dealers, in respect of the Ordinary Shares
sold in the Offerings for their account may be reclaimed by the syndicate if
such Ordinary Shares are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Ordinary Shares which may be higher than the
price that might otherwise prevail in the open market.
Prior to the Offerings, there has been no public market for the Ordinary
Shares. The Price to Public was determined by negotiations between the Company
and the Representatives. Among the factors considered in determining the Price
to Public were prevailing market conditions, the market values of publicly
traded companies that the Underwriters believed to be somewhat comparable to
the Company, the demand for the Ordinary Shares and for similar securities of
publicly traded companies that the Underwriters believed to be somewhat
comparable to the Company, the future prospects of the Company and its
industry in general, sales, earnings and certain other financial and operating
information of the Company in recent periods, and other factors deemed
relevant. There can be no assurance that the prices at which the Ordinary
Shares will sell in the public market after the Offerings will not be lower
than the Price to Public.
The closing of the Concurrent Offering is conditioned upon the closing of
the initial public offering. The price of the Ordinary Shares to be sold to
the Concurrent Purchaser in the Concurrent Offering is equal to the initial
public offering price. The Placement Agents in connection with the Concurrent
Offering will be paid a fee of $ per share for each Ordinary Share sold in
the Concurrent Offering in consideration for the provision of certain advisory
services and for acting as the Company's Placement Agents, which fee is equal
to the Underwriting discount payable in connection with the initial public
offering. The Placement Agents will be indemnified by the Company against
certain liabilities, including liabilities under the Securities Act.
Certain existing shareholders (including 5% or greater shareholders),
directors and officers of the Company may purchase Ordinary Shares from the
Underwriters in the Offerings. The Company may reserve some of the Ordinary
Shares offered hereby for sale to certain individuals, including employees of
the Company and other entities with whom the directors of the Company are
affiliated, and members of their families. The price of such Ordinary Shares
to such persons will be the Price to Public set forth on the cover of this
Prospectus. The number of Ordinary Shares available to the general public will
be reduced to the extent those persons purchase the reserved Ordinary Shares.
Any Ordinary Shares not so purchased will be offered in the initial public
offering at the Price to Public set forth on the cover of this Prospectus.
Certain of the U.S. Underwriters and International Underwriters provide
financial advisory services to or are engaged in other financial transactions
with the Company for which they have received and will receive customary
compensation. The Company has retained Rothschild Natural Resources LLC, an
affiliate of ABN AMRO Rothschild, to act as the Company's financial advisor in
connection with the anticipated project financing with respect to the San
Cristobal Project.
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TAXATION
The following discussion is a summary of the material Cayman Islands and
U.S. federal income tax consequences of the acquisition, ownership and
disposition of Ordinary Shares. The discussion is based on the Code and the
tax laws of the Cayman Islands as in effect on the date hereof, which are
subject to change. The discussion does not consider any specific facts or
circumstances that may apply to a particular investor, some of which (for
example, tax-exempt entities, insurance companies, banks, broker-dealers,
investors liable for alternative minimum tax, investors who hold Ordinary
Shares as part of straddles or hedging or conversion transactions or
constructive sales, and investors whose functional currency is not the U.S.
dollar) may be subject to special rules. In addition, the discussion does not
address special rules that could in certain circumstances apply to a U.S.
Holder (as defined below) of Ordinary Shares that owns directly or by
attribution 10 percent or more of the Ordinary Shares. Because the discussion
is not exhaustive of all possible tax considerations relevant to the ownership
of Shares and is not based upon an opinion of counsel, prospective investors
are urged to consult their tax advisors regarding the U.S. federal, state,
local and foreign tax consequences, including the Cayman Islands tax
consequences, of the acquisition, ownership and disposition of Ordinary Shares
in their particular circumstances.
CAYMAN ISLANDS TAXATION
There is, at present, no direct income taxation in the Cayman Islands.
Accordingly, income and gains received by the Company, and distributions by
the Company to its shareholders and gains realized upon the disposition of
Ordinary Shares, will be received free of all Cayman Islands income and
withholding taxes. The Company is registered as an exempted Company under
Cayman Islands law, and the Company has received an undertaking from the
Governor-in-Council of the Cayman Islands to the effect that, for a period of
20 years from the date of the undertaking, no law that is enacted in the
Cayman Islands imposing any tax to be levied on profits or income or gains or
appreciations will apply to the Company nor shall any tax in the nature of
estate duty or inheritance tax be payable on the shares, debentures or other
obligations of the Company.
UNITED STATES FEDERAL INCOME TAXATION
For purposes of this discussion, a "U.S. Holder" is any beneficial owner
that owns Ordinary Shares as a capital asset and is (i) a citizen or resident
of the U.S., (ii) a corporation or partnership that is created or organized in
the U.S. or under the law of the U.S. or any state thereof, (iii) an estate
that is subject to U.S. federal income tax on its income regardless of source,
or (iv) a trust if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
fiduciaries have authority to control all substantial decisions of the trust.
TAXATION OF DIVIDENDS
Subject to the discussion under "Passive Foreign Investment Company
Considerations" and "Foreign Personal Holding Company Considerations", under
U.S. federal income tax law, U.S. Holders will include in gross income as a
dividend the gross amount of any distribution paid by the Company to the
extent of its current or accumulated earnings and profits (as determined for
U.S. federal income tax purposes) as ordinary income when the dividend is
received by the U.S. Holder. The dividend will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations. In
general, the dividend will be income from sources outside the U.S., and
generally will be treated together with other items of "passive income" (or,
in the case of certain holders, "financial services income") for U.S. foreign
tax credit purposes.
TAXATION OF CAPITAL GAINS
Subject to the discussion under "Passive Foreign Investment Company
Considerations", upon a sale or other disposition of Ordinary Shares, a U.S.
Holder will recognize gain or loss for U.S. federal income tax purposes in an
amount equal to the difference between the U.S. dollar value of the amount
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realized and the U.S. Holder's tax basis (determined in U.S. dollars) in such
Ordinary Shares. Such gain or loss will be capital gain or loss and, if the
U.S. Holder's holding period for such Ordinary Shares exceeds 18 months, will
be long-term capital gain or loss.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
Classification as a PFIC. The Company will be a PFIC for any taxable year if
75 percent or more of its gross income for the taxable year is "passive"
income or 50 percent or more of its assets produce or are held for the
production of "passive" income. For purposes of applying these income and
asset tests, the Company is deemed to receive its pro rata share of the
income, and to own its pro rata share of the assets, of any corporation in
which the Company directly or indirectly owns 25 percent or more of the stock
(measured by value). In addition, although not free from doubt, it is expected
that the Company will be deemed to receive its pro rata share of the income,
and to own its pro rata share of the assets, of any partnership in which the
Company is a partner (either directly or through one or more intervening
partnerships). U.S. Holders should be aware that the Ordinary Shares may be
treated as stock of a passive foreign investment company ("PFIC") for U.S.
federal income tax purposes because the Company will earn significant passive
income from investments relative to any non-passive income of the Company
prior to the commencement by the Company of substantial mining operations.
Further, the Code treats gains from transactions in commodities, such as
silver, as passive income for PFIC purposes unless "substantially all" of a
company's business is as an active producer of the commodity. Applicable U.S.
Treasury Regulations interpret "substantially all" to mean that 85 percent or
more of a producer's taxable income must be gross receipts from sales in the
active conduct of a commodities business or certain related activities. Under
these rules, there can be no assurance that the Company would not be treated
as a PFIC in future taxable years even after it has begun to earn income from
mining operations. In this regard, prospective investors should note that the
Company would likely constitute a PFIC even after it begins to generate
significant income from mining operations in the event the Company conducts
its mining operations predominantly through the use of independent contractors
rather than directly through the use of its own employees.
Prospective investors should note that the PFIC classification rules are
complex and may apply in numerous unexpected circumstances. Under these rules,
the Company could be classified as a PFIC in various circumstances in addition
to those described in the preceding paragraphs. For example, the Company could
constitute a PFIC for any taxable year as a consequence of owning substantial
"passive assets" such as cash and marketable securities (including any cash
derived from the issuance of Company securities or the sale of assets of the
Company), even in a year in which the Company generates significant income
from direct mining operations.
Consequences of PFIC Status. If the Company were treated as a PFIC, unless a
U.S. Holder makes a "QEF election" or "mark to market election" in respect of
the Company, as described below, such U.S. Holder will be subject to a special
tax regime (i) in respect of gains realized on the sale or other disposition
of Ordinary Shares, and (ii) in respect of distributions on Ordinary Shares
held for more than one taxable year to the extent those distributions
constitute "excess distributions". Although not entirely free from doubt, the
PFIC rules should not apply to gain realized in respect of any Ordinary Shares
disposed of during the same taxable year in which the Ordinary Shares are
acquired. An excess distribution generally includes dividends or other
distributions received from a PFIC in any taxable year to the extent the
amount of such distributions exceeds 125 percent of the average distributions
for the three preceding years (or, if shorter, the investor's holding period).
In general, under the PFIC rules, a U.S. Holder will be required to allocate
such excess distributions and any gain realized on sale of the Ordinary Shares
to each day during the Holder's holding period for the Ordinary Shares, and
will be taxable at the highest rate of taxation applicable to ordinary income
for the year to which the excess distribution or gain is allocable (without
regard to the U.S. Holder's other items of income and loss for such taxable
year) (the "deferred tax"). The deferred tax (other than the tax on
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amounts allocable to the year of disposition or receipt of the distribution)
will then be increased by an interest charge computed by reference to the rate
generally applicable to underpayments of tax (which interest charge generally
will be non-deductible interest expense for individual taxpayers).
QEF Election. The special PFIC tax rules described above will not apply to a
U.S. Holder if the U.S. Holder elects to have the Company treated as a
"qualified electing fund" ("QEF election") in the first taxable year of the
holder's ownership of the Ordinary Shares during which the Company is a PFIC
and the Company complies with certain reporting requirements. The Company
intends to comply with all reporting requirements necessary for U.S. Holders
to make a QEF election with respect to the Company and will upon request
provide to U.S. Holders such information as may be required to make such QEF
election effective.
A U.S. Holder that makes a QEF election with respect to the Company will be
currently taxable on its pro rata share of ordinary earnings and net capital
gain of the Company for each taxable year of the Company in which the Company
qualifies as a PFIC, regardless of whether the holder receives any
distribution from the Company. The U.S. Holder's basis in the Ordinary Shares
of the Company will be increased to reflect taxed but undistributed income of
the Company. Distributions of income that previously had been taxed will
result in a corresponding reduction of basis in the Ordinary Shares and will
not be taxed again as a distribution to the U.S. Holder.
During the period in which the Company may be a PFIC, the Company may be
entitled to deductions under U.S. federal income tax principles that may
substantially offset earnings of the Company. As a result, the pro rata share
of the ordinary earnings and net capital gain of the Company that would be
includable by a U.S. Holder making a QEF election may not be material. If this
were the case, U.S. Holders generally could obtain the benefits of making a
QEF election in respect of the Company (i.e., the elimination of deferred tax
and interest charges on excess distributions and realized gains) without
having to bear current inclusions of income substantially in excess of
distributions received. U.S. Holders should consult their own tax advisors
concerning the most appropriate manner in which to make a QEF election.
Lower-Tier PFICs. At the present time, none of the Company's non-U.S.
subsidiaries is classified as a corporation for U.S. federal income tax
purposes. Accordingly, U.S. Holders are not subject to the PFIC rules with
respect to their indirect ownership interests in these subsidiaries.
If, in the future, the Company acquires a non-U.S. subsidiary that is
classified as a corporation for U.S. federal income tax purposes, the Company
will notify its shareholders so that U.S. Holders may determine whether to
make a QEF election with respect to the subsidiary. If the Company were a
PFIC, U.S. Holders generally would be deemed to own, and also would be subject
to the PFIC rules with respect to, their indirect ownership interests in any
corporate subsidiaries of the Company which themselves constitute PFICs
("lower-tier PFICs"). If the Company were a PFIC and a U.S. Holder does not
make a QEF election in respect of any lower-tier PFIC, the U.S. Holder could
incur liability for the deferred tax and interest charge described above if
either (i) the Company receives a distribution from, or disposes of all or
part of its interest in, a lower-tier PFIC or (ii) the U.S. Holder disposes of
all or part of its Ordinary Shares. The Company intends to cause any lower-
tier PFIC to comply with all reporting requirements necessary for a U.S.
Holder to make a QEF election with respect to the lower-tier PFIC.
Mark to Market Election. For taxable years beginning after December 31,
1997, a U.S. Holder who owns marketable stock of a PFIC may elect to recognize
any gain or loss on the stock on a mark-to-market basis at the end of the U.S.
Holder's taxable year. If an election is made, any mark-to-market gains, and
any gains realized on disposition of the stock, will be treated as ordinary
income. Mark-to-market losses, and any losses recognized on disposition of the
stock to the extent of the holder's net mark-to-market gains, will be treated
as ordinary losses. U.S. Holders should consult their tax advisors regarding
the effect of making a mark-to-market election with respect to the Ordinary
Shares, including the effect of such an election on any lower-tier PFICs that
the holder is deemed to own.
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<PAGE>
A U.S. Holder who owns Ordinary Shares during any year that the Company is a
PFIC must file an Internal Revenue Service Form 8621 in respect of such
Ordinary Shares and, under proposed U.S. Treasury Regulations, in respect of
interests in any lower-tier PFICs.
Prospective investors are urged to consult their own tax advisors regarding
the possible classification of the Company as a PFIC as well as the potential
tax consequences arising from the ownership and disposition (directly or
indirectly) of interests in a PFIC.
FOREIGN PERSONAL HOLDING COMPANY CONSIDERATIONS
Prospective investors should also be aware that special U.S. tax laws would
apply to U.S. Holders if the Company (or any corporate subsidiary of the
Company) is characterized as a foreign personal holding company ("FPHC"). In
particular, if the Company (or any corporate subsidiary) is an FPHC in respect
of any taxable year of the Company, U.S. Holders may be subject to current tax
on their (direct or indirect) pro rata share of the income of the FPHC (as
determined for purposes of the FPHC rules), even if no cash dividend is
actually paid by the FPHC. In general, the Company (or any corporate
subsidiary of the Company) will constitute a FPHC during a taxable year if (i)
a specified percentage of its income is passive for purposes of the FPHC
rules, and (ii) at any time during the taxable year five or fewer individuals
who are U.S. citizens or residents own (directly, indirectly or
constructively) more than 50 percent of the voting power or value of such
company's stock. The Company does not anticipate that it or any of its
subsidiaries will be an FPHC immediately following the Offerings or in the
future. The Company, however, can provide no assurance as to such conclusion.
TAXATION OF NON-U.S. HOLDERS
An investor who is not a U.S. Holder will not be subject to U.S. federal
income tax on any dividends received on the Ordinary Shares unless (i) the
investor has an office or other fixed place of business in the U.S. to which
the dividends are attributable and either the dividends are derived in the
active conduct of a banking, finance or similar business in the U.S. or the
investor is a non-U.S. corporation the principal business of which consists of
trading in stocks or securities for its own account and certain other
conditions are met or (ii) the investor is a foreign insurance company that
conducts business in the U.S. and the dividends are attributable to such
business.
An investor who is not a U.S. Holder will not be subject to U.S. federal
income tax on any gain realized on the sale or other disposition of Ordinary
Shares unless (i) the investor is engaged in the conduct of a trade or
business in the U.S. and the gain is effectively connected with such trade or
business or (ii) the investor is an individual who is present in the U.S. for
183 days or more during the taxable year in which the gain is realized and
certain other conditions are met.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING
Under current U.S. federal income tax law, payments of dividends to certain
U.S. Holders are subject to information reporting, and a "back up" withholding
tax at a rate of 31 percent if such persons fail to supply correct taxpayer
identification numbers and certain other information in the required manner.
Payments of dividends to a U.S. Holder (a) made by mail or wire transfer to an
address in the U.S. , (b) made by a paying agent, broker or other intermediary
in the U.S. or (c) made by a U.S. broker or by a custodian, nominee or agent
that is (i) a U.S. person, (ii) a controlled foreign corporation for U.S. tax
purposes, or (iii) a foreign person 50% or more of whose gross income is from
a U.S. trade or business (hereinafter, any of the persons described in (i),
(ii) and (iii) shall be referred to as a "U.S. Controlled Person") to such
holder outside the U.S. may be subject to U.S. information reporting
requirements. Payments of dividends received by investors who are not U.S.
Holders generally would be exempt from these reporting requirements, but such
persons may be required to comply with
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<PAGE>
certification and identification procedures in order to prove their exemption
from the reporting requirements. Treasury regulations currently in effect do
not require backup withholding with respect to dividends paid by a foreign
corporation such as the Company.
The payment of proceeds of the disposition of Ordinary Shares by a holder to
or through the U.S. office of a broker generally will be subject to
information reporting and backup withholding at a rate of 31 percent, unless
the holder either certifies its status as a non-U.S. Holder under penalties of
perjury or otherwise establishes an exemption. The payment of proceeds of the
disposition by a holder of Ordinary Shares to or through a non-U.S. office of
a broker will generally not be subject to backup withholding and information
reporting. However, information reporting (but not backup withholding) may
apply to such a holder who sells a beneficial interest in Ordinary Shares
through a non U.S. branch of a U.S. broker, or through a non-U.S. office of a
U.S. Controlled Person, in either case unless the holder establishes an
exemption or the broker has documentary evidence in its files of the holder's
status as a non-U.S. person.
Any amounts withheld under the backup withholding rules from payment to a
holder will be refunded (or credited against the holder's United States
federal income tax liability, if any) provided that the required information
is furnished to the United States Internal Revenue Service.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1995 and
for each of the years in the two year period ended December 31, 1996 and for
the periods from December 22, 1994 (inception) through December 31, 1994 and
from inception through December 31, 1996 included in this Prospectus have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The estimates of the Company's development and operating costs for the San
Cristobal property appearing herein were based upon the first phase
feasibility report prepared by the independent engineering firm Kvaerner
Metals, Davy Nonferrous Division; reserves for the San Cristobal Project were
based upon estimates prepared by Mine Reserves Associates Inc. and were
corroborated by an independent grade model prepared by Pincock, Allen & Holt.
Mineral Resources Development Inc. conducted the metallurgical test work and
developed the process flow sheet. Knight Piesold LLC was contracted to perform
the preliminary environmental assessment and geotechnical estimates, including
mill tailings design. The independent engineering firm of Behre Dolbear was
hired by the Company to conduct and oversee a technical audit of Davy's
procedures and analyses as well as the work of the technical subcontractors.
All such figures are included herein in reliance upon the authority of said
firms as experts in such matters.
The estimates of the Company's development and operating costs for the El
Ocote property appearing herein were based upon the conceptual study prepared
by Davy, and are included herein in reliance upon the authority of said firm
as an expert in such matters.
LEGAL MATTERS
Certain United States legal matters will be passed upon for the Company by
Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, New York, and certain
Cayman Islands legal matters, including the validity of the Shares offered
hereby will be passed upon for the Company by W.S. Walker & Company, Grand
Cayman, Cayman Islands. Certain United States legal matters will be passed
upon for the U.S. Underwriters by Winston & Strawn, Chicago, Illinois.
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<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the Shares offered hereby. The Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Shares,
reference is made to such Registration Statement and Exhibits. Statements made
in the Prospectus as to the contents of any contract, agreement or other
documents referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved. The Registration Statement and exhibits may be inspected
without charge and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Northwestern Atrium Center, 500 West Madison,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material may be obtained at
prescribed rates from the Commission's Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. Material filed by the Company may also be inspected at the
offices of the American Stock Exchange.
The Company will be subject to the periodic reporting and other
informational requirements of the Exchange Act, and in accordance therewith
will file reports and other information with the Commission. Such reports and
other information concerning the Company can be inspected and copied at the
public reference facilities and regional offices referred to above, or can be
accessed electronically as referred to above.
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<PAGE>
GLOSSARY
ADIT--a horizontal or nearly horizontal passage driven from the surface for
the working of a mine.
ANDESITE--a porphyritic igneous rock with low quartz content.
ASSAY TONNE--a weight of 32.151 grams used in assaying to represent
proportionally the assay value of an ore.
BACK--a mining term indicating the rock volume which is above a level in a
mine; the term may also refer to the roof of a mine working.
BLOCK CAVING--a mass mining system where the extraction of ore depends
largely on the action of gravity. By removing a thin horizontal layer at a
lower mining level of the ore column, using standard mining methods, the
vertical support of the ore column above is removed and the ore then caves by
gravity. As broken ore is removed from the mining level the ore above
continues to break and cave by gravity to the mining level for extraction.
BRECCIATION or BRECCIA--fracturing of preexisting rocks by natural forces; a
rock type formed in this manner.
BULK MINING--surface or underground mining methods applied to large bodies
of ore which involve large-scale, automated excavation techniques.
CALDERA--a large basin shaped depression caused by volcanic activity.
CASH PRODUCTION COST PER EQUIVALENT OUNCE--the total equivalent ounces
divided by the sum of the mine site cash production costs plus the transport
costs of the concentrates to the market.
CONCENTRATE--a mineral processing product that generally describes the
material that is produced after crushing and grinding ore and then effecting
significant separation of gangue (waste) minerals from the metal and/or metal
minerals, discarding the waste and minor amounts of metal and/or metal
minerals leaving a "concentrate" of metal and/or metal minerals with a
consequent order of magnitude higher content of metal and/or metal minerals
than the beginning ore material.
CONCEPTUAL STUDY--an initial technical financial study of a project at a
sufficient level of accuracy and detail to allow a decision as to whether to
undertake a feasibility study with respect to a given property.
CONGLOMERATE--a course-grained clastic sedimentary rock, composed of rounded
to subangular fragments larger than 2 millimeters in diameter set in a fine-
grained matrix of sand or silt.
CORE--a sample of rock produced by diamond drilling.
CUT-OFF GRADE--the minimum grade of mineralization or ore used to establish
quantitative estimates of total mineralized ore.
DACITE--a rock similar to andesite with less plagioclase and more quartz.
DEVELOPMENT--work carried out for the purpose of opening up a mineral
deposit and making the actual ore extraction possible.
DIAMOND DRILL--a type of rotary drill in which the cutting is done by
abrasion rather than by percussion. The hollow bit of the drill cuts a core of
rock which is recovered in long cylindrical sections.
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DISSEMINATED--a mineral deposit in which the desired minerals occur as
scattered particles in the adjacent rocks to the primary passage of
penetrating solutions that originally carried these minerals.
DORE--unrefined gold and silver in bullion form.
DRIFT--a horizontal passage underground that follows along the length of a
vein or mineralized rock formation.
EPITHERMAL--said of a Hydrothermal mineral deposit formed within about 1
kilometer of the earth's surface and in the temperature range of 100 to 250
degrees Celsius, occurring mainly as veins; a term applied to deposits formed
at shallow depths from ascending solutions of moderate temperatures.
EQUIVALENT SILVER OUNCES--is calculated by dividing the gross net smelter
return of silver, zinc and lead by the market price of silver per ounce. For
purposes of this Prospectus, the market price of silver is assumed to be $5.00
per ounce of silver, and the market prices of zinc and lead are assumed to be
$0.55 and $0.30 per pound, respectively.
EXPLORATION--work involved in searching for ore, by geological mapping,
geochemistry, geophysics, drilling and other methods.
FAULT--a fracture in a rock where there has been displacement of the two
sides.
FEASIBILITY STUDY--a technical financial study of a project at sufficient
level of accuracy and detail to allow a decision as to whether a given project
should proceed.
FIRE ASSAY--the assaying of metallic ores, usually gold and silver by
methods requiring a furnace, heat sufficient to melt the entire sample;
commonly involves the process of scorification, cupellation, etc.
FRACTURE--breaks in a rock, usually due to intensive folding or faulting.
GRADE--the average assay of a ton of ore, reflecting metal content.
GRAVIMETRIC ANALYSIS--quantitative chemical analysis in which the different
substances of a compound are measure by weight.
HEAP LEACHING--a process involving the percolation of a cyanide solution
through crushed ore heaped on an impervious pad or base to dissolve minerals
or metals out of the ore.
HYDROTHERMAL ALTERATION--alteration of rocks or minerals by the reaction of
hydrothermal water (hot water) with preexisting solid phases.
IMMEDIATELY ACCESSIBLE--blocks of ore immediately accessible from current
mine workings.
INTRUSION--in geology, a mass of igneous rock that while molten, was forced
into or between other rocks.
INVERSE DISTANCE ESTIMATING METHOD--a method of establishing the importance
accorded to specific data points of a three dimensional block model in order
to determine the economic value of the minerals located in such block. This
determination is a weighted average with the individual weights of each data
point computed as an inverse power of distance as follows:
wi = di/-power/i = 1. . .number of samples
-------
SUM(di)
where w is the weight computed for each sample; i, each distance; d, the
distance between the location being estimated and sample i; and -power is the
inverse distance weighting power.
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<PAGE>
KRIGING--a geostatistical estimation method for calculating a geological
three dimensional model for the estimation of mineralized material and proven
and probable reserves. This method was developed to provide the "best linear,
unbiased estimate" for grade based on a least squares minimization of the
error estimation, or Kriging errors.
LEACHED--the separation, selective removal or dissolving out of soluble
constituents from a rock or orebody by the natural action of percolating
water.
LENS--a geological deposit bounded by converging surfaces, at least one of
which is curved, thick in the middle and thinning out to the edges, resembling
a convex lens.
LEVEL--a subhorizontal working in a mine, like a drift or a tunnel, often
given a number which relates its depth below an arbitrarily chosen reference
point, e.g., the -300 Level usually means the working is 300 meters below some
chosen reference point.
MASSIVE--said of mineral deposits characterized by a great concentration of
ore in one place, as opposed to disseminated or vein deposits.
MATRIX--the finer-grained material between the larger particles of a rock or
the material surrounding mineral particles.
MILL--a processing plant that produces a concentrate of the valuable
minerals or metals contained in an ore. The concentrate must then be treated
in some other type of plant, such as a smelter, to effect recovery of the pure
metal.
MINEABLE--the portion of a resource for which extraction is technically and
economically feasible.
MINERALIZATION--the concentration of metals and their compounds in rocks,
and the processes involved therein.
MINERALIZED MATERIAL--that part of mineral deposits (i) for which tonnage
and grade are computed (a) partly from specific measurements, samples or
production data compiled from appropriately spaced assays of outcrops,
trenches, underground workings or drill holes and (b) partly from projections
based on geological evidence, and (ii) that have not been measured and sampled
with sufficient confidence to determine that the identified deposit can be
economically and legally extracted at the time of such determination.
NET SMELTER RETURN OR NSR--a return based on the actual proceeds from sale
of metal or mineral products received less the cost of refining or smelting at
an off-site refinery.
OPEN PIT--a surface working open to daylight, such as a quarry.
ORE--material that can be economically mined and processed.
OUNCE--a unit of measurement of weight. In the precious metals industry, and
at Apex one troy ounce, the equivalent of 31.103 grams.
OUTCROP--the part of a rock formation that appears at the earth's surfaces,
often protruding above the surrounding ground.
PLANAR--Lying or arranged as a plane or in parallel planes, usually implying
more or less parallelism as in bedding or cleavage. It is a two-dimensional
arrangement, in contrast to the one-dimensional linear arrangements.
PORPHYRY--an igneous rock of any composition that contains conspicuous
phenocrysts (large crystals) in a fine-grained rock mass.
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PROBABLE RESERVES--that part of a mineral deposit which may be economically
and legally extracted or produced at the time of the reserve determination for
which quantity and grade and/or quality are computed from information similar
to that used for proven reserves (see below), but the sites for inspection,
sampling and measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven reserves,
is high enough to assume continuity between points of observation.
PROPYLITIC ALTERATION--a hydrothermally altered rock containing chlorite,
pyrite, and carbonate.
PROVEN RESERVES--that part of a mineral deposit which may be economically
and legally extracted or produced at the time of the reserve determination for
which (a) quantity is computed from dimensions revealed in outcrops, trenches,
workings and drill holes and grade and/or quality are computed from the
results of detailed sampling; and (b) the sites for inspection, sampling and
grade measurement are spaced so closely and the geological character is so
well defined that size, shape, depth and mineral content of reserves are well
established.
RECOVERY--the percentage of contained of metal extracted from ore in the
course of processing such ore.
REFINING--the final stage of metal production in which residual impurities
are removed from the metal.
RESERVES--that part of a mineral deposit which may be economically and
legally extracted or produced at the time of the reserve determination.
REVERSE CIRCULATION DRILL--a rotary drill or rotary percussion drill in
which the drilling fluid and cuttings return to the surface through the drill
pipe, minimizing contamination.
RHYOLITE--A group of extrusive igneous rocks, typically porphyritic and
commonly exhibiting flow texture; the extrusive equivalent of granite.
SECONDARY ENRICHMENT/SUPERGENE ENRICHMENT--a mineral deposition process in
which near surface oxidation produces acidic solutions that leach (dissolve)
minerals or metals, carry them downward, and precipitate them, thus enriching
sulfide minerals already present.
SEDIMENTARY ROCKS/SEDIMENTS--rocks resulting from the consolidation of loose
sediments that have accumulated in layers consisting of mechanically formed
fragments of older rock transported from its source and deposited in water, or
from air or ice.
SEMI-AUTOGENOUS-GRINDING OR SAG--a grinding method that uses a rotating mill
drum of large diameter, versus its axial length, to tumble ores that have
characteristics of hardness and particle size requiring only small amounts of
grinding steel balls added to the mill to aid the grinding process.
SHAFT--a vertical or steeply inclined excavation for the purposes of opening
and servicing an underground mine. It is usually equipped with a hoist at the
top which lowers and raises a conveyance for handling personnel and materials.
SILL--a near horizontal flat-bedded strata of intrusive rock.
SKARN--a rock composed of calc-silicate minerals formed by the action of
igneous bodies intruding into a calcium-rich rock such as limestone. Precious
metals and sulfides of copper, lead and zinc may be introduced as part of the
process.
SMELTING--heating ore or concentrate material with suitable flux materials
at high temperatures creating a fusion of these materials to produce a melt
consisting of two layers on top, a slag of the flux
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and gangue (waste) minerals, and below molten impure metals. This generally
produces an unfinished product requiring refining.
STERILIZATION DRILLING--refers to drilling conducted in areas proposed for
surface facilities or waste material dumps, to test for unexpected existence
of economic mineralization.
STOCKWORK--a mineral deposit in the form of a three dimensional network of
anastomosing veinlets diffused in the host rock.
STRATA-BOUND--a mineral deposit confined to a single stratigraphic unit.
STRATIFIED--formed, arranged, or laid down in layers of strata.
STOPE--an excavation in a mine from which ore is being or has been
extracted.
STRIKE--the course or bearing of a vein or a layer of rock.
TAILINGS--the finely-ground waste product from ore processing.
TON--a dry short ton (2,000 pounds).
TONNE--a metric ton (1,000 kilograms, or 2,205 pounds).
TUFF--a general term for all pyroclastic (volcanic ash) rock.
TWIN HOLE--refers to a drill hole drilled parallel to and as practically
close to a preexisting drill hole in order to obtain samples to test the
continuity or similarity of the results from both drill holes.
VEIN--a mineralized zone having a more or less regular development in
length, width and depth which clearly separates it from neighboring rock.
VEZIN SAMPLER--A mechanical device that automatically extracts a regular
portion (a sample) from a stream of pulverized material passing through it.
WALL ROCK--the rock adjacent to, enclosing, or including a vein, layer, or
dissemination of ore minerals.
WASTE--barren rock in a mine, or mineralization that is too low in grade to
be mined and milled at a profit.
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CONVERSION TABLE
In this Prospectus, figures are presented in both United States standard and
metric measurements. Conversion rates from United States standard to metric and
metric to United States standard measurement systems are provided in the table
below.
<TABLE>
<CAPTION>
U.S. MEASURE METRIC UNIT
- ------------ -----------
<S> <C>
2.47 acres.............. 1 hectare
3.28 feet............... 1 meter
0.62 miles.............. 1 kilometer
0.032 ounces (troy)..... 1 gram
1.102 tons.............. 1 tonne
</TABLE>
<TABLE>
<CAPTION>
METRIC MEASURE U.S. UNIT
- -------------- ---------
<S> <C>
0.4047 hectares......... 1 acre
0.3048 meters........... 1 foot
1.609 kilometer......... 1 mile
31.103 grams............ 1 ounce (troy)
0.907 tonnes............ 1 ton
</TABLE>
96
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheet at September 30, 1997 (unaudited) and at
December 31, 1996 and 1995.............................................. F-3
Consolidated Statement of Operations for the nine-month periods ended
September 30, 1997 and 1996 (unaudited), the years ended December 31,
1996 and 1995, the period from December 22, 1994 (inception) through
December 31, 1994, and the period from inception through December 31,
1996.................................................................... F-4
Consolidated Statement of Changes in Shareholders' Equity for the nine-
month period ended September 30, 1997 (unaudited), for the years ended
December 31, 1996 and 1995, and for the period ended December 31, 1994
........................................................................ F-5
Consolidated Statement of Cash Flows for the nine-month periods ended
September 30, 1997 and 1996 (unaudited), the years ended December 31,
1996 and 1995, the period from December 22, 1994 (inception) through
December 31, 1994, and the period from inception through December 31,
1996.................................................................... F-6
Notes to the Consolidated Financial Statements........................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Apex Silver Mines Limited
(Successor to Apex Silver Mines LDC),
an Exploration Stage Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Apex Silver Mines Limited (successor to Apex Silver Mines LDC) and its
subsidiaries at December 31, 1996 and 1995 and the results of their operations
and their cash flows for the years ended December 31, 1996 and 1995, the
period from December 22, 1994 (inception) through December 31, 1994 and the
period from inception through December 31, 1996 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
August 29, 1997
F-2
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
-------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ 8,806,284 $25,949,771 $ 3,296,618
Short-term investments............... -- -- --
Note and accrued interest
receivable.......................... -- -- 2,885,830
Prepaid expenses and other assets.... 501,317 154,225 --
Cash advances to associates.......... -- -- 311,246
------------ ----------- -----------
Current assets...................... 9,307,601 26,103,996 6,493,694
Mining properties..................... 3,758,944 -- --
Plant, buildings and equipment (net).. 680,125 523,534 --
Deferred financing costs.............. 1,266,414 -- --
Deferred organizational costs (net)... 127,331 169,774 226,365
Loan receivable from associates....... -- -- 100,000
------------ ----------- -----------
Total assets........................ $ 15,140,415 $26,797,304 $ 6,820,059
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Amounts due to related parties....... $ 70,702 $ 533,275 $ 110,933
Accrued salaries, wages and
benefits............................ 33,135 310,669 --
Accounts payable and other accrued
liabilities......................... 1,252,221 1,642,050 247,926
------------ ----------- -----------
Current liabilities................. 1,356,058 2,485,994 358,859
Commitments and contingencies
(Note 10)............................ -- -- --
Minority interest in consolidated
subsidiary........................... -- -- 2,875,927
Shareholders' equity
Ordinary shares, $.01 par value,
50,000,000 shares authorized;
13,601,544, 13,079,246 and
8,822,546, shares issued and
outstanding, respectively
(See Note 1d)....................... 136,015 130,792 88,225
Contributed surplus.................. 44,444,242 37,978,181 5,571,398
Accumulated deficit.................. (30,795,900) (13,797,663) (2,074,350)
------------ ----------- -----------
Total shareholders' equity.......... 13,784,357 24,311,310 3,585,273
------------ ----------- -----------
Total liabilities and shareholders'
equity............................. $ 15,140,415 $26,797,304 $ 6,820,059
============ =========== ===========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22, PERIOD
1994 FROM
NINE MONTHS NINE MONTHS (INCEPTION) INCEPTION
ENDED ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994 1996
------------- ------------- ------------ ------------ -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Income
Interest income........ $ 607,072 $ 254,962 $ 574,470 $ 462,247 $ 15,256 $ 1,051,973
------------ ----------- ------------ ----------- ---------- ------------
Total income........... 607,072 254,962 574,470 462,247 15,256 1,051,973
------------ ----------- ------------ ----------- ---------- ------------
Expenses
Exploration............ 10,128,698 5,916,535 9,590,632 1,559,874 105,185 11,255,691
Administrative......... 5,332,473 602,539 1,923,165 982,261 147,780 3,053,206
Consulting............. 1,862,201 1,443,275 2,506,250 560,060 144,840 3,211,150
Professional fees...... 226,591 827,066 1,096,271 657,621 20,600 1,774,492
Amortization and
depreciation.......... 55,346 28,296 57,392 56,591 -- 113,983
------------ ----------- ------------ ----------- ---------- ------------
Total expenses......... 17,605,309 8,817,711 15,173,710 3,816,407 418,405 19,408,522
------------ ----------- ------------ ----------- ---------- ------------
Loss before minority
interests.............. (16,998,237) (8,562,749) (14,599,240) (3,354,160) (403,149) (18,356,549)
Minority interest in
loss of consolidated
subsidiary............. -- -- 2,875,927 1,492,975 189,984 4,558,886
------------ ----------- ------------ ----------- ---------- ------------
Net loss for the
period................ $(16,998,237) $(8,562,749) $(11,723,313) $(1,861,185) $ (213,165) $(13,797,663)
============ =========== ============ =========== ========== ============
Net loss per ordinary
share.................. $ (1.05) $ (0.66) $ (0.85) $ (0.16) $ (0.02)
============ =========== ============ =========== ==========
Weighted average
ordinary shares
outstanding
(See Note 1d).......... 16,231,660 12,920,893 13,748,585 11,974,960 11,974,960
============ =========== ============ =========== ==========
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
ORDINARY SHARES
-------------------- TOTAL
SHARES CONTRIBUTED ACCUMULATED SHAREHOLDERS'
OUTSTANDING AMOUNT SURPLUS DEFICIT EQUITY
----------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Issuance of shares upon
incorporation--December
22, 1994............... 8,822,546 $ 88,225 $ 5,571,398 $ -- $ 5,659,623
Net loss................ -- -- -- (213,165) (213,165)
---------- -------- ----------- ------------ ------------
Balance, December 31,
1994................... 8,822,546 88,225 5,571,398 (213,165) 5,446,458
Net loss................ -- -- -- (1,861,185) (1,861,185)
---------- -------- ----------- ------------ ------------
Balance, December 31,
1995................... 8,822,546 88,225 5,571,398 (2,074,350) 3,585,273
Issuance of shares in
private placement...... 4,256,700 42,567 32,406,783 -- 32,449,350
Net loss................ -- -- -- (11,723,313) (11,723,313)
---------- -------- ----------- ------------ ------------
Balance, December 31,
1996................... 13,079,246 130,792 37,978,181 (13,797,663) 24,311,310
Issuance of shares
(unaudited)............ 522,298 5,223 5,865,710 -- 5,870,833
Stock option
compensation expense
(unaudited)............ -- -- 600,351 -- 600,351
Net loss (unaudited).... -- -- -- (16,998,237) (16,998,237)
---------- -------- ----------- ------------ ------------
Balance, September 30,
1997 (unaudited)....... 13,601,544 $136,015 $44,444,242 $(30,795,900) $ 13,784,357
========== ======== =========== ============ ============
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-5
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 22,
1994 PERIOD FROM
NINE MONTHS NINE MONTHS (INCEPTION) INCEPTION
ENDED ENDED YEAR ENDED YEAR ENDED THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1996 1995 1994 1996
------------- ------------- ------------ ------------ -------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................. $(16,998,237) $(8,562,749) $(11,723,313) $(1,861,185) $(213,165) $(13,797,663)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Amortization and
depreciation............ 55,346 28,296 57,392 56,591 -- 113,983
Minority interest in loss
of
consolidated subsidiary.. -- -- (2,875,927) (1,492,975) (189,984) (4,558,886)
Stock option compensation
expense................. 600,351 -- -- -- -- --
Shares issued in
consideration for
services................ 1,940,330 -- -- -- -- --
Changes in operating
assets and liabilities:
(Increase) decrease in
accrued interest
receivable............. -- 2,885,830 66,112 (50,856) (15,256) --
(Increase) decrease in
prepaid expenses and
other assets........... (347,092) -- (154,225) 24,167 (24,167) (154,225)
(Increase) decrease in
cash advances to and
loan receivable from
associates............. -- (1,662,436) 411,246 (411,246) -- --
Increase (decrease) in
current liabilities.... (1,129,936) 1,096,747 2,127,135 244,873 113,986 2,485,994
------------ ----------- ------------ ----------- --------- ------------
Net cash used in
operating activities.. (15,879,238) (6,214,312) (12,091,580) (3,490,631) (328,586) (15,910,797)
------------ ----------- ------------ ----------- --------- ------------
Cash flows from investing
activities:
Purchases of short-term
investments............. ( -- ) -- -- -- -- --
Purchases of property and
equipment............... (169,493) -- (524,335) -- -- (524,335)
------------ ----------- ------------ ----------- --------- ------------
Net cash used in
investing activities.. (169,493) -- (524,335) -- -- (524,335)
------------ ----------- ------------ ----------- --------- ------------
Cash flows from financing
activities:
Proceeds from issuance of
ordinary shares......... 171,658 28,734,745 35,269,068 6,430,307 968,484 42,667,859
Deferred organizational
and financing costs..... (1,266,414) -- -- -- (282,956) (282,956)
------------ ----------- ------------ ----------- --------- ------------
Net cash provided by
(used in) financing
activities............ (1,094,756) 28,734,745 35,269,068 6,430,307 685,528 42,384,903
------------ ----------- ------------ ----------- --------- ------------
Net increase (decrease) in
cash and cash
equivalents.............. (17,143,487) 22,520,433 22,653,153 2,939,676 356,942 25,949,771
Cash and cash equivalents:
Beginning of period...... 25,949,771 3,296,618 3,296,618 356,942 -- --
------------ ----------- ------------ ----------- --------- ------------
End of period............ $ 8,806,284 $25,817,051 $ 25,949,771 $ 3,296,618 $ 356,942 $ 25,949,771
============ =========== ============ =========== ========= ============
SUPPLEMENTAL NON-CASH
TRANSACTIONS:
Acquisition of minority
interest in ASC Bolivia
for ordinary shares at
$14 per share........... $ 3,758,944 -- -- -- -- --
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-6
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1.INCORPORATION, RECAPITALIZATION, OWNERSHIP AND OPERATIONS
a. Apex Silver Mines Limited ("Apex Limited" or the "Company") was formed
under the laws of the Cayman Islands in March of 1996 for the sole purpose of
serving as a holding company for certain ownership interests in Apex Silver
Mines LDC ("Apex LDC"). On April 15, 1996, holders of approximately 55% of the
then-outstanding shares of Apex LDC elected to participate, effective as of
the completion of a proposed private placement of shares of Apex Limited which
was completed as of August 6, 1996, in a recapitalization effected by an
exchange, on a one-for-one basis, of their shares in Apex LDC for identical
equity instruments of Apex Limited (the "Recapitalization"). The balance of
shareholders retained a direct ownership interest in Apex LDC. As a result of
this recapitalization, Apex LDC became a majority-owned subsidiary of Apex
Limited. The accompanying financial statements reflect the historical accounts
of the Company's predecessor, Apex LDC. For purposes of the accompanying
consolidated financial statements of Apex Limited, the recapitalization has
been given retroactive effect to the date of incorporation of Apex LDC, with
the results of operations and equity attributable to the other ownership
interests in Apex LDC being reflected in "minority interest in consolidated
subsidiary". Consequently, for purposes of these financial statements, Apex
Limited is considered the successor to Apex LDC.
b. In August of 1996, Apex Limited issued 4,256,700 ordinary shares in a
private placement transaction (the "Private Placement") for net proceeds of
$32.4 million. These proceeds were contributed to Apex LDC in exchange for the
issuance by Apex LDC of 4,256,700 shares of its share capital. As a result of
this private placement, the Company's ownership interest in Apex LDC was
increased from approximately 55% to 65%.
c. Apex LDC was incorporated under the laws of the Cayman Islands on November
23, 1994 as a 30-year limited duration company on the contribution of all the
assets of its predecessor entity, Apex Silver Mines Ltd., a Bermuda
corporation. (Actual contribution occurred on December 22, 1994.) The activity
of the predecessor has not been presented herein as it was immaterial.
However, all expenses incurred by the predecessor have been presented. The
Company's principal activity is the exploration of mineral properties. The
Company participates in the acquisition and exploration of mineral properties
for possible future development directly and indirectly through Apex LDC's
principal subsidiaries, Andean Silver Corporation LDC ("Andean"), ASC Bolivia
LDC ("ASC Bolivia"), Apex Asia LDC ("Apex Asia"), Minera de Cordilleras
(Honduras), S. de R.L. ("Cordilleras Honduras"), Cordilleras Silver Mines Ltd.
("Cordilleras Bahamas"), Cordilleras Silver Mines (Cayman) LDC ("Cordilleras
Cayman"), Compania Minerales de Zacatecas, S. de R.L. de C.V. ("CMZ"), Apex
Silver Mines Corporation, ("Apex Corporation") and ASC Peru LDC ("ASC Peru").
d. In conjunction with the Recapitalization and the Private Placement, Apex
Limited and the shareholders of Apex LDC entered into a Buy-Sell Agreement
(the "Buy-Sell Agreement") which is intended to maintain the same beneficial
interest in Apex LDC attributable to all shareholders of Apex LDC prior to the
Recapitalization and Private Placement. Pursuant to the terms of the Buy-Sell
Agreement, upon a request by a shareholder of Apex LDC, Apex Limited is
required to purchase, at its sole option, for cash, for ordinary shares or for
a combination thereof, the shares of Apex LDC owned by such shareholder. Apex
Limited currently expects that any purchase of shares of Apex LDC will involve
only an equal number of ordinary shares. As of August 29, 1997, Apex Limited
has approximately 13,601,544 shares outstanding and approximately 7,077,007
ordinary shares reserved
F-7
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
for issuance for the approximately 7,077,007 shares of Apex LDC owned by such
shareholders. If all such ordinary shares were issued, the Company would have
approximately 20,678,551 ordinary shares outstanding. Because of the
provisions of the Buy-Sell Agreement, all of the outstanding shares of Apex
LDC are considered ordinary share equivalents for purposes of computing net
loss per ordinary share but are not included in the computation for any of the
periods presented because they are antidilutive. If all of the Apex LDC shares
were assumed to be purchased in all periods, the outstanding ordinary shares
and the net loss per ordinary share as of and for the periods ended September
30, 1997 and 1996 and December 31, 1996, 1995 and 1994, on a pro forma basis,
would have been (all unaudited) 20,678,551, 15,899,553, 17,673,178, 15,899,553
and 15,899,553 ordinary shares and $(0.73), $(0.43), $(0.56), $(0.10) and
$(0.01) net loss per ordinary share.
e. The Company, through its direct and indirect subsidiaries, is active in
Central America, South America and Central Asia and currently holds interests
in, or is the beneficial owner of, non-producing silver resource properties in
Chile, Bolivia, Honduras, Kyrgyzstan, Mexico, Mongolia, Peru and Tajikistan.
The Company is in the process of evaluating its properties to determine
economic feasibility of bringing one or more of the properties into
production.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The policies adopted, considered by management to
be significant, are summarized as follows:
a. Basis of consolidation
These consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Investment in 50% joint ventures are
proportionately consolidated.
b. Interim financial data
The interim financial data as of September 30, 1997 and for the nine-month
periods ended September 30, 1997 and 1996 are unaudited; however, in the
opinion of management, such interim data includes all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation of financial position and results of operations for the interim
periods. All data included herein as of such date and for such periods are
unaudited.
c. Translation of foreign currencies
All expenditures are made in United States dollars. Accordingly, the Company
uses the United States dollar as its functional currency.
F-8
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
d. Cash, cash equivalents and short-term investments
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Short-term investments
include certificates of deposit with maturities greater than three months, but
not exceeding six months. Short-term investments are recorded at cost which
approximates fair value.
e. Exploration and development costs
The Company expenses general prospecting costs and the costs of acquiring
and exploring unevaluated mining properties. When a property is determined to
have proven and probable reserves, further exploration costs and development
costs are capitalized. When commercially profitable ore reserves are developed
and operations commence, capitalized costs will be amortized using the units-
of-production method. Upon abandonment or sale of projects, all capitalized
costs relating to the specific project are written off in the year abandoned
or sold and a gain or loss is recognized.
As of September 30, 1997, no exploration and development costs of $3,758,944
(unaudited) have been capitalized.
f. Fixed assets
Buildings and equipment are carried at cost and are depreciated on a
straight-line basis over estimated useful lives of three to thirty years.
g. Deferred organizational costs
Costs incurred in the organization of the Company have been capitalized and
are being amortized on a straight-line basis over five years.
h. Asset impairment
The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amount may not be
recoverable. If the sum of estimated future net cash flows on an undiscounted
basis is less than the carrying amount of the related asset, an asset
impairment is considered to exist. The related impairment loss is measured by
comparing estimated future net cash flows on a discounted basis to the
carrying amount of the asset. Changes in significant assumptions underlying
future cash flow estimates may have a material effect on the Company's
financial position and results of operations. To date no such impairments have
been identified.
i. Fair value of financial instruments
The Company's financial instruments consist of cash, receivables, accounts
payable and other current liabilities. The carrying amounts of these financial
instruments approximate fair value due to their short maturities.
F-9
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
j. Stock compensation
As permitted under Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the Company has elected to
measure compensation expense as prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Under that method,
the difference between the exercise price and the estimated fair value of the
shares at the date of grant is charged to compensation expense ratably over the
vesting period.
k. Net loss per ordinary share
Net loss per ordinary share is computed using the weighted average number of
ordinary and equivalent shares outstanding during the period. Equivalent shares
are excluded from the computation if their effect is antidilutive except that,
pursuant to the requirements of the Securities and Exchange Commission,
equivalent shares relating to options issued and ordinary shares sold at less
than the initial public offering price during the twelve-month period prior to
the initial public offering contemplated hereby are included in the
computations for all periods presented.
l. New accounting pronouncements
During February of 1997, the Financial Accounting Standards Board released
SFAS No. 128, Earnings per Share, which requires the disclosure of both basic
earnings per share and diluted earnings per share. The Company will be required
to adopt SFAS No. 128 effective December 31, 1997, and believes it will not
have a material impact on previously reported losses per share.
Other pronouncements issued by authoritative bodies with future effective
dates are either not applicable or not material to the consolidated financial
statements of the Company.
3. INCOME TAXES
The provision for income taxes includes United States federal, state and
foreign income taxes currently payable and deferred based on currently enacted
tax laws. Deferred income taxes are provided for the tax consequences of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
There is currently no taxation imposed by the Cayman Islands. If any form of
taxation were to be enacted, the Company has been granted exemption therefrom
to January 16, 2015. The Company's subsidiaries which do business in other
countries have not generated income and therefore are not liable for local
income taxes.
Apex Corporation, a Delaware corporation, is the only entity within the
Company which is currently subject to United States federal and state income
taxes. As of September 30, 1997 and December 31, 1996, Apex Corporation had a
United States net operating loss carryforward of approximately $1,300,000
(unaudited) and $500,000, respectively. As such, no United States tax provision
is included in the accompanying financial statements. Additionally, as of
September 30, 1997 and December 31, 1996, Apex Corporation had net deferred tax
assets of approximately $500,000 (unaudited) and $200,000, respectively,
primarily as a result of operating loss carryforwards which are entirely offset
by a valuation allowance.
F-10
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
As of September 30, 1997 and December 31, 1996, operating loss carryforwards
generated by ASC Bolivia amounted to approximately $12.2 million (unaudited)
and $3.4 million, respectively. Operating losses (as adjusted for inflation)
may be carried forward and deducted from taxable income indefinitely. The
deferred tax asset resulting from the operating loss carryforwards has been
entirely offset by a valuation allowance.
No net deferred tax assets related to operating losses generated through
September 30, 1997 by the Company's other foreign subsidiaries have been
included in the accompanying financial statements, as all such assets have
been entirely offset by a valuation allowance.
4. NOTE RECEIVABLE
At December 31, 1995, the note receivable represents the outstanding balance
of a $10,000,000 non-negotiable secured demand note, dated December 22, 1994,
on demand at any time, accruing interest at LIBOR, issued by Silver Holdings
LDC in consideration for 7,500 shares of the share capital (75% of the then
issued and outstanding shares) of Apex LDC. The balance at December 31, 1995
is comprised of the note receivable in the amount of $2,819,718 and accrued
interest of $66,112. The note was paid in full during 1996.
5. PLANT, BUILDINGS AND EQUIPMENT
The components of plant, buildings and equipment were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
Buildings......................................... $274,054 $274,054
Mining equipment.................................. 350,390 183,356
Other furniture and equipment..................... 79,401 66,925
-------- --------
703,845 524,335
Less: Accumulated depreciation.................... (23,720) (801)
-------- --------
$680,125 $523,534
======== ========
</TABLE>
Depreciation expense for the nine months ended September 30, 1997 and the
year ended December 31, 1996 totaled $22,919 and $801, respectively.
6. DEFERRED ORGANIZATIONAL COSTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
------------------- ----------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
Organizational costs.... $ 282,956 $ 282,956 $282,956
Less: Accumulated
amortization........... (155,625) (113,182) (56,591)
--------- --------- --------
$ 127,331 $ 169,774 $226,365
========= ========= ========
</TABLE>
Amortization expense for the nine-month period ended September 30, 1997 was
$42,443 and for each of the years ended December 31, 1996 and 1995 was
$56,591.
F-11
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
7. STOCK OPTION PLANS
During 1996, options to purchase 281,250 shares of the Company's ordinary
shares were granted, exercisable at a price of $8.00 per share. Of these
options, 73,438 vested immediately. The remainder of the options vest ratably
over periods of up to four years with the first tranche vesting on the date of
grant. Unexercised options expire ten years after the date of grant.
The following table summarizes stock option information:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Options granted at $8 during period........................ 281,250
Options outstanding at end of period....................... 281,250
Options exercisable at end of period....................... 73,438
</TABLE>
The weighted average grant-date fair value of options granted for the year
ended December 31, 1996 is $1.30. The weighted average remaining contractual
life of the options at December 31, 1996 is 11.1 years. To date, none of these
options have been exercised.
Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company has accounted for its employees' stock
options under the fair value method of SFAS No. 123. For purposes of
calculating the fair value of options, volatility was not considered for the
options granted in 1996 since the Company was non-public at the date of grant.
The Company currently does not foresee the payment of dividends in the near
term. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Weighted average risk-free interest rate................... 6.45%
Expected dividend yield.................................... --
Weighted average expected life (in years).................. 2.78
</TABLE>
For the purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
-------------
<S> <C>
As reported
Net loss........................................................ $(11,723,313)
Net loss per ordinary share..................................... (1.11)
Pro forma
Net loss........................................................ (11,852,522)
Net loss per ordinary share..................................... (1.12)
</TABLE>
F-12
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
8. EVENTS SUBSEQUENT TO DECEMBER 31, 1996
In January 1997, the Company received payment for 115,207 shares issued
effective September 30, 1996 at the then book value of $1.49 per share in
consideration for services received in conjunction with the Private Placement.
Effective August 15, 1997, the minority shareholder of ASC Bolivia exchanged
its 2.5% interest for 268,496 shares of Apex Limited and the Company granted
two associates a total of 138,595 shares of the Company in consideration for
services.
9. RELATED PARTY TRANSACTIONS
Apex LDC engaged Tigris Financial Group Ltd. ("Tigris") and LCM Holdings LDC
("LCM") to provide management advisory services to Apex LDC and its
subsidiaries. Tigris is wholly owned by Mr. Thomas S. Kaplan, a director and
officer of Apex LDC and its subsidiaries, and an indirect shareholder. LCM is
wholly owned by an indirect shareholder of Apex LDC. This consulting
arrangement was terminated at the end of the first quarter of 1997, following
the formation of Apex Corporation. Apex Corporation provides management,
advisory and administrative services for the Company pursuant to a Management
Services Agreement dated October 22, 1996. The Company pays Apex Corporation
in providing its services, plus 10 percent of such costs. During the periods
ended December 31, 1996, 1995 and 1994 fees paid to Tigris and LCM for such
services amounted to $423,684, $143,368 and $21,250, respectively. As of
December 31, 1996, the amount payable for such services was $11,119.
Apex LDC hires both individuals and companies ("associates") to perform
services on its behalf in countries in which it has mineral interests. These
services include administrative expenses, obtaining interests in properties on
Apex LDC's behalf, and consulting services. In certain cases persons
affiliated with such associates serve as officers or directors of Apex LDC's
subsidiaries. During the periods ended December 31, 1996, 1995 and 1994, the
total amounts charged to Apex LDC by such related associates were $5,695,193,
$1,965,276 and $275,653, respectively, and are included in the statement of
operations under the applicable captions. As of December 31, 1996, the amount
payable for such services was $386,639.
During the periods ended December 31, 1996, 1995 and 1994, Apex LDC paid an
associate who, until August 6, 1996, was a shareholder of certain subsidiaries
of Apex LDC $485,179, $239,647 and $14,104, respectively, in consideration for
geology services provided and disbursements made on Apex LDC's behalf. As of
December 31, 1996, the amount payable for such services was $135,517.
During the year ended December 31, 1995, Apex LDC made an interest-free loan
to an indirect shareholder in the amount of $100,000. The loan was forgiven by
Apex LDC as of August 6, 1996, as partial payment for that shareholder's
remaining interest in one subsidiary and his profits interests in certain
properties owned or controlled by Apex LDC or its subsidiaries.
Apex LDC received interest income on the note receivable issued by Silver
Holdings LDC, a shareholder of Apex LDC. During the periods ended December 31,
1995 and 1994, such interest income amounted to $360,937 and $15,256,
respectively.
Two individuals, one of whom is an officer and indirect shareholder of Apex
LDC, the second of whom is an officer of certain of Apex LDC's subsidiaries,
are also shareholders and directors of Begeyge Minera Ltda. ("Begeyge"), with
whom the Company has a non-binding commitment to purchase the Suyatal Project
for an aggregate purchase price of $3,000,000 (see Note 10). Begeyge also
served as an associate and during the year ended December 31, 1996, total
amounts charged to Apex LDC by Begeyge were $106,691.
F-13
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
10. COMMITMENTS AND CONTINGENCIES
The Company had outstanding nonbinding commitments relating to certain
mineral properties at December 31, 1996 (as adjusted for contract terminations
and modifications through September 30, 1997) as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 THEREAFTER
---------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
HONDURAS
El Ocote(/1/)......... $ 250,000 $ 93,866 $ 75,000 $ -- $ -- $ --
Suyatal(/2/).......... 15,000 25,000 40,000 40,000 40,000 2,825,000
Tatumbla(/3/)......... 66,667 66,667 66,666 -- -- --
BOLIVIA
San Cristobal(/4/).... 297,000 120,000 -- -- -- --
Choroma(/5/).......... 227,000 349,250 -- -- -- --
Cobrizos(/6/)......... 318,841 214,675 201,314 201,314 1,006,551 --
General............... 170,000 170,000 170,000 170,000 170,000 --
PERU
Otuzco(/7/)........... 36,000 18,000 18,000 18,000 18,000 450,000
Total............... $1,380,508 $1,057,458 $570,980 $429,314 $1,234,551 $3,275,000
</TABLE>
- --------
(/1/) Upon production, the Company will also pay a 5% net smelter return ("NSR")
royalty.
(/2/) Annual installments are not to exceed the greater of $40,000, or a 2% NSR.
(/3/) In addition, beginning in January of 1999, the Company will pay the
greater of a $20,000 per year advance against future NSR royalties, or a
2% NSR. Upon the earlier of the fifth anniversary of commercial
production or recovery of the Company's entire capital investment, the
Company will pay the higher of the $20,000 per year advance, or a 3% NSR,
plus an additional 2% NSR on production from the project.
(/4/) The Company, through a wholly-owned subsidiary has an option to purchase
these properties prior to October of 1998 for $2,000,000, less the sum of
all prior lease payments ($12,000 per month). As of September 30, 1997,
the Company had an outstanding balance of $980,000 to be paid at the rate
of $12,000 per month for eighty-one months and a final payment of $8,000
on July 15, 2004. In addition, the Company has an option to acquire
mining concessions for $6,000 per month until February 1, 1998. Upon
exercise of the option, a payment of $250,000 is due, to be followed by
another $250,000 due on February 1, 1999 plus the assumption of certain
indebtedness of the seller.
(/5/) Upon production, the Company will pay a royalty of 5% of operating cash
flow until the investment has been recovered, and a 15% royalty
thereafter.
(/6/) The commitments relating to the years 1999 to 2001 are for land taxes.
The amounts disclosed represent the maximum possible payment. Upon
production, the Company will pay a royalty of 5% of operating cash flow
until the investment has been recovered, and a 15% royalty thereafter.
(/7/) The lease agreement related to this property also includes payment of a
production royalty of 4.5% NSR. Concurrent with the lease is a four-year
option to purchase the property for $350,000. In addition, the Company has
a $40,400 per year payment due for land taxes on staked claims.
In addition to those summarized above, the Company has the following
nonbinding commitments:
Bolivia--Pulacayo: ASC Bolivia is obligated to pay $1,500 per month during
exploration until completion of a feasibility study. If the property is
developed, ASC Bolivia will be required to pay a 5% NSR.
F-14
<PAGE>
APEX SILVER MINES LIMITED
(SUCCESSOR TO APEX SILVER MINES LDC)
AN EXPLORATION STAGE COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(EXPRESSED IN UNITED STATES DOLLARS)
Peru--San Juan de Lucanas: Andean has contracted to purchase mining
concessions for total payment of $2,100,000 over a fourteen month period.
Tajikistan--Kanimansur Ore Field: The joint venture agreement related to
this proposed acquisition is still awaiting approval by the government. An
initial capital contribution of $49,000 must be effected within one year of
the formal registration of Kanimansur Mining.
F-15
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PRO-
SPECTUS IN CONNECTION WITH THE OFFERS MADE BY THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE U.S. UNDERWRITERS. NEITHER THE DE-
LIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUM-
STANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF. THE PROSPECTUS DOES NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITA-
TION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 8
Concurrent Offering...................................................... 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Corporate Structure...................................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
The Company.............................................................. 28
Properties............................................................... 30
Development Project...................................................... 31
Advanced Exploration Properties.......................................... 40
Other Mineral Properties................................................. 48
Metals Market Overview................................................... 51
Republic of Bolivia...................................................... 53
Management............................................................... 57
Executive Compensation................................................... 64
Principal Shareholders................................................... 69
Certain Transactions..................................................... 72
Description of Ordinary Shares........................................... 75
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 82
Taxation................................................................. 85
Experts.................................................................. 89
Legal Matters............................................................ 89
Additional Information................................................... 90
Glossary................................................................. 91
Conversion Table......................................................... 96
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL , 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR
NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS U.S. UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS.
9,000,000 SHARES
APEX SILVER
MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
[LOGO OF APEX SILVER MINES LIMITED APPEARS HERE]
SALOMON BROTHERS INC
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS
SMITH BARNEY INC.
PROSPECTUS
, 1997
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THIS REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE FRONT COVER PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION
PROSPECTUS NOVEMBER 18, 1997
9,000,000 SHARES
[LOGO OF APEX SILVER MINES LIMITED APPEARS HERE]
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
Of the 9,000,000 shares (the "Shares") of ordinary shares, par value $0.01 per
share, (the "Ordinary Shares") of Apex Silver Mines Limited (the "Company")
offered hereby (the "Offerings"), 6,100,000 Shares are being offered initially
in the United States and Canada by the U.S. Underwriters, 1,800,000 Shares are
being offered initially outside the United States by the International
Underwriters and 1,100,000 shares are being offered in a Concurrent Offering by
the Company directly to a shareholder of the Company at a price per share equal
to the initial public offering price per share. The consummation of the
Concurrent Offering and the initial public offering are contingent upon each
other. To the extent the shareholder purchases less than the maximum 1,100,000
Ordinary Shares to be sold pursuant to the Concurrent Offering, the number of
Ordinary Shares available to the general public by the U.S. Underwriters will
be increased accordingly. See "Concurrent Offering" and "Underwriting." Upon
completion of the Offering (assuming the over-allotment options granted to the
U.S. Underwriters and the International Underwriters are not exercised), the
Company will own 76.2 percent of the outstanding share capital of Apex Silver
Mines LDC ("Apex LDC"), the Company's principal operating subsidiary. See
"Corporate Structure". The minority shareholders of Apex LDC (the "Minority
Shareholders") are entitled to sell their shares of Apex LDC to the Company
for, at the Company's sole option, Ordinary Shares of the Company on a one-for-
one basis, cash, or a combination of cash and Ordinary Shares. The Company
currently expects that any future purchases by the Company of shares of Apex
LDC from the Minority Shareholders will involve only Ordinary Shares of Apex
Silver Mines Limited. Any such transactions will not affect the beneficial or
economic interest in Apex LDC attributable to shareholders of Apex Silver Mines
Limited. Currently, the Company has approximately 13,601,544 Ordinary Shares
outstanding and approximately 7,077,007 Ordinary Shares reserved for issuance
for approximately 7,077,007 shares of Apex LDC owned by the Minority
Shareholders. If all such shares of Apex LDC were issued, the Company would
have 20,678,551 Ordinary Shares outstanding, excluding the Shares to be sold in
the Offerings. See "Certain Transactions". An application has been made to list
the Shares for quotation on the American Stock Exchange under the trading
symbol "SIL", subject to notice of issuance.
Prior to the Offerings, there has been no public market for the Shares. It is
anticipated that the initial offering price will be between $13.00 and $15.00
per share. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN PURCHASING THE SHARES OFFERED HEREBY, SEE "RISK FACTORS" ON PAGE
8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Ordinary Share.................. $ $ $
Total(3)............................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Salomon Brothers Inc, PaineWebber Incorporated, Scotia Capital Markets
(USA) Inc. and Smith Barney Inc. are also acting as the Company's Placement
Agents in connection with the Concurrent Offering, and the Company has
agreed to pay the Placement Agents a fees of $ per Ordinary Share sold in
the Concurrent Offering. In addition, the Company has agreed to indemnify
the International Underwriters and the Placement Agents against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(2) Before deducting certain expenses of the Offerings, payable by the Company,
estimated to be $1,500,000.
(3) The Company has granted the U.S. Underwriters and the International
Underwriters 30-day options to purchase up to an aggregate 1,185,000
additional Ordinary Shares, at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If the U.S. Underwriters
and the International Underwriters exercise such options in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting".
The Ordinary Shares offered in the initial public offering are subject to
receipt and acceptance by the International Underwriters, to prior sale, and to
the International Underwriters' right to reject any order in whole or in part
and to withdraw, cancel or modify the offer without notice. It is expected that
delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of the
Depository Trust Company, on or about , 1997.
SALOMON BROTHERS INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL
ABN AMRO ROTHSCHILD
SMITH BARNEY INC.
The date of this Prospectus is , 1997.
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the International Underwriters (the "International
Underwriting Agreement"), the Company has agreed to sell to each of the
International Underwriters named below (the "International Underwriters"), and
each of the International Underwriters, for whom Salomon Brothers
International Limited, PaineWebber International (U.K.) Limited, ABN AMRO
Rothschild and Smith Barney Inc. are acting as the representatives (the
"International Representatives"), has severally agreed to purchase the number
of Ordinary Shares set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITING
INTERNATIONAL UNDERWRITERS COMMITMENT
-------------------------- ------------
<S> <C>
Salomon Brothers International Limited........................
PaineWebber International (U.K.) Limited......................
ABN AMRO Rothschild...........................................
Smith Barney Inc. ............................................
---------
Total....................................................... 1,800,000
=========
</TABLE>
The Company has been advised by the International Representatives that the
several International Underwriters initially propose to offer such Ordinary
Shares to the public at the Price to Public set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per Share. The International Underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per Share to other
dealers. After the initial public offering, the Price to Public and such
concessions may be changed.
The Company has granted to the International Underwriters and the U.S.
underwriters (the "U.S. Underwriters" and, collectively with the International
Underwriters, the "Underwriters") options, exercisable during the 30-day
period after the date of this Prospectus, to purchase up to 1,185,000
additional Ordinary Shares from the Company at the Price to Public less the
Underwriting Discount, solely to cover over-allotments. To the extent that the
International Underwriters and the U.S. Underwriters exercise such options,
each of the International Underwriters and the U.S. Underwriters, as the case
may be, will be committed, subject to certain conditions, to purchase a number
of option shares proportionate to such International Underwriter's or U.S.
Underwriter's initial commitment.
The Company has entered into a U.S. Underwriting Agreement with the U.S.
Underwriters named therein, for whom Salomon Brothers Inc, PaineWebber
Incorporated, Scotia Capital Markets (USA) Inc. and Smith Barney Inc. are
acting as the representatives (the "U.S. Representatives" and, together with
the International Representatives, the "Representatives") providing for the
concurrent offer and sale of 6,100,000 Ordinary Shares (in addition to the
Ordinary Shares covered by the over-allotment options described above) in the
United States and Canada. Both the International Underwriting Agreement and
the U.S. Underwriting Agreement provide that the obligations of the
International Underwriters and the U.S. Underwriters are such that if any of
the Ordinary Shares are purchased by the International Underwriters pursuant
to the International Underwriting Agreement, or by the U.S. Underwriters
pursuant to the U.S. Underwriting Agreement, all the Ordinary Shares agreed to
be purchased by either the International Underwriters or the U.S.
Underwriters, as the case may be, pursuant to their respective agreements must
be so purchased. The Price to Public and Underwriting Discount per Ordinary
Share for the International Offering and the U.S. Offering will be identical.
The closing of the U.S. Offering is a condition to the closing of the
International Offering and the closing of the International Offering is a
condition to the closing of the U.S. Offering.
82
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Each International Underwriter has severally agreed, that, as part of the
distribution of the 1,800,000 Ordinary Shares offered by the International
Underwriters, (i) it is not purchasing any Ordinary Shares for the account of
any United States or Canadian Person, (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any Ordinary Shares or
distribute this Prospectus to any person in the United States or Canada, or to
any United States or Canadian Person and (iii) any dealer to whom it may sell
any Ordinary Shares will represent that it is not purchasing for the account
of any United States or Canadian Person and agree that it will not offer or
resell, directly or indirectly, any Ordinary Shares in the United States or
Canada, or to any United States or Canadian Person or to any other dealer who
does not so represent and agree. Each U.S. Underwriter has severally agreed
that, as part of the distribution of the 6,100,000 Ordinary Shares by the U.S.
Underwriters, (i) it is not purchasing any Ordinary Shares for the account of
anyone other than a United States or Canadian Person, (ii) it has not offered
or sold, and will not offer or sell, directly or indirectly, any Ordinary
Shares or distribute any Prospectus relating to the U.S. Offering to any
person outside of the United States or Canada, or to anyone other than a
United States or Canadian Person and (iii) any dealer to whom it may sell any
Ordinary Shares will represent that it is not purchasing for the account of
anyone other than a United States or Canadian Person and agree that it will
not offer or resell, directly or indirectly, any Ordinary Shares outside of
the United States or Canada, or to anyone other than a United States or
Canadian Person or to any dealer who does not so represent and agree.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement between the U.S.
Underwriters and the International Underwriters. "United States or Canadian
Person" means any person who is a national or resident of the United States or
Canada, any corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada or of any political
subdivision thereof, and any estate or trust the income of which is subject to
United States or Canadian federal income taxation, regardless of its source
(other than any non-United States or non-Canadian branch of any United States
or Canadian person), and includes any United States or Canadian branch of a
person other than a United States or Canadian Person.
Pursuant to the Agreement Between U.S. Underwriters and the International
Underwriters, sales may be made between the U.S. Underwriters and the
International Underwriters of such number of Ordinary Shares as may be
mutually agreed. The price of any Ordinary Shares so sold shall be the Price
to Public, less an amount not greater than the concession to securities
dealers. To the extent that there are sales between the International
Underwriters and the U.S. Underwriters pursuant to the Agreement Between U.S.
Underwriters and the International Underwriters, the number of Ordinary Shares
initially available for sale by the International Underwriters or by the U.S
Underwriters may be more or less than the amount specified on the cover page
of this Prospectus.
Each International Underwriter has severally represented and agreed that (i)
it has not offered or sold and, prior to the expiry of six months from the
closing date of the Offerings, will not offer or sell in the United Kingdom,
by means of any document, any Ordinary Shares other than to persons whose
ordinary activities would involve them in acquiring, holding, managing or
disposing of investments (whether as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted in and
will not result in an offer to the public within the meaning of the Public
Offers of Securities Regulations 1995 (the "Regulations"); (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the Ordinary Shares in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on, and will only issue or
pass on, to any person in the United Kingdom any document received by it in
connection with the issue of the Ordinary Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995, or is a person to whom the document
may otherwise be issued or passed on.
83
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Purchases of the Ordinary Shares offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the Price to Public set forth in the cover
page hereof.
The U.S. Underwriting Agreement provides that the Company will indemnify the
U.S. Underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, or contribute to payments the U.S.
Underwriters may be required to make in respect thereof.
The International Underwriting Agreement provides that the Company will
indemnify the International Underwriters against certain liabilities and
expenses, including contributing to payments the International Underwriters
may be required to make in respect thereof.
The existing holders of Ordinary Shares have agreed not to affect any public
sale or distribution (including any sale pursuant to Rule 144 of the
Securities Act) of any Ordinary Shares or securities convertible into, or
exchangeable or exercisable for Ordinary Shares, for 180 days from the date of
this Prospectus, without the prior written consent of Salomon Brothers Inc.
During and after the Offerings, the Underwriters may purchase and sell the
Ordinary Shares in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offerings. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to
syndicate members of other broker-dealers in respect of the Ordinary Shares in
the Offerings for their account may be reclaimed by the syndicate if such
Ordinary Shares are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Ordinary Shares which may be higher than the price that
might otherwise prevail in the open market.
Prior to the Offerings, there has been no public market for the Ordinary
Shares. The Price to Public will be determined by negotiations between the
Company and the Representatives. Among the factors to be considered in
determining the Price to Public are prevailing market conditions, the market
values of publicly traded companies that the Underwriters believe to be
somewhat comparable to the Company, the demand for the Ordinary Shares and for
similar securities of publicly traded companies that the Underwriters believe
to be somewhat comparable to the Company, the future prospects of the Company
and its industry in general, sales, earnings and certain other financial and
operating information of the Company in recent periods, and other factors
deemed relevant. There can be no assurance that the prices at which the
Ordinary Shares will sell in the public market after the Offerings will not be
lower than the Price to Public.
The closing of the Concurrent Offering is conditioned upon the closing of
the initial public offering. The price of the Ordinary Shares to be sold to
the Concurrent Purchaser in the Concurrent Offering is equal to the initial
public offering price. The Placement Agents in connection with the Concurrent
Offering will be paid a fee of $ per share for each Ordinary Share sold in
the Concurrent Offering in consideration for the provision of certain advisory
services and for acting as the Company's Placement Agents, which fee is equal
to the underwriting discount payable in connection with the initial public
offering. The Placement Agents will be indemnified by the Company against
certain liabilities, including liabilities under the Securities Act.
Certain existing shareholders (including 5% or greater shareholders),
directors and officers of the Company may purchase Ordinary Shares from the
Underwriters in the Offerings. The Company may reserve some of the Ordinary
Shares offered hereby for sale to certain individuals, including employees of
the Company and other entities with whom the directors of the Company are
affiliated, and members of their families. The price of such Ordinary Shares
to such persons will be the Price to Public set forth on the cover of this
Prospectus. The number of Ordinary Shares available to the general public will
be reduced to the extent those persons purchase the reserved Ordinary Shares.
Any Ordinary Shares not so purchased will be offered in the initial public
offering at the Price to Public set forth on the cover of this Prospectus.
84
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
Certain of the International Underwriters and U.S. Underwriters provide
financial advisory services to or are engaged in other financial transactions
with the Company for which they have received and will receive customary
compensation. The Company has retained Rothschild Natural Resources LLC, an
affiliate of ABN AMRO Rothschild, to act as the Company's financial advisor in
connection with the anticipated project financing with respect to the San
Cristobal Project.
85
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE
PROSPECTUS IN CONNECTION WITH THE OFFERS MADE BY THE PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE INTERNATIONAL UNDERWRITERS. NEI-
THER THE DELIVERY OF THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THE PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OF-
FER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 8
Concurrent Offering...................................................... 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Corporate Structure...................................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
The Company.............................................................. 28
Properties............................................................... 30
Development Project...................................................... 31
Advanced Exploration Properties.......................................... 40
Other Mineral Properties................................................. 48
Metals Market Overview................................................... 51
Republic of Bolivia...................................................... 53
Management............................................................... 57
Executive Compensation................................................... 64
Principal Shareholders................................................... 69
Certain Transactions..................................................... 72
Description of Ordinary Shares........................................... 75
Shares Eligible for Future Sale.......................................... 81
Underwriting............................................................. 82
Taxation................................................................. 85
Experts.................................................................. 89
Legal Matters............................................................ 89
Additional Information................................................... 90
Glossary................................................................. 91
Conversion Table......................................................... 96
Index to Consolidated Financial Statements............................... F-1
</TABLE>
UNTIL , 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR
NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS INTERNATIONAL UNDERWRITERS AND WITH RE-
SPECT TO THEIR UNSOLD ALLOTMENTS.
9,000,000 SHARES
APEX SILVER
MINES LIMITED
ORDINARY SHARES
(PAR VALUE $0.01 PER SHARE)
[LOGO OF APEX SILVER MINES LIMITED APPEARS HERE]
SALOMON BROTHERS INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL
ABN AMRO ROTHSCHILD
SMITH BARNEY INC.
PROSPECTUS
, 1997
[ALTERNATE BACK COVER PAGE FOR INTERNATIONAL PROSPECTUS]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses, other than the underwriting
discounts and commissions, expected to be incurred in connections with the
issuance and distribution of the securities registered under this Registration
Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 47,046
AMEX Listing Fee................................................. $ 50,000
NASD Filing Fee.................................................. $ 10,500
Blue Sky Fees and Expenses*...................................... $ 10,000
Printing and Engraving Expenses*................................. $ 300,000
Legal Fees and Expenses*......................................... $ 800,000
Accounting Fees and Expenses*.................................... $ 250,000
Transfer Agent's Fees and Expenses*.............................. $ 3,500
Miscellaneous*................................................... $ 28,954
----------
Total.......................................................... $1,500,000
==========
</TABLE>
- --------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Companies Act (1995 Revision) of the Cayman Islands provides in Section
77 that:
The liability of the directors, manager or the managing director of a
company may, if so provided by the memorandum of association, be unlimited.
The Articles of Association of the Company provide as follows:
85. (a) Every Director (including for the purposes of this Article any
Alternate Director appointed pursuant to the provisions of
these Articles), Managing Director, Secretary, Assistant
Secretary, and, at the discretion of the Board of Directors,
other officer, consultant, employee or agent, for the time
being and from time to time of the Company and the personal
representatives of the same shall be indemnified and secured
harmless out of the assets and funds of the Company against all
actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by him in or about the
conduct of the Company's business or affairs or in the
execution or discharge of his duties, powers, authorities or
discretions, including without prejudice to the generality of
the foregoing, any costs, expenses, losses or liabilities
incurred by him in defending (whether successfully or
otherwise) any civil proceedings concerning the Company or its
affairs in any court whether in the Cayman Islands or elsewhere
provided, that no indemnification shall be available in the
case of wilful default or fraud.
(b) No such Director, Alternate Director, Managing Director, agent,
Secretary, Assistant Secretary or other officer of the Company
shall be liable (i) for the acts, receipts, neglects, defaults
or omissions of any other such director or officer or agent of
the Company or (ii) by reason of his having joined in any
receipt for money not received by him personally or (iii) for
any loss on account of defect of title to any property of the
Company or (iv) on account of the insufficiency of any security
in or upon which any money of the Company shall be invested or
(v) for any loss incurred through any bank, broker or other
agent or (vi) for any loss occasioned by any negligence,
default, breach of duty, breach of trust, error of
II-1
<PAGE>
judgment or oversight on his part or (vii) for any loss, damage
or misfortune whatsoever which may happen in or arise from the
execution or discharge of the duties, powers authorities, or
discretions of his office or in relation thereto, unless the
same shall happen through his own dishonesty.
(c) The Board of Directors may authorize the Company to purchase
and maintain insurance on behalf of any person described in
Section 83(a), against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Company would have the power
to indemnify him against such liability under the provisions of
this Section 83.
To the extent that it is permitted to do so by these provisions, the Company
intends to give an indemnity to each of its directors and to arrange for the
liabilities under these indemnities to be covered.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its formation in March of 1996, Ordinary Shares have been issued in
the following transactions:
1. Effective as of August 6, 1996, the Company issued 4,256,700 Ordinary
Shares at a price of $8.00 per share to subscribers in a Private Placement.
Salomon Brothers Inc, S.G. Warburg & Co. Inc. and Matrix U.S.A., LLC acted
as Private Placement agents for the Offering. The Company paid $1,243,050
to the Private Placement agents as a fee for their services. All of the
shares issued were issued to "accredited investors" as defined within
Regulation D under the Securities Act of 1933, as amended.
2. Effective as of August 6, 1996, the Company issued (i) 25,000 Ordinary
Shares to each of Ms. Berliner and Messrs. Buchanan, Mohamed Kashoggi and
de Lucio in exchange for their respective two and one-half percent (2.5%)
interests in Andean; (ii) 25,000 Ordinary Shares to Mr. McDonald in
exchange for his profits interests in certain Mexican and Honduran
properties and his one share of Cordillera Mexico; and (iii) 25,000
Ordinary Shares to Mr. Golan in exchange for his two and one-half percent
(2.5%) interest in Apex Asia.
3. Effective as of September 30, 1996, the Company issued 115,207
Ordinary Shares to Mr. William Natbony at the then per share book value of
the Company in exchange for consulting services.
4. Effective as of August 15, 1997, the Company issued (i) 268,496
Ordinary Shares to Mintec in exchange for Mintec's two and one-half percent
(2.5%) interest in ASC Bolivia, (ii) 113,595 Ordinary Shares to Johnny
Delgado Achaval in consideration of his consulting and other work for the
Company, and (iii) 25,000 Ordinary Shares to Mada Limited in consideration
for its and Mr. Golan's work for the Company.
The Company believes that the foregoing described issuances of securities,
if they constitute sales, are exempt from registration under the Securities
Act of 1933, as amended, by virtue of the exemption provided by Section 4(2)
thereof for transactions not involving a public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. Attached hereto are the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and the U.S.
Underwriters.
1.2 Form of Underwriting Agreement between the Registrant and the
International Underwriters.
1.3 Form of Placement Agency Agreement between the Registrant and the
Placement Agents.
3.1 Form of Amended and Restated Memorandum of Association of the
Registrant.*
3.2 Form of Amended and Restated Articles of Association of the
Registrant.*
4.1 Specimen of certificate representing the Registrant's Ordinary Shares,
par value $0.01 per share.
5.1 Opinion of W.S. Walker & Company as to the validity of the Ordinary
Shares (Cayman Islands law).
10.1 Shareholders' Agreement, dated as of August 6, 1996, among the
Shareholders of the Registrant.*
10.2 Form of consent to amendment of above Shareholders' Agreement, dated
March 21, 1995.*
10.3 Buy-Sell Agreement, dated as of August 6, 1996, by and among the
Registrant, Apex LDC, Litani and Silver Holdings.*
10.4 Summary of the Registrant's 401(K) Plan.*
10.5 Management Services Agreement among the Registrant and its
subsidiaries.*
10.6 Form of Registrant's Non-Employee Director's Plan.*
10.7 Form of Registrant's Employees' Share Option Plan.*
10.8 Form of Registrant's Share Option Agreement.*
10.9 Employment contract between the Registrant and Marcel F. DeGuire,
dated July 23, 1996.*
10.10 Employment contract between the Registrant and Gregory Marlier, dated
September 26, 1996.*
10.11 Employment contract between the Registrant and Keith R. Hulley, dated
August 14, 1996.*
10.12 Employment contract between the Registrant and Douglas M. Smith, Jr.,
dated January 21, 1997.*
10.13 English translation of Deed of Lease and Purchase Option Contract
between Monica de Prudencio and Mineria Tecnia Consultores Asociados
S.A. ("Mintec"), dated November 7, 1994, regarding the Tesorera and
Jayula concessions, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
10.14 English translation of Assignment Agreement, between ASC Bolivia LDC
and Mintec regarding the rights to the above agreement, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.15 English translation of the Lease and Purchase Option Contract between
Empresa Minera Yana Mallcu S.A. and Mintec, dated February 7, 1996,
regarding the Toldos concession, with an attached note from Keith
Hulley, a director of the Registrant, as required by Rule 306 of
Regulation S-T.*
10.16 English translation of the Assignment of Lease and Purchase Option
Agreement among Banco Industrial S.A., Mintec and ASC Bolivia LDC,
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.*
10.17 English translation of the Purchase Option Agreement between Mintec
and Litoral Mining Cooperative Ltd., dated August 17, 1995, regarding
the Animas concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.18 English translation of the Assignment and Assumption Agreement between
Mintec and ASC Bolivia LDC, dated May 22, 1996, regarding the Animas
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.*
10.19 English translation of the Purchase Agreement between ASC Bolivia LDC
and Litoral Mining Cooperative Ltd., regarding the Animas concessions
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.*
10.20 English translation of the Joint Venture Agreement between Corporacion
Minera Boliviano S.A. ("Comibol") and ASC Bolivia LDC, regarding the
Cobrizos Concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
10.21 English translation of the Joint Venture Agreement between Comibol and
ASC Bolivia LDC, regarding the Choroma Concession, with an attached
note from Keith Hulley, a director of the Registrant, as required by
Rule 306 of Regulation S-T.*
10.22 Mining Agreement between Compania Minera Ocote and Kerry A. McDonald,
dated June 24, 1994, regarding the El Ocote concession.*
10.23 Assignment and Assumption Agreement between Kerry A. McDonald and
Cordilleras Silver Mines Ltd., dated September 27, 1994, regarding the
assignment of the above Mining Agreement.*
10.24 Acknowledgment from Bruce Wallis in his capacity as President of
Compania Minera Ocote S. de R.L. that Cordilleras Silver Mines
(Cayman) LDC has been assigned Kerry A. McDonald's rights under the
above Mining Agreement, dated July 10, 1995.*
10.25 English translation of the agreement between Andean Silver Corporation
LDC and 190 of the co-owners of the assets which previously belonged
to Empressa Minera San Juan de Lucanas, S.A. ("EMSJ"), regarding the
San Juan de Lucanas concession, dated January 12, 1995, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.26 English translation of the agreement between Andean Silver Corporation
LDC and 133 of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, dated January
12, 1995, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.*
10.27 English translation of the form of agreement between 16 individuals
who are some of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.28 Board Designation Agreement, dated October 28, 1997, by and between
the Registrant and Silver Holdings.
10.29 Registration Rights and Voting Agreement, dated October 28, 1997 by
and among the Registrant, Silver Holdings, Consolidated, Argentum,
Aurum LLC and Thomas S. Kaplan.
10.30 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Consolidated.
10.31 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Argentum LLC.
10.32 English translation of the Purchase Agreement between Monica de
Prudencio and ASC Bolivia, regarding the Tesorera and Jayula
concessions, dated September 3, 1997, with an attached note from Keith
Hulley as required by Rule 306 of Regulation S-T.*
11 Statement regarding computation of per share earnings.*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
21 List of Subsidiaries.*
23.1 Consent of W.S. Walker & Company (included as part of Exhibit 5.1).
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of CPM Group.*
23.5 Consent of Mineral Resource Development Inc.*
23.6 Consent of Knight Piesold LLC.*
23.7 Consent of Pincock, Allen & Holt.*
23.8 Consent of Mine Reserves Associates, Inc.*
23.9 Consent of Kvaerner Metals.*
23.10 Consent of Behre Dolbear.*
24.1 Powers of attorney of the Registrant (included on page II-6 hereof).
</TABLE>
- --------
*Previously filed.
ITEM 17. UNDERTAKINGS.
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 provisions described in Item 14 of this
registration statement or otherwise may be permitted, 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 Securities Act
and is, 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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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) The undersigned registrant hereby undertakes to provide the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized in, New York, New York on November 18, 1997.
Apex Silver Mines Limited
/s/ Thomas S. Kaplan
By: _________________________________
THOMAS S. KAPLAN
CHAIRMAN, BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment has been signed by the following persons in the capacities as set
forth below on November 18, 1997.
SIGNATURE TITLE DATE
--------- -----
/s/ Thomas S. Kaplan Director
- ------------------------------------- (Registrant's
THOMAS S. KAPLAN authorized
representative in
the United States)
* Director
- -------------------------------------
HARRY M. CONGER
* Director
- -------------------------------------
MICHAEL COMNINOS
* Director
- -------------------------------------
EDUARDO S. ELSZTAIN
* Director
- ------------------------------------- November 18,
DAVID SEAN HANNA 1997
* Director
- -------------------------------------
OVE HOEGH
* Director
- -------------------------------------
KEITH R. HULLEY
* Director
- -------------------------------------
RICHARD KATZ
* Director
- -------------------------------------
PAUL SOROS
* /s/ Thomas S. Kaplan
_____________________________________
THOMAS S. KAPLAN
ATTORNEY-IN-FACT
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and the U.S.
Underwriters.
1.2 Form of Underwriting Agreement between the Registrant and the
International Underwriters.
1.3 Form of Placement Agency Agreement between the Registrant and the
Placement Agents.
3.1 Form of Amended and Restated Memorandum of Association of the
Registrant.*
3.2 Form of Amended and Restated Articles of Association of the
Registrant.*
4.1 Specimen of certificate representing the Registrant's Ordinary Shares,
par value U.S. $0.01 per share.
5.1 Opinion of W.S. Walker & Company as to the validity of the Ordinary
Shares (Cayman Islands law).
10.1 Shareholders' Agreement, dated as of August 6, 1996, among the
Shareholders of the Registrant.*
10.2 Form of consent to amendment of above Shareholders' Agreement, dated
March 21, 1995.*
10.3 Buy-Sell Agreement, dated as of August 6, 1996, by and among the
Registrant, Apex LDC, Litani and Silver Holdings.*
10.4 Summary of the Registrant's 401(K) Plan.*
10.5 Management Services Agreement among the Registrant and its
subsidiaries.*
10.6 Form of Registrant's Non-Employee Director's Plan.*
10.7 Form of Registrant's Employees' Share Option Plan.*
10.8 Form of Registrant's Share Option Agreement.*
10.9 Employment contract between the Registrant and Marcel F. DeGuire,
dated July 23, 1996.*
10.10 Employment contract between the Registrant and Gregory Marlier, dated
September 26, 1996.*
10.11 Employment contract between the Registrant and Keith R. Hulley, dated
August 14, 1996.*
10.12 Employment contract between the Registrant and Douglas M. Smith, Jr.,
dated January 21, 1997.*
10.13 English translation of Deed of Lease and Purchase Option Contract
between Monica de Prudencio and Mineria Tecnia Consultores Asociados
S.A. ("Mintec"), dated November 7, 1994, regarding the Tesorera and
Jayula concessions, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
10.14 English translation of Assignment Agreement, between ASC Bolivia LDC
and Mintec, regarding the rights to the above agreement, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.15 English translation of the Lease and Purchase Option Contract between
Empresa Minera Yana Mallcu S.A. and Mintec, dated February 7, 1996,
regarding the Toldos concession, with an attached note from Keith
Hulley, a director of the Registrant, as required by Rule 306 of
Regulation S-T.*
10.16 English translation of the Assignment of Lease and Purchase Option
Agreement among Banco Industrial S.A., Mintec and ASC Bolivia LDC,
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.*
10.17 English translation of the Purchase Option Agreement between Mintec
and Litoral Mining Cooperative Ltd. dated, August 17, 1995, regarding
the Animas concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.18 English translation of the Assignment and Assumption Agreement between
Mintec and ASC Bolivia LDC, dated May 22, 1996, regarding the Animas
concession, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.*
10.19 English translation of the Purchase Agreement between ASC Bolivia LDC
and Litoral Mining Cooperative Ltd., regarding the Animas Concession
with an attached note from Keith Hulley, a director of the Registrant,
as required by Rule 306 of Regulation S-T.*
10.20 English translation of the Joint Venture Agreement between Corporacion
Minera Boliviano S.A. ("Comibol") and ASC Bolivia LDC, regarding the
Cobrizos Concession, with an attached note from Keith Hulley, a
director of the Registrant, as required by Rule 306 of Regulation S-
T.*
10.21 English translation of the Joint Venture Agreement between Comibol and
ASC Bolivia LDC, regarding the Choroma Concession, with an attached
note from Keith Hulley, a director of the Registrant, as required by
Rule 306 of Regulation S-T.*
10.22 Mining Agreement between Compania Minera Ocote and Kerry A. McDonald,
dated June 24, 1994, regarding the El Ocote concession.*
10.23 Assignment and Assumption Agreement between Kerry A. McDonald and
Cordilleras Silver Mines Ltd., dated September 27, 1994, regarding the
assignment of the above Mining Agreement.*
10.24 Acknowledgment from Bruce Wallis in his capacity as President of
Compania Minera Ocote S. de R.L. that Cordilleras Silver Mines
(Cayman) LDC has been assigned Kerry A. McDonald's rights under the
above Mining Agreement, dated July 10, 1995.*
10.25 English translation of the agreement between Andean Silver Corporation
LDC and 190 of the co-owners of the assets which previously belonged
to Empressa Minera San Juan de Lucanas, S.A. ("EMSJ"), regarding the
San Juan de Lucanas concession, dated January 12, 1995, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.26 English translation of the agreement between Andean Silver Corporation
LDC and 133 of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, dated January
12, 1995, with an attached note from Keith Hulley, a director of the
Registrant, as required by Rule 306 of Regulation S-T.*
10.27 English translation of the form of agreement between 16 individuals
who are some of the co-owners of the assets which previously belonged
to EMSJ, regarding the San Juan de Lucanas concession, with an
attached note from Keith Hulley, a director of the Registrant, as
required by Rule 306 of Regulation S-T.*
10.28 Board Designation Agreement, dated October 28, 1997, by and between
the Registrant and Silver Holdings.
10.29 Registration Rights and Voting Agreement, dated October 28, 1997 by
and among the Registrant, Silver Holdings, Consolidated, Argentum,
Aurum LLC and Thomas S. Kaplan.
10.30 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Consolidated.
10.31 Amended and Restated Voting Trust Agreement, dated October 29, 1997,
between Thomas Kaplan and Argentum LLC.
10.32 English translation of the Purchase Agreement between Monica de
Prudencio and ASC Bolivia, regarding the Tesorera and Jayula
concessions, dated September 3, 1997, with an attached note from Keith
Hulley as required by Rule 306 of Regulation S-T.*
11 Statement regarding computation of per share earnings.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
21 List of Subsidiaries.*
23.1 Consent of W.S. Walker & Company (included as part of Exhibit 5.1).
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of CPM Group.*
23.5 Consent of Mineral Resource Development Inc.*
23.6 Consent of Knight Piesold LLC.*
23.7 Consent of Pincock, Allen & Holt.*
23.8 Consent of Mine Reserves Associates, Inc.*
23.9 Consent of Kvaerner Metals.*
23.10 Consent of Behre Dolbear.*
24.1 Powers of attorney of the Registrant (included on page II-6 hereof).
</TABLE>
- --------
* Previously Filed
<PAGE>
EXHIBIT 1.1
W&S DRAFT
11/13/97
Apex Silver Mines Limited
7,200,000 Shares/1/
Ordinary Shares
($.01 par value)
U.S. Underwriting Agreement
New York, New York
November , 1997
Salomon Brothers Inc
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
Smith Barney Inc.
As U.S. Representatives of the several
U.S. Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Apex Silver Mines Limited, a Cayman Islands corporation (the
"Company") proposes to sell to the underwriters named in Schedule I hereto (the
"U.S. Underwriters"), for whom you (the "U.S. Representatives") are acting as
representatives, 7,200,000 shares of Ordinary Shares, $.01 par value ("Ordinary
Shares"), of the Company, (said shares to be issued and sold by the Company
being hereinafter called the "U.S. Underwritten Securities"). The Company also
proposes to grant to the U.S. Underwriters an option to purchase up to 1,080,000
additional shares of Ordinary Shares (the "U.S. Option Securities"; the U.S.
Option Securities, together with the U.S. Underwritten Securities, being
hereinafter called the "U.S. Securities"). It is understood that the Company is
concurrently entering into an International Underwriting Agreement dated the
date hereof (the "International Underwriting Agreement") providing for the sale
by the Company of an aggregate of 1,800,000 shares of Ordinary Shares (said
shares to be sold by the Company pursuant to the International Underwriting
Agreement being hereinafter called the "International Underwritten Securities"),
and providing for the grant to the International Underwriters of an option to
purchase from the Company
- ---------------------------
/1/ Plus an option to purchase from the Company up to 1,350,000 additional
shares to cover over-allotments.
<PAGE>
up to 270,000 additional shares of Ordinary Shares (the "International Option
Securities"; the International Option Securities, together with the
International Underwritten Securities, being hereinafter called the
"International Securities" and the U.S. Securities, together with the
International Securities, being hereinafter called the "Securities"). It is
further understood and agreed that the International Underwriters and the U.S.
Underwriters have entered into an Agreement Between U.S. Underwriters and
International Underwriters dated the date hereof (the "Agreement Between U.S.
Underwriters and International Underwriters"), pursuant to which, among other
things, the International Underwriters may purchase from the U.S. Underwriters a
portion of the U.S. Securities to be sold pursuant to the U.S. Underwriting
Agreement and the U.S. Underwriters may purchase from the International
Underwriters a portion of the International Securities to be sold pursuant to
the International Underwriting Agreement. To the extent there are no additional
U.S. Underwriters listed on Schedule I other than you, the term U.S.
Representatives as used herein shall mean you, as U.S. Underwriters, and the
terms U.S. Representatives and U.S. Underwriters shall mean either the singular
or plural as the context requires.
1. Representations and Warranties.
-------------------------------
(a) The Company represents and warrants to, and agrees with, each U.S.
Underwriter as set forth below in this Section 1. Certain terms used in this
Section 1 are defined in Section 17 hereof.
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file number 333-
34685) on Form S-1, including related preliminary prospectuses, for the
registration under the Act of the offering and sale of the Securities. The
Company may have filed one or more amendments thereto, including the
related preliminary prospectuses, each of which has previously been
furnished to you. The Company will next file with the Commission either
(A) prior to the Effective Date of such registration statement, a further
amendment to such registration statement (including the form of final
prospectus) or (B) after the Effective Date of such registration statement,
final prospectuses in accordance with Rules 430A and 424(b)(1) or (4). In
the case of clause (B), the Company has included in such registration
statement, as amended at the Effective Date, all information (other than
Rule 430A Information) required by the Act and the rules there under to be
included in such registration statement and the Prospectuses. As filed,
such amendment and form of final prospectuses, or such final prospectuses,
shall contain all Rule 430A Information, together with all other such
required information, and, except to the extent the U.S. Representatives
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the Execution Time or, to
the extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that contained in
the latest U.S. Preliminary Prospectus) as the Company has advised you,
prior to the Execution Time, will be included or made therein.
It is understood that two forms of prospectus are to be used in
connection with the offering and sale of the Securities: one form of
prospectus relating to the U.S. Securities,
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which are to be offered and sold to United States and Canadian Persons, and
one form of prospectus relating to the International Securities, which are
to be offered and sold to persons other than United States and Canadian
Persons. The two forms of prospectus are identical except for the outside
front cover page, the inside front cover page, the discussion under the
heading "Underwriting" and the outside back cover page. Such form of
prospectus relating to the U.S. Securities as first filed pursuant to Rule
424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is
made, such form of prospectus included in the Registration Statement at the
Effective Date, is hereinafter called the "U.S. Prospectus"; such form of
prospectus relating to the International securities as first filed pursuant
to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule
424(b) is made, such form of prospectus included in the Registration
Statement at the Effective Date, is hereinafter called the "International
Prospectus"; and the U.S. Prospectus and the International Prospectus are
hereinafter collectively called the "Prospectuses".
(ii) On the Effective Date, the Registration Statement did or
will, and when the Prospectuses are first filed (if required) in accordance
with Rule 424(b) and on the Closing Date (as defined herein) and on any
date on which shares sold in respect of the U.S. Underwriters' over-
allotment option are purchased, if such date is not the Closing Date (a
"settlement date"), each Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act
and the rules thereunder; on the Effective Date and at the Execution Time,
the Registration Statement did not or will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, each Prospectus, if not filed
pursuant to Rule 424(b), will not, and on the date of any filing pursuant
to Rule 424(b) and on the Closing Date and any settlement date, each
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Company makes no representations or warranties as to the
-------
information contained in or omitted from the Registration Statement, or the
Prospectuses (or any supplement thereto) in reliance upon and in conformity
with information furnished herein or in writing to the Company by or on
behalf of any U.S. Underwriter through the U.S. Representatives
specifically for inclusion in the Registration Statement or the
Prospectuses (or any supplement thereto).
(iii) The subsidiaries of the Company listed on Annex A hereto
(individually a "Significant Subsidiary" and collectively, the "Significant
Subsidiaries") are the Significant Subsidiaries of the Company (within the
meaning of Rule 1-02 of Regulation S-X under the Act). The Company and
each Significant Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate
power and authority to own its properties and conduct its business as
described in each Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which
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<PAGE>
requires such qualification, except where any failure to be so qualified
would not individually or in the aggregate have a material adverse effect
on the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole.
(iv) All the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set forth in the
Prospectuses, all outstanding shares of capital stock of the Subsidiaries
are owned directly or indirectly by the Company free and clear of any
perfected security interest or any other security interests, claims, liens
or encumbrances.
(v) The Company's authorized equity capitalization is as set
forth in the Prospectuses; the Ordinary Shares of the Company conform in
all material respects to the description thereof contained in the
Prospectuses; the outstanding shares of Ordinary Shares have been duly and
validly authorized and issued and are fully paid and nonassessable; the
U.S. Securities being sold hereunder have been duly and validly authorized,
and, when issued and delivered to and paid for by the U.S. Underwriters
pursuant to this Agreement, will be fully paid and nonassessable; the U.S.
Securities have been duly authorized for listing, subject to official
notice of issuance on the American Stock Exchange; the certificates for the
U.S. Securities are in valid and sufficient form; the holders of
outstanding shares of Ordinary Shares of the Company are not entitled to
preemptive or other rights to subscribe for the U.S. Securities; and,
except as set forth in the Prospectuses, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of
Ordinary Shares of or ownership interests in the Company are outstanding.
(vi) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectuses, or to be filed as an exhibit thereto, which is not described
or filed as required; and the statements in the Prospectuses under the
heading "Taxation", and the summaries of legal and regulatory matters and
proceedings under the headings "Republic of Bolivia," "Description of
Ordinary Shares" and "Title and Ownership Rights" (under both of the
"Development Project" and "Advanced Exploration Properties" headings)
fairly summarize the matters therein described.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms.
(viii) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectuses, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
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<PAGE>
(ix) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection with
the transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated herein and in the
Prospectuses.
(x) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to,
(i) the charter or by-laws of the Company or any of its subsidiaries or
(ii) the terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which the Company or any of its subsidiaries is a
party or bound or to which their respective property is subject, or (iii)
any statute, law, rule, regulation, judgment, order or decree applicable to
the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties, which breach, violation or imposition would
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole.
(xi) Except as set forth in the Prospectuses, no holders of
securities of the Company have rights to the registration of such
securities under the Securities Act.
(xii) The consolidated financial statements and schedules of
the Company and its consolidated subsidiaries included in the Prospectuses
and the Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the Company as
of the dates and for the periods indicated, comply as to form with the
applicable accounting requirements of the Act and the rules and regulations
thereunder and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). The selected financial data
set forth under the caption "Selected Consolidated Financial Data" in the
Prospectuses and Registration Statement fairly present, on the basis stated
in the Prospectuses and the Registration Statement, the information
included therein.
(xiii) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or their property is pending or
threatened that (i) could reasonably be expected to have a material adverse
effect on the performance of this Agreement or the consummation of any of
the transactions contemplated hereby or (ii) could reasonably be expected
to have a material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from
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<PAGE>
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto)
(except, in the case of this clause (ii), for those that have been
disclosed in the Prospectuses).
(xiv) Except as set forth in the Prospectuses, each of the
Company and each of its subsidiaries, owns or leases all such properties as
are necessary to the conduct of its operations as presently conducted and
each of the Company and each of its subsidiaries owns, leases or possesses
the rights to all properties as are necessary to explore, develop and
exploit the San Cristobal Project (as defined in the Prospectuses) in
Bolivia, except where the failure to own, lease or possess the rights for
any property would not singularly or in the aggregate have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken
as a whole.
(xv) Except as set forth in the Prospectuses, neither the
Company nor any subsidiary is in violation of any law, rule or regulation
of any foreign national, federal, state or local governmental or regulatory
authority applicable to it or is not in non-compliance with any term or
condition of, or has failed to obtain and maintain in effect, any license,
certificate, permit, registration, concession, franchise, or other
governmental authorization required for the ownership or lease of its
property or the conduct of its business, which violation, non-compliance or
failure would individually or in the aggregate have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectuses; and
the Company has not received notice of any proceedings relating to the
revocation or material modification of any such license, certificate,
permit or other authorization.
(xvi) Neither the Company nor any subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, regulation, judgment, order or
decree of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or
such subsidiary or any of its properties, as applicable, which violation or
default would individually or in the aggregate have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole.
(xvii) Price Waterhouse LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries and
delivered their report with respect to the audited consolidated financial
statements and schedules included in the Prospectuses, are independent
public accountants with respect to the Company within the meaning of the
Act and the applicable published rules and regulations thereunder.
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<PAGE>
(xviii) There are no transfer taxes or other similar fees or
charges under foreign national law, federal law or the laws of any state,
or any political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the issuance by the
Company or sale by the Company of the Securities, except as set forth in
the Prospectuses or where the failure to pay any such taxes, fees or
charges would not individually or in the aggregate have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole.
(xix) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have
a material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the Prospectuses and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any
of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as described
in or as would not have a material adverse change in the condition
(financial or otherwise), prospects, earnings, business or properties of
the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth
in or contemplated in the Prospectuses.
(xx) Except as set forth in the Prospectuses, no labor
dispute with the employees of the Company or any of its subsidiaries exists
or is threatened or imminent that could result in a material adverse change
in the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectuses.
(xxi) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for; and neither the
Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a material
adverse change in the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Prospectuses.
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<PAGE>
(xxii) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets to
the Company or any other subsidiary of the Company, except as described in
or contemplated by the Prospectuses.
(xxiii) The Company and its subsidiaries possess all
certificates, authorizations, registrations, qualifications, licenses,
concessions, franchises and permits issued by the appropriate federal,
state, foreign national or local regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization,
registration, qualification, license, concession, franchise or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change in
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Prospectuses.
(xxiv) Neither the Company nor any of its subsidiaries is in
violation of any federal, state, foreign national or local law or
regulation relating to occupational safety and health or to the storage,
handling or transportation of hazardous or toxic materials and the Company
and its subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal, state, foreign national and
local occupational safety and health and environmental laws and regulations
to conduct their respective businesses, and the Company and each such
subsidiary is in compliance with all terms and conditions of any such
permit, license or approval, except any such violation of law or
regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals which would not, singly or in the aggregate,
result in a material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses.
(xxv) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
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<PAGE>
(xxvi) The subsidiaries listed on Annex A attached hereto are
the only significant subsidiaries of the Company as defined by Rule 1-02 of
Regulation S-X.
(xxvii) The Company's independent technical consultants Kvaerner
Metals, Davy Nonferrous Division, Mine Reserves Associates Inc., Pincock,
Allen & Holt, Mineral Resources Development Inc., Knight Piesold LLC and
Behre Dolbear who have affirmed and verified the proven and probable ore
reserves located at the San Cristobal Project as of __________, 1997 and as
set forth in or incorporated by reference in the Prospectuses are experts
(as such term is used in Section 11 (b) (3) of the Act) in the field of
mining engineering and have consented to being named in the Registration
Statement.
(xxviii) The information set forth in the Registration Statement
and the Prospectuses relating to the proven and probable ore reserves
located at the San Cristobal Project as of __________, 1997 has been
prepared by the Company, Kvaerner Metals, Davy Nonferrous Division, Mine
Reserves Associates Inc., Pincock, Allen & Holt, Mineral Resources
Development Inc., Knight Piesold LLC and Behre Dolbear, respectively,
materially in accordance with methods generally applied in the mining
industry and conforms in all material respects to the rules and regulations
of the Commission.
(xxix) No stamp or other issuance or transfer taxes or duties
and no capital gains, income, withholding or other taxes are payable by or
on behalf of the several Underwriters or International Underwriters to the
Cayman Islands or any political subdivision or taxing authority thereof or
therein purely as a direct consequence of the issue of Securities by the
Company to or for the respective accounts of the several Underwriters and
International Underwriters, in each case for resale and delivery to the
initial purchasers thereof in the manner contemplated herein and in the
International Underwriting Agreement.
(xxx) The Shareholders' Agreements dated July, 1996 by and
among the Company, Apex Silver Mines LDC, Consolidated Commodities Ltd.,
Mr. Thomas S. Kaplan, Litani Capital Management LDC, Silver Holdings LDC
and each shareholder a signatory thereto have been duly authorized,
executed and delivered and are valid and binding obligations enforceable,
against the parties thereto, including, without limitation, the "Holdback"
provisions of Section 7 thereto.
Any certificate signed by any director of the Company and any
executive officer of Apex Corporation and delivered to the U.S. Representatives
or counsel for the U.S. Underwriters in connection with the offering of the
Securities shall be deemed a representation and warranty by the Company, as to
matters covered thereby, to each U.S. Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions
------------------
and in reliance upon the representations and warranties herein set forth, the
Company agrees, to sell to each U.S. Underwriter, and each U.S. Underwriter
agrees, severally and not jointly, to purchase from the
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Company, at a purchase price of $_______________ per share, the amount of the
U.S. Underwritten Securities set forth opposite such U.S. Underwriter's name in
Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several U.S. Underwriters to purchase, severally and not jointly,
up to ____________ shares of the U.S. Option Securities at the same purchase
price per share as the U.S. Underwriters shall pay for the U.S. Underwritten
Securities. Said option may be exercised only to cover over-allotments in the
sale of the U.S. Underwritten Securities by the U.S. Underwriters. Said option
may be exercised in whole or in part at any time (but not more than once) on or
before the 30th day after the date of the U.S. Prospectus upon written or
facsimile notice by the U.S. Representatives to the Company setting forth the
number of shares of the U.S. Option Securities as to which the several U.S.
Underwriters are exercising the option and the settlement date. Delivery of
certificates for the shares of U.S. Option Securities by the Company, and
payment therefor to the Company, shall be made as provided in Section 3 hereof.
The number of shares of the U.S. Option Securities to be purchased by each U.S.
Underwriter shall be the same percentage of the total number of shares of the
U.S. Option Securities to be purchased by the several U.S. Underwriters as such
U.S. Underwriter is purchasing of the U.S. Underwritten Securities, subject to
such adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. Delivery and Payment. Delivery of and payment for the U.S.
---------------------
Underwritten Securities and the U.S. Option Securities (if the option provided
for in Section 2(b) hereof shall have been exercised on or before the second
Business Day prior to the Closing Date) shall be made at 10:00 AM, New York City
time, on ________________________________, 1997, or at such time on such later
date not more than two Business Days after the foregoing date as the U.S.
Representatives and the International Representatives shall designate, which
date and time may be postponed by agreement among the U.S. Representatives, the
International Representatives and the Company or as provided in Section 9 hereof
(such date and time of delivery and payment for the U.S. Securities being herein
called the "Closing Date"). Delivery of the U.S. Securities shall be made to
the U.S. Representatives for the respective accounts of the several U.S.
Underwriters against payment by the several U.S. Underwriters through the U.S.
Representatives of the respective aggregate purchase prices of the U.S.
Securities being sold by the Company to or upon the order of the Company by wire
transfer payable in same-day funds to an account specified by the Company.
Delivery of the U.S. Underwritten Securities and the U.S. Option Securities
shall be made through the facilities of The Depository Trust Company unless the
U.S. Representatives shall otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised
after the second business day prior to the Closing Date, the Company will
deliver the U.S. Option Securities (at the expense of the Company) to the U.S.
Representatives, at Seven World Trade Center, New York, New York, on the date
specified by the U.S. Representatives (which shall be within two Business Days
after exercise of said option), certificates for the U.S. Option Securities in
such names and denominations as the U.S. Representatives shall have requested
for the respective accounts of the several U.S. Underwriters, against payment by
the several U.S. Underwriters through the U.S. Representatives
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<PAGE>
of the purchase price thereof to or upon the order of the Company by wire
transfer payable in same-day funds to an account specified by the Company. If
settlement for the U.S. Option Securities occurs after the Closing Date, the
Company will deliver to the U.S. Representatives on the settlement date for the
U.S. Option Securities, and the obligation of the U.S. Underwriters to purchase
the U.S. Option Securities shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the International Underwriting
Agreement, and that the settlement date, if any, shall occur simultaneously with
the "settlement date" under the International Underwriting Agreement.
4. Offering by Underwriters. It is understood that the
-------------------------
several U.S. Underwriters propose to offer the U.S. Securities for sale to the
public as set forth in the U.S. Prospectus.
5. Agreements.
-----------
(a) The Company agrees with the several U.S. Underwriters that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the Securities, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectuses or any Rule 462(b)
Registration Statement unless the Company has furnished you a copy for your
review prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectuses is otherwise required
under Rule 424(b), the Company will cause the Prospectuses, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the U.S.
Representatives of such timely filing. The Company will promptly advise
the U.S. Representatives (A) when the Registration Statement, if not
effective at the Execution Time, shall have become effective, (B) when the
Prospectuses, and any supplement thereto, shall have been filed (if
required) with the Commission pursuant to Rule 424(b) or when any Rule
462(b) Registration Statement shall have been filed with the Commission,
(C) when, prior to termination of the offering of the Securities, any
amendment to the Registration Statement shall have been filed or become
effective, (D) of any request by the Commission or its staff for any
amendment of the Registration Statement, or any Rule 462(b) Registration
Statement, or for any supplement to the Prospectuses or of any additional
information, (E) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F) of
the receipt by the Company of any notification with
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respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order or the suspension of any such qualification and, if
issued, to obtain as soon as possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which either of the Prospectuses as then supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend the Registration Statement or supplement either of the
Prospectuses to comply with the Act or the rules thereunder, the Company
promptly will (i) prepare and file with the Commission, subject to the
second sentence of paragraph (a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance and (ii) supply any supplemented Prospectuses to you in such
quantities as you may reasonably request.
(iii) As soon as practicable, the Company will make generally
available to its security holders and to the U.S. Representatives an
earnings statement or statements of the Company and its subsidiaries which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(iv) The Company will furnish to the U.S. Representatives and
counsel for the U.S. Underwriters, without charge, four (4) signed copies
of the Registration Statement (including exhibits thereto) and to each
other U.S. Underwriter a copy of the Registration Statement (without
exhibits thereto) and, so long as delivery of a prospectus by an U.S.
Underwriter or dealer may be required by the Act or otherwise required, as
many copies of each U.S. Preliminary Prospectus and the U.S. Prospectus and
any supplement thereto as the U.S. Representatives may reasonably request.
The Company will pay the expenses of printing or other production of all
documents relating to the offering.
(v) The Company will cooperate with the U.S. Representatives
and counsel for the U.S. Representatives in connection with endeavoring to
obtain qualification of the Securities for sale under the laws of such
jurisdictions as the U.S. Representatives may designate, will maintain such
qualifications in effect so long as required for the distribution of the
U.S. Securities and will pay any fee of the National Association of
Securities Dealers, Inc., in connection with its review of the offering;
provided, however, that the Company shall not be required to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not otherwise so subject.
(vi) The Company will not, for a period of 180 days following
the Execution Time, without the prior written consent of Salomon Brothers
Inc, offer, sell or
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<PAGE>
contract to sell, or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in the
disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company) directly or indirectly, or announce the offering
of, any other shares of Ordinary Shares or any securities convertible into,
or exchangeable for, shares of Ordinary Shares; provided, however, that the
-------- -------
Company may issue and sell Ordinary Shares pursuant to any employee or
director stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the Execution Time and described in the
Prospectuses; and the Company may issue Ordinary Shares issuable upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time or pursuant to the Buy-Sell Agreement as disclosed in the
Prospectuses.
(b) Each U.S. Underwriter agrees that (i) it is not purchasing any of
the U.S. Securities for the account of anyone other than a United States or
Canadian Person, (ii) it has not offered or sold, and will not offer or sell,
directly or indirectly, any of the U.S. Securities or distribute any U.S.
Prospectus to any person outside the United States or Canada, or to anyone other
than a United States or Canadian Person, and (iii) any dealer to whom it may
sell any of the U.S. Securities will represent that it is not purchasing for the
account of anyone other than a United States or Canadian Person and agree that
it will not offer or resell, directly or indirectly, any of the U.S. Securities
outside the United States or Canada, or to anyone other than a United States or
Canadian Person or to any other dealer who does not so represent and agree;
provided, however, that the foregoing shall not restrict (A) purchases and sales
- -------- -------
between the International Underwriters on the one hand and the U.S. Underwriters
on the other hand pursuant to the Agreement Between U.S. Underwriters and
International Underwriters, (B) stabilization transactions contemplated under
the Agreement Between U.S. Underwriters and International Underwriters,
conducted through Salomon Brothers Inc (or through the U.S. Representatives and
International Representatives) as part of the distribution of the Securities,
and (C) sales to or through (or distributions of U.S. Prospectuses or U.S.
Preliminary Prospectuses to) United States or Canadian Persons who are
investment advisors, or who otherwise exercise investment discretion, and who
are purchasing for the account of anyone other than a United States or Canadian
Person.
(c) The agreements of the U.S. Underwriters set forth in paragraph (b)
of this Section 5 shall terminate upon the earlier of the following events:
(i) a mutual agreement of the U.S. Representatives and the
International Representatives to terminate the selling restrictions set
forth in paragraph (b) of this Section 5 and in Section 5(b) of the
International Underwriting Agreement; or
(ii) the expiration of a period of 30 days after the Closing
Date, unless (A) the International Representatives shall have given notice
to the Company and the Representatives that the distribution of the
International Securities by the International Underwriters has not yet been
completed, or (B) the Representatives shall have given notice
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<PAGE>
to the Company and the International Underwriters that the distribution of
the U.S. Securities by the U.S. Underwriters has not yet been completed. If
such notice by the Representatives or the International Representatives is
given, the agreements set forth in such paragraph (b) shall survive until
the earlier of (1) the event referred to in clause (i) of this subsection
(c) or (2) the expiration of an additional period of 30 days from the date
of any such notice.
6. Conditions to the Obligations of the U.S. Underwriters. The
-------------------------------------------------------
obligations of the U.S. Underwriters to purchase the U.S. Underwritten
Securities and the U.S. Option Securities, as the case may be, shall be subject
to the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time, the Closing Date and any settlement
date pursuant to Section 3 hereof, to the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the U.S. Representatives and the International
Representatives agree in writing to a later time, the Registration Statement
will become effective not later than (i) 6:00 PM New York City time on the date
of determination of the public offering price, if such determination occurred at
or prior to 3:00 PM New York City time on such date or (ii) 9:30 AM on the
Business Day following the day on which the public offering price was
determined, if such determination occurred after 3:00 PM New York City time on
such date; if filing of either of the Prospectuses, or any supplement thereto,
is required pursuant to Rule 424(b), the Prospectuses, and any such supplement,
will be filed in the manner and within the time period required by Rule 424(b);
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have furnished to the U.S. Representatives the
opinion of W.S. Walker & Company, Cayman Islands counsel for the Company, dated
the Closing Date, to the effect that:
(i) each of the Company and its subsidiaries (individually a
"Subsidiary" and collectively the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and conduct
its business as described in the Prospectuses, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification, except where such
breach, violation or imposition would not individually or in the aggregate
have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and,
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<PAGE>
except as otherwise set forth in the Prospectuses, all outstanding shares
of capital stock of the Subsidiaries are owned, directly or indirectly, by
the Company free and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other security interests,
claims, liens or encumbrances;
(iii) the outstanding shares of Ordinary Shares have been duly
and validly authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder by the Company have been duly and validly
authorized, and, when issued and delivered to and paid for by the U.S.
Underwriters pursuant to this Agreement and by the International
Underwriters pursuant to the International Underwriting Agreement, will be
fully paid and nonassessable; the certificates for the Securities are in
valid and sufficient form; and the holders of outstanding shares of capital
stock of the Company are not entitled to preemptive or other rights to
subscribe for the Securities;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be disclosed
in the Registration Statement which is not adequately disclosed in the
Prospectuses, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectuses, or to be filed as an exhibit thereto, which is not described
or filed as required; and the summaries of legal and regulatory matters and
proceedings under the heading "Description of Ordinary Shares" fairly
summarize the matters therein described;
(v) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein or in the
International Underwriting Agreement nor the fulfillment of the terms
hereof will conflict with, result in a breach or violation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or its subsidiaries pursuant to, (i) the charter or by-laws of the Company
or its subsidiaries or (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or its
subsidiaries is a party or bound or to which their respective property is
subject, or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or its subsidiaries or
any of its or their respective properties, except where such breach,
violation or imposition would not individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole;
(vi) the Company's agreement to the choice of law provisions set
forth in Section 14 hereof and in Section 15 of the International
Underwriting Agreement will be recognized by the courts of the Cayman
Islands; the Company can sue and be sued in its own
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<PAGE>
name under the laws of the Cayman Islands, the irrevocable submission of
the Company to the non-exclusive personal jurisdiction of a New York Court,
the waiver by the Company of any objection to the venue of a proceeding of
a New York Court and the agreement of the Company that this Agreement shall
be governed by and construed in accordance with the laws of the State of
New York are legal, valid and binding; and judgment obtained in a New York
Court arising out of or in relation to the obligations of the Company under
this Agreement and the International Underwriting Agreement, not being a
sum payable in respect of taxes or other charges of a like nature or a fine
or other penalty, is enforceable against the Company in the courts of the
Cayman Islands; and
(vii) The Company is not entitled to any immunity on the basis of
sovereignty or otherwise in respect of its obligations under this Agreement
or the International Underwriting Agreement and could not successfully
interpose any such immunity as a defense in any suit or action brought or
maintained in respect of its obligations under this Agreement or the
International Underwriting Agreement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws of the
Cayman Islands, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the U.S. Underwriters and (B)
as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Reference to the
Prospectuses in this paragraph (b) include any supplements thereto at the
Closing Date.
(c) The Company shall have furnished to the U.S. Representatives the
opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Company,
dated the Closing Date, to the effect that:
(i) each of the Company and its subsidiaries incorporated in
the United States (individually a "Domestic Subsidiary" and collectively
the "Domestic Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and authority to own its properties and conduct its business as
described in the Prospectuses, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, except where such breach,
violation or imposition would not individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each
Domestic Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set forth in the
Prospectuses, all outstanding shares of Ordinary Shares of the Domestic
Subsidiaries are owned by the Company, directly or indirectly, free and
clear
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<PAGE>
of any perfected security interest and, to the knowledge of such counsel,
after due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectuses; the Ordinary Shares of the Company conform in
all material respects to the description thereof contained in the
Prospectuses; the Securities being sold hereunder by the Company are duly
authorized for listing, subject to official notice of issuance, on the
American Stock Exchange; and, except as set forth in the Prospectuses, to
such counsel's knowledge, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of Ordinary Shares
or ownership interests in the Company are outstanding;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be disclosed
in the Registration Statement which is not adequately disclosed in the
Prospectuses, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectuses, or to be filed as an exhibit thereto, which is not described
or filed as required; the descriptions contained in the Prospectuses under
the heading "Taxation" constitute fair summaries of those statues and
regulations discussed therein applicable to the offering of the U.S.
Securities;
(v) the Registration Statement has become effective under the
Act; any required filing of the Prospectuses, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or threatened
and the Registration Statement and each of the Prospectuses (other than the
financial statements and other financial information contained therein, as
to which such counsel need not express any opinion) comply as to form in
all material respects with the applicable requirements of the Act and the
rules thereunder; and such counsel has no reason to believe that on the
Effective Date or at the Execution Time the Registration Statement contains
or contained any untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses as of their
date and on the Closing Date include any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (in each case, other than the financial statements and
other financial information contained therein, as to which such counsel
need not express any opinion);
(vi) this Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;
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<PAGE>
(vii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectuses, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended;
(viii) no consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection with
the transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of any
jurisdiction (and the securities laws of any jurisdiction outside the
United States) in connection with the purchase and distribution of the
Securities by the U.S. Underwriters in the manner contemplated in this
Agreement and in the Prospectuses and such other approvals (specified in
such opinion) as have been obtained;
(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein or in the
International Underwriting Agreement nor the fulfillment of the terms
hereof will conflict with, result in a breach or violation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or its subsidiaries pursuant to, (i) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or its subsidiaries is a party or bound or to which their
respective property is subject, or (ii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or its subsidiaries of
any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or its
subsidiaries or any of its or their respective properties, except where
such breach, violation or imposition would not individually or in the
aggregate have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole; and
(x) Except as set forth in the Prospectuses, no holders of
securities of the Company have rights to the registration of such
securities under the Securities Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the Federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the U.S. Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials. Reference to the Prospectuses in this paragraph (b) include any
supplements thereto at the Closing Date.
(d) The Company shall have furnished to the U.S. Representatives the
opinion of Quintanilla & Soria, Bolivian counsel for the Company, dated the
Closing Date, with respect to matters of title and to corporate status in
Bolivia and other related matters as the U.S. Representatives may reasonably
require.
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<PAGE>
(e) The Company shall have furnished to the U.S. Representatives the
opinion of Bufete Gutierrez-Falla, Honduran counsel for the Company, dated the
Closing Date, with respect to matters of title and to corporate status in
Honduras and other related matters as the U.S. Representatives may reasonably
require.
(f) The Company shall have furnished to the U.S. Representatives the
opinion of Rodriguez-Mariategui & Vidal, Peruvian counsel for the Company, dated
the Closing Date, with respect to matters of title and corporate status in Peru
and other related matters as the U.S. Representatives may reasonably require.
(g) The U.S. Representatives shall have received from Winston &
Strawn, counsel for the U.S. Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the issuance and sale of the U.S. Securities, the
Registration Statement, the Prospectuses (together with any supplement thereto)
and other related matters as the U.S. Representatives may reasonably require,
and the Company shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(h) The Company shall have furnished to the U.S. Representatives a
certificate of the Company, signed by the Chairman of the Company and the Vice
President of Finance and Chief Financial Officer of Apex Corporation, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectuses, any supplements to the
Prospectuses and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the same
effect as if made on 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 Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectuses (exclusive of any supplement thereto), there
has been no material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto).
(i) At the Execution Time and at the Closing Date, Price Waterhouse,
LLP shall have furnished to the U.S. Representatives letters, dated respectively
as of the Execution Time and as of the Closing Date, in form and substance
satisfactory to the U.S. Representatives, confirming that
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<PAGE>
they are independent accountants within the meaning of the Act and the
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the audited financial statements and
financial statement schedules included in the Registration Statement and
the Prospectuses and reported on by them comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71 of the unaudited interim financial information
for the nine month period ended September 30, 1997 and as at September 30,
1996; carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the
stockholders, directors and audit committees of the Company and the
Subsidiaries; and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to December 31, 1996,
nothing came to their attention which caused them to believe that:
(1) any unaudited financial statements included in the
Registration Statement and the Prospectuses do not comply in form in
all material respects with applicable accounting requirements of the
Act and with the published rules and regulations of the Commission
with respect to registration statements on Form S-1; and said
unaudited financial statements are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Registration Statement and the Prospectuses;
(2) with respect to the period subsequent to September 30,
1997, there were any changes, at a specified date not more than five
days prior to the date of the letter, in the accumulated deficit of
the Company and its subsidiaries or capital stock of the Company or
decreases in the shareholders' equity of the Company as compared with
the amounts shown on the September 30, 1997, consolidated balance
sheet included in the Registration Statement and the Prospectuses, or
for the period from October 1, 1997 to such specified date there were
any decreases, as compared with the corresponding period in the
preceding year; in interest income or in total or per share amounts of
interest income of the Company and its subsidiaries, except in all
instances for changes or decreases set forth in such letter, in which
case the letter shall be accompanied by an explanation by the Company
as to the significance thereof unless said explanation is not deemed
necessary by the U.S. Representatives;
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<PAGE>
(3) the unaudited amounts of [describe the capsule
information and its location] do not agree with the amounts set forth
in the unaudited financial statements for the same periods or were not
determined on a basis substantially consistent with that of the
corresponding amounts in the audited financial statements included in
the Registration Statement and the Prospectuses;
(4) the information included in the Registration Statement
and Prospectuses in response to Regulation S-K, Item 301 (Selected
Financial Data), Item 302 (Supplementary Financial Information) and
Item 402 (Executive Compensation) is not in conformity with the
applicable disclosure requirements of Regulation S-K; and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company and its subsidiaries) set forth in the Registration Statement
and the Prospectuses agrees with the accounting records of the Company and
its subsidiaries, excluding any questions of legal interpretation.
References to the Prospectuses in this paragraph (i) include any
supplement thereto at the date of the letter.
(j) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectuses (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (i) of this Section 6 or (ii) any change, or
any development involving a prospective material change, in or affecting the
condition (financial or otherwise), earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto) the
effect of which, in any case referred to in clause (i) or (ii) above, is, in the
sole judgment of the U.S. Representatives, so material and adverse as to make it
impractical or inadvisable to proceed with the offering or delivery of the U.S.
Securities as contemplated by the Registration Statement (exclusive of any
amendment thereof) and the Prospectuses (exclusive of any supplement thereto).
(k) On or prior to the Execution Time, the American Stock Exchange
shall have approved the U.S. Underwriters' participation in the distribution of
the U.S. Securities to be sold hereunder.
(l) At the Execution Time, the Company shall have furnished to the
U.S. Representatives a letter substantially in the form of Exhibit __ hereto
from each officer and director of the Company addressed to the U.S.
Representatives, in which each such person agrees not to offer, sell, contract
to sell, pledge or otherwise dispose of, or file a registration statement with
the
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Commission in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act with respect to, any shares of Ordinary Shares of
the Company or any securities convertible into or exercisable or exchangeable
for such Ordinary Shares, or publicly announce an intention to effect any such
transaction, for a period of 180 days after the date of this Agreement, other
than (i) any shares of Ordinary Shares to be sold hereunder, (ii) any option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus to which this Agreement relates and (iii) other
than shares of Ordinary Shares disposed of as bona fide gifts approved by
Salomon Brothers Inc.
(m) Prior to the Closing Date, the Company shall have furnished to the
U.S. Representatives such further information, certificates and documents as the
U.S. Representatives may reasonably request.
(n) The closing of the purchase of the International Underwritten
Securities to be issued and sold by the Company pursuant to the International
Underwriting Agreement shall occur concurrently with the closing described
herein.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the U.S. Representatives and counsel for the U.S. Underwriters,
this Agreement and all obligations of the U.S. Underwriters hereunder may be
canceled at, or at any time prior to, the Closing Date by the U.S.
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel
for the Company, at 590 Madison Avenue, New York, New York, on the Closing Date.
7. Reimbursement of U.S. Underwriters' Expenses. If the sale of the
---------------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the U.S. Underwriters set forth in Section 6 hereof is not
satisfied, because of any termination pursuant to Section 10 hereof or because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the U.S. Underwriters, the Company will reimburse the U.S.
Underwriters severally through Salomon Brothers Inc on demand for all out-of-
pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the proposed purchase and
sale of the U.S. Securities.
8. Indemnification and Contribution. (a) The Company agrees to
---------------------------------
indemnify and hold harmless each U.S. Underwriter, the directors, officers,
employees and agents of each U.S. Underwriter and each person who controls any
U.S. Underwriter within the meaning of either the Act
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<PAGE>
or the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any U.S. or International Preliminary
Prospectus or in either of the Prospectuses, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i) the
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Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any U.S. Underwriter through the U.S.
Representatives specifically for inclusion therein, and (ii) such indemnity with
respect to any preliminary prospectus shall not inure to the benefit of any U.S.
Underwriter (or any person controlling such U.S. Underwriter) from whom the
person asserting such loss, claim, damage, or liability purchased the U.S.
Securities which are the subject thereof if such person did not receive a copy
of the U.S. Prospectus (as then amended or supplemented if the Company shall
have furnished any amendment or supplement thereto) at or prior to the
confirmation of the sale of such U.S. Securities to such person in any case
where such delivery is required by the Act and the untrue statement or omission
of a material fact contained in such preliminary prospectus was corrected in the
Prospectuses (as so amended or supplemented). This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity to each U.S. Underwriter, but only with reference to written
information relating to such U.S. Underwriter furnished to the Company by or on
behalf of such U.S. Underwriter through the U.S. Representatives specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any U.S.
Underwriter may otherwise have. The Company acknowledges that the statements
set forth in the last paragraph of the cover page regarding delivery of the U.S.
Securities, the stabilization legend in block capital letters on page (ii) and,
under the heading "Underwriting" [or "Plan of Distribution",] (i) the sentences
related to concessions and reallowances and (ii) the paragraph related to
stabilization in any U.S. or International Preliminary Prospectus and the
Prospectuses constitute the only information furnished in writing by or on
behalf of the several U.S. Underwriters for inclusion in any U.S. or
International Preliminary Prospectus or the Prospectuses.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be
-23-
<PAGE>
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof; but the failure so to
notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than pursuant to the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the U.S. Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the U.S. Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company and by the U.S.
Underwriters from the offering of the U.S. Securities; provided, however, that
-------- -------
in no case shall any U.S. Underwriter (except as may be provided in any
agreement among underwriters relating to the offering of the U.S. Securities) be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Securities purchased by such U.S. Underwriter hereunder. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the Company and the U.S. Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the U.S.
-24-
<PAGE>
Underwriters in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by it, and benefits
received by the U.S. Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the cover
page of the U.S. Prospectus. Relative fault shall be determined by reference to,
among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information provided by the Company or the U.S. Underwriters, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the U.S. Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls an U.S. Underwriter within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of an U.S.
Underwriter shall have the same rights to contribution as such U.S. Underwriter,
and each person who controls the Company within the meaning of either the Act or
the Exchange Act, and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Default by an U.S. Underwriter. If any one or more U.S.
-------------------------------
Underwriters shall fail to purchase and pay for any of the U.S. Securities
agreed to be purchased by such U.S. Underwriter or U.S. Underwriters hereunder
and such failure to purchase shall constitute a default in the performance of
its or their obligations under this Agreement, the remaining U.S. Underwriters
shall be obligated severally to take up and pay for (in the respective
proportions which the amount of U.S. Securities set forth opposite their names
in Schedule I hereto bears to the aggregate amount of U.S. Securities set forth
opposite the names of all the remaining U.S. Underwriters) the U.S. Securities
which the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of U.S.
-------- -------
Securities which the defaulting U.S. Underwriter or U.S. Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate amount of U.S. Securities
set forth in Schedule I hereto, the remaining U.S. Underwriters shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the U.S. Securities, and if such nondefaulting U.S. Underwriters do not purchase
all the U.S. Securities, this Agreement will terminate without liability to any
nondefaulting U.S. Underwriter or the Company. In the event of a default by any
U.S. Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding five Business Days, as the U.S.
Representatives shall determine in order that the required changes in the
Registration Statement and the Prospectuses or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting U.S. Underwriter of its liability, if any, to the Company and any
nondefaulting U.S. Underwriter for damages occasioned by its default hereunder.
-25-
<PAGE>
10. Termination. This Agreement shall be subject to termination in
------------
the absolute discretion of the U.S. Representatives, by notice given to the
Company prior to delivery of and payment for the U.S. Securities, if at any time
prior to such time (i) trading in the Company's Ordinary Shares shall have been
suspended by the Commission or the American Stock Exchange or trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on either of such Exchanges, (ii) a banking moratorium shall have
been declared either by Federal or New York State authorities or (iii) there
shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war or other calamity or crisis the
effect of which on financial markets is such as to make it, in the sole judgment
of the U.S. Representatives, impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the U.S. Prospectus
(exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
-------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the U.S. Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of any U.S. Underwriter, or the Company
or any of the officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the U.S. Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
--------
effective only on receipt, and, if sent to the U.S. Representatives, will be
mailed, delivered or telefaxed to the Salomon Brothers Inc General Counsel (fax
no.: (212) 783-1752) and confirmed to the General Counsel, care of Salomon
Brothers Inc, at Seven World Trade Center, New York, New York, 10048, Attention:
General Counsel; or, if sent to the Company, will be mailed, delivered or
telefaxed to Thomas S. Kaplan (facsimile number___________________) and
confirmed to him at Apex Silver Mines Corporation, 1700 Lincoln Street, Suite
3050, Denver, Colorado 80203, attention of the Legal Department.
13. Successors. This Agreement will inure to the benefit of and be
-----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in one or more
------------
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
-26-
<PAGE>
16. Headings. The section headings used herein are for convenience
---------
only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
------------
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"International Preliminary Prospectus" shall have the meaning set
forth under "U.S. Preliminary Prospectus."
"Preliminary Prospectus" shall have the meaning set forth under "U.S.
Preliminary Prospectus."
"Prospectus" shall mean the prospectus relating to the Securities that
is first filed pursuant to Rule 424(b) after the Execution Time or, if no
filing pursuant to Rule 424(b) is required, shall mean the form of final
prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any Rule
430A Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.
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<PAGE>
"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating
to the offering covered by the initial registration statement.
"U.S. Preliminary Prospectus" and the "International Preliminary
Prospectus", respectively, shall mean any preliminary prospectus with
respect to the offering of the U.S. Securities and the International
Securities, as the case may be, referred to in paragraph (i) above and any
preliminary prospectus with respect to the offering of the U.S. Securities
and the International Securities, as the case may be, included in the
Registration Statement at the Effective Date that omits Rule 430A
Information; and the U.S. Preliminary Prospectus and the International
Preliminary Prospectus are hereinafter collectively called the "Preliminary
Prospectuses".
"United States or Canadian Person" shall mean any person who is a
national or resident of the United States or Canada, any corporation,
partnership, or other entity created or organized in or under the laws of
the United States or Canada or of any political subdivision thereof, or any
estate or trust the income of which is subject to United States or Canadian
Federal income taxation, regardless of its source (other than any non-
United States or non-Canadian branch of any United States or Canadian
Person), and shall include any United States or Canadian branch of a person
other than a United States or Canadian Person. "U.S." or "United States"
shall mean the United States of America (including the states thereof and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several U.S. Underwriters.
Very truly yours,
Apex Silver Mines Limited
By
------------------------------
Chairman
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<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
Smith Barney Inc.
By: Salomon Brothers Inc
By:
-------------------------------------
Vice President
For themselves and the other
several U.S. Underwriters
named in Schedule I to the foregoing
Agreement.
-29-
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of Shares
to be
Underwriters Purchased
- ------------ ----------------
<S> <C>
Salomon Brothers Inc..............
PaineWebber Incorporated..........
Scotia Capital Market (USA) Inc...
Smith Barney Inc..................
_______________
Total.............. 7,200,000
===============
</TABLE>
-30-
<PAGE>
EXHIBIT __
[Letterhead of officer or director of the Company]
Apex Silver Mines Limited
-------------------------
Public Offering of Ordinary Shares
----------------------------------
, 1997
------------
Salomon Brothers Inc
PaineWebber Incorporated
Scotia Capital Markets (USA) Inc.
Smith Barney Inc.
As U.S. Representatives of the several U.S. Underwriters,
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
U.S. Underwriting Agreement (the "Underwriting Agreement"), between Apex Silver
Mines Limited, a Cayman Islands corporation (the "Company"), and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Ordinary Shares, $.01 par value (the "Ordinary
Shares"), of the Company.
In order to induce you and the other U.S. Underwriters to enter into
the Underwriting Agreement, the undersigned will not, without the prior written
consent of Salomon Brothers Inc, offer, sell, contract to sell, pledge or
otherwise dispose of, or file a registration statement with the Commission in
respect of, or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the
Exchange Act with respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such capital
stock, or publicly announce an intention to effect any such transaction, for a
period of 180 days after the date of this Agreement, other than (i) any shares
of Ordinary Shares to be sold hereunder, (ii) any option or warrant or the
conversion of a security outstanding on the date hereof and referred to in the
Prospectus to which this Agreement relates and (iii) shares of Ordinary Shares
disposed of as bona fide gifts approved by Salomon Brothers Inc.
If for any reason the Underwriting Agreement shall be terminated prior
to the Closing Date (as defined in the Underwriting Agreement), the agreement
set forth above shall likewise be terminated.
Yours very truly,
[Signature of officer or director]
-31-
<PAGE>
[Name and address of officer or director]
-32-
<PAGE>
EXHIBIT 1.2
Apex Silver Mines Limited
1,800,000 Shares //1/
Ordinary Shares
($.01 par value)
International Underwriting Agreement
London, England
November __, 1997
Salomon Brothers International Limited
PaineWebber International
ABN AMRO Rothschild
Smith Barney Inc.
As International Representatives of the several
International Underwriters,
c/o Salomon Brothers International Limited
Victoria Plaza
111 Buckingham Palace Road
London SW1W 0SB ENGLAND
Ladies and Gentlemen:
Apex Silver Mines Limited, a Cayman Islands corporation (the
"Company"), proposes to sell to the underwriters named in Schedule I hereto (the
"International Underwriters"), for whom you (the "International
Representatives") are acting as representatives, 1,800,000 shares of Ordinary
Shares, $.01 par value ("Ordinary Shares"), of the Company, (said shares to be
issued and sold by the Company being hereinafter called the "International
Underwritten Securities"). The Company also proposes to grant to the
International Underwriters an option to purchase up to 270,000 additional shares
of Ordinary Shares (the "International Option Securities"; the International
Option Securities, together with the International Underwritten Securities,
being hereinafter called the "International Securities"). It is understood that
the Company is concurrently entering into a U.S. Underwriting Agreement dated
the date hereof (the "U.S. Underwriting Agreement") providing for the sale by
the Company of an aggregate of 7,200,000 shares of Ordinary Shares (said shares
to be sold by the Company pursuant to the U.S. Underwriting Agreement being
hereinafter called the "U.S. Underwritten Securities"), in the United States and
Canada through arrangements with certain underwriters in the United States and
Canada (the "U.S.
- -----------------------
/1/ Plus an option to purchase from Apex Silver Mines Limited up to 1,350,000
additional shares to cover over-allotments.
<PAGE>
Underwriters"), for whom Salomon Brothers Inc, PaineWebber Incorporated, Scotia
Capital Markets (USA) Inc. and Smith Barney Inc. are acting as representatives
(the "Representatives"), and providing for the grant to the U.S. Underwriters of
an option to purchase from the Company up to 1,080,000 additional shares of
Ordinary Shares (the "U.S. Option Securities"; the U.S. Option Securities,
together with the U.S. Underwritten Securities, being hereinafter called the
"U.S. Securities" and the International Securities, together with the U.S.
Securities, being hereinafter called the "Securities"). It is further understood
and agreed that the U.S. Underwriters and the International Underwriters have
entered into an Agreement Between U.S. Underwriters and International
Underwriters dated the date hereof (the "Agreement Between U.S. Underwriters and
International Underwriters"), pursuant to which, among other things, the
International Underwriters may purchase from the U.S. Underwriters a portion of
the U.S. Securities to be sold pursuant to the U.S. Underwriting Agreement and
the U.S. Underwriters may purchase from the International Underwriters a portion
of the International Securities to be sold pursuant to the International
Underwriting Agreement. To the extent there are no additional International
Underwriters listed on Schedule I other than you, the term International
Representatives as used herein shall mean you, as International Underwriters,
and the terms International Representatives and International Underwriters shall
mean either the singular or plural as the context requires.
1. Representations and Warranties.
-------------------------------
(a) The Company represents and warrants to, and agrees with, each
International Underwriter as set forth below in this Section 1. Certain terms
used in this Section 1 are defined in Section 17 hereof.
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement (file number 333-
34685) on Form S-1, including related preliminary prospectuses, for the
registration under the Act of the offering and sale of the Securities. The
Company may have filed one or more amendments thereto, including the
related preliminary prospectuses, each of which has previously been
furnished to you. The Company will next file with the Commission either (A)
prior to the Effective Date of such registration statement, a further
amendment to such registration statement (including the form of final
prospectus) or (B) after the Effective Date of such registration statement,
final prospectuses in accordance with Rules 430A and 424(b)(1) or (4). In
the case of clause (B), the Company has included in such registration
statement, as amended at the Effective Date, all information (other than
Rule 430A Information) required by the Act and the rules thereunder to be
included in such registration statement and the Prospectuses. As filed,
such amendment and form of final prospectuses, or such final prospectuses,
shall contain all Rule 430A Information, together with all other such
required information, and, except to the extent the International
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to
-2-
<PAGE>
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest International
Preliminary Prospectus) as the Company has advised you, prior to the
Execution Time, will be included or made therein.
It is understood that two forms of prospectus are to be used in
connection with the offering and sale of the Securities: one form of
prospectus relating to the U.S. Securities, which are to be offered and
sold to United States and Canadian Persons, and one form of prospectus
relating to the International Securities, which are to be offered and
sold to persons other than United States and Canadian Persons. The two
forms of prospectus are identical except for the outside front cover
page, the inside front cover page, the discussion under the heading
"Underwriting" and the outside back cover page. Such form of prospectus
relating to the U.S. Securities as first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
made, such form of prospectus included in the Registration Statement at
the Effective Date, is hereinafter called the "U.S. Prospectus"; such
form of prospectus relating to the International Securities as first
filed pursuant to Rule 424(b) after the Execution Time or, if no filing
pursuant to Rule 424(b) is made, such form of prospectus included in
the Registration Statement at the Effective Date, is hereinafter called
the "International Prospectus"; and the U.S. Prospectus and the
International Prospectus are hereinafter collectively called the
"Prospectuses".
(ii) On the Effective Date, the Registration Statement did or
will, and when the Prospectuses are first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein)
and on any date on which shares sold in respect of the International
Underwriters' over-allotment option are purchased, if such date is not
the Closing Date (a "settlement date"), each Prospectus (and any
supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and the rules thereunder; on the
Effective Date and at the Execution Time, the Registration Statement
did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
on the Effective Date, each Prospectus, if not filed pursuant to Rule
424(b), will not, and on the date of any filing pursuant to Rule 424(b)
and on the Closing Date and any settlement date, each Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Company makes no representations or warranties as to
-------
the information contained in or omitted from the Registration
Statement, or the Prospectuses (or any supplement thereto) in reliance
upon and in conformity with information furnished herein or in writing
to the Company by or on behalf of any International Underwriter through
the International Representatives
-3-
<PAGE>
specifically for inclusion in the Registration Statement or the
Prospectuses (or any supplement thereto).
(iii) The subsidiaries of the Company listed on Annex A hereto
(individually a "Significant Subsidiary" and collectively, the
"Significant Subsidiaries") are the Significant Subsidiaries of the
Company (within the meaning of Rule 1-02 of Regulation S-X under the
Act). The Company and each Significant Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or
organized with full corporate power and authority to own its properties
and conduct its business as described in each Prospectus, and is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification, except where any failure to be so qualified would not
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole.
(iv) All the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectuses, all outstanding shares of capital stock of
the Subsidiaries are owned directly or indirectly by the Company free
and clear of any perfected security interest or any other security
interests, claims, liens or encumbrances.
(v) The Company's authorized equity capitalization is as set
forth in the Prospectuses; the Ordinary Shares of the Company conform
in all material respects to the description thereof contained in the
Prospectuses; the outstanding shares of Ordinary Shares have been duly
and validly authorized and issued and are fully paid and nonassessable;
the International Securities being sold hereunder have been duly and
validly authorized, and, when issued and delivered to and paid for by
the International Underwriters pursuant to this Agreement, will be
fully paid and nonassessable; the International Securities have been
duly authorized for listing, subject to official notice of issuance on
the American Stock Exchange; the certificates for the International
Securities are in valid and sufficient form; the holders of outstanding
shares of Ordinary Shares of the Company are not entitled to preemptive
or other rights to subscribe for the International Securities; and,
except as set forth in the Prospectuses, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights
to convert any obligations into or exchange any securities for, shares
of Ordinary Shares of or ownership interests in the Company are
outstanding.
(vi) There is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectuses, or to be filed as an exhibit thereto, which is not
described or filed as required; and the statements
-4-
<PAGE>
in the Prospectuses under the heading "Taxation", and the summaries of
legal and regulatory matters and proceedings under the headings
"Republic of Bolivia," "Description of Ordinary Shares" and "Title and
Ownership Rights" (under both of the "Development Project" and
"Advanced Exploration Properties" headings) fairly summarize the
matters therein described.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding obligation
of the Company enforceable in accordance with its terms.
(viii) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Prospectuses, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(ix) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection
with the transactions contemplated herein, except such as have been
obtained under the Act and such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters in the manner
contemplated herein and in the Prospectuses.
(x) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will conflict with, result in a
breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, (i) the charter or by-laws of the Company or any of its
subsidiaries or (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which
their respective property is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any
of its subsidiaries of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or any of its subsidiaries or any of
their respective properties, which breach, violation or imposition
would individually or in the aggregate have a material adverse effect
on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole.
(xi) Except as set forth in the Prospectuses, no holders of
securities of the Company have rights to the registration of such
securities under the Securities Act.
(xii) The consolidated financial statements and schedules of the
Company
-5-
<PAGE>
and its consolidated subsidiaries included in the Prospectuses and the
Registration Statement present fairly in all material respects the
financial condition, results of operations and cash flows of the
Company as of the dates and for the periods indicated, comply as to
form with the applicable accounting requirements of the Act and the
rules and regulations thereunder and have been prepared in conformity
with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as otherwise noted
therein). The selected financial data set forth under the caption
"Selected Consolidated Financial Data" in the Prospectuses and
Registration Statement fairly present, on the basis stated in the
Prospectuses and the Registration Statement, the information included
therein.
(xiii) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or their property is pending or
threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation
of any of the transactions contemplated hereby or (ii) could reasonably
be expected to have a material adverse change in the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectuses (exclusive of any
supplement thereto) (except, in the case of this clause (ii), for those
that have been disclosed in the Prospectuses).
(xiv) Except as set forth in the Prospectuses, each of the
Company and each of its subsidiaries, owns or leases all such
properties as are necessary to the conduct of its operations as
presently conducted and each of the Company and each of its
subsidiaries owns, leases or possesses the rights to all properties as
are necessary to explore, develop and exploit the San Cristobal Project
(as defined in the Prospectuses) in Bolivia, except where the failure
to own, lease or possess the rights for any property would not
singularly or in the aggregate have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole.
(xv) Except as set forth in the Prospectuses, neither the
Company nor any subsidiary is in violation of any law, rule or
regulation of any foreign national, federal, state or local
governmental or regulatory authority applicable to it or is not in non-
compliance with any term or condition of, or has failed to obtain and
maintain in effect, any license, certificate, permit, registration,
concession, franchise, or other governmental authorization required for
the ownership or lease of its property or the conduct of its business,
which violation, non-compliance or failure would individually or in the
aggregate have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary
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<PAGE>
course of business, except as set forth in or contemplated in the
Prospectuses; and the Company has not received notice of any
proceedings relating to the revocation or material modification of any
such license, certificate, permit or other authorization.
(xvi) Neither the Company nor any subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its
property is subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or such subsidiary or any of its
properties, as applicable, which violation or default would
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole.
(xvii) Price Waterhouse LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements and schedules included in the Prospectuses, are
independent public accountants with respect to the Company within the
meaning of the Act and the applicable published rules and regulations
thereunder.
(xviii) There are no transfer taxes or other similar fees or
charges under foreign national law, federal law or the laws of any
state, or any political subdivision thereof, required to be paid in
connection with the execution and delivery of this Agreement or the
issuance by the Company or sale by the Company of the Securities,
except as set forth in the Prospectuses or where the failure to pay any
such taxes, fees or charges would not individually or in the aggregate
have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole.
(xix) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
would not have a material adverse change in the condition (financial or
otherwise), prospects, earnings, business or properties of the Company
and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in
or contemplated in the Prospectuses and has paid all taxes required to
be paid by it and any other assessment, fine or penalty levied against
it, to the extent that any of the foregoing is due and payable, except
for any such assessment, fine or penalty that is currently being
contested in good faith or as described in or as would not have a
material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not
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<PAGE>
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Prospectuses.
(xx) Except as set forth in the Prospectuses, no labor dispute
with the employees of the Company or any of its subsidiaries exists or
is threatened or imminent that could result in a material adverse
change in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the
Prospectuses.
(xxi) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse change in the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectuses.
(xxii) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from
the Company or from transferring any of such subsidiary's property or
assets to the Company or any other subsidiary of the Company, except as
described in or contemplated by the Prospectuses.
(xxiii) The Company and its subsidiaries possess all
certificates, authorizations, registrations, qualifications, licenses,
concessions, franchises and permits issued by the appropriate federal,
state, foreign national or local regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization,
registration, qualification, license, concession, franchise or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change
in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the
Prospectuses.
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<PAGE>
(xxiv) Neither the Company nor any of its subsidiaries is in
violation of any federal, state, foreign national or local law or
regulation relating to occupational safety and health or to the
storage, handling or transportation of hazardous or toxic materials and
the Company and its subsidiaries have received all permits, licenses or
other approvals required of them under applicable federal, state,
foreign national and local occupational safety and health and
environmental laws and regulations to conduct their respective
businesses, and the Company and each such subsidiary is in compliance
with all terms and conditions of any such permit, license or approval,
except any such violation of law or regulation, failure to receive
required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals which
would not, singly or in the aggregate, result in a material adverse
change in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the
Prospectuses.
(xxv) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xxvi) The subsidiaries listed on Annex A attached hereto are
the only significant subsidiaries of the Company as defined by Rule
1-02 of Regulation S-X.
(xxvii) The Company's independent technical consultants Kvaerner
Metals, Davy Nonferrous Division, Mine Reserves Associates Inc.,
Pincock, Allen & Holt, Mineral Resources Development Inc., Knight
Piesold LLC and Behre Dolbear who have affirmed and verified the proven
and probable ore reserves located at the San Cristobal Project as of
___________, 1997 and as set forth in or incorporated by reference in
the Prospectuses are experts (as such term is used in Section 11 (b)
(3) of the Act) in the field of mining engineering and have consented
to being named in the Registration Statement.
(xxviii) The information set forth in the Registration Statement
and the Prospectuses relating to the proven and probable ore reserves
located at the San Cristobal Project as of __________, 1997 has been
prepared by the Company, Kvaerner Metals, Davy Nonferrous Division,
Mine Reserves Associates Inc., Pincock, Allen & Holt, Mineral Resources
Development Inc., Knight Piesold LLC and Behre
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<PAGE>
Dolbear, respectively, materially in accordance with methods generally
applied in the mining industry and conforms in all material respects to
the rules and regulations of the Commission.
(xxix) No stamp or other issuance or transfer taxes or duties and
no capital gains, income, withholding or other taxes are payable by or
on behalf of the several Underwriters or International Underwriters to
the Cayman Islands or any political subdivision or taxing authority
thereof or therein purely as a direct consequence of the issue of
Securities by the Company to or for the respective accounts of the
several Underwriters and International Underwriters, in each case for
resale and delivery to the initial purchasers thereof in the manner
contemplated herein and in the U.S. Underwriting Agreement.
(xxx) The Shareholders' Agreements dated July, 1996 by and among
the Company, Apex Silver Mines LDC, Consolidated Commodities Ltd., Mr.
Thomas S. Kaplan, Litani Capital Management LDC, Silver Holdings LDC
and each shareholder a signatory thereto have been duly authorized,
executed and delivered and are valid and binding obligations
enforceable, against the parties thereto, including, without
limitation, the "Holdback" provisions of Section 7 thereto.
Any certificate signed by any director of the Company and any
executive officer of Apex Corporation and delivered to the
International Representatives or counsel for the International
Underwriters in connection with the offering of the Securities shall be
deemed a representation and warranty by the Company, as to matters
covered thereby, to each International Underwriter.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees, to sell to each International Underwriter, and each International
Underwriter agrees, severally and not jointly, to purchase from the Company, at
a purchase price of $ per share, the amount of the International Underwritten
Securities set forth opposite such International Underwriter's name in Schedule
I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several International Underwriters to purchase, severally and not
jointly, up to shares of the International Option Securities at the
same purchase price per share as the International Underwriters shall pay for
the International Underwritten Securities. Said option may be exercised only to
cover over-allotments in the sale of the International Underwritten Securities
by the International Underwriters. Said option may be exercised in whole or in
part at any time (but not more than once) on or before the 30th day after the
date of the International Prospectus upon written or facsimile notice by the
International Representatives to the Company setting forth the number of shares
of the International Option Securities as
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<PAGE>
to which the several International Underwriters are exercising the option and
the settlement date. Delivery of certificates for the shares of International
Option Securities by the Company, and payment therefor to the Company, shall be
made as provided in Section 3 hereof. The number of shares of the International
Option Securities to be purchased by each International Underwriter shall be the
same percentage of the total number of shares of the International Option
Securities to be purchased by the several International Underwriters as such
International Underwriter is purchasing of the International Underwritten
Securities, subject to such adjustments as you in your absolute discretion shall
make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the International
--------------------
Underwritten Securities and the International Option Securities (if the option
provided for in Section 2(b) hereof shall have been exercised on or before the
second Business Day prior to the Closing Date) shall be made at 10:00 AM, New
York City time, on , 1997, or at such time on such later
date not more than two Business Days after the foregoing date as the
International Representatives and the Representatives shall designate, which
date and time may be postponed by agreement among the International
Representatives, the Representatives and the Company or as provided in Section 9
hereof (such date and time of delivery and payment for the International
Securities being herein called the "Closing Date"). Delivery of the
International Securities shall be made to the International Representatives for
the respective accounts of the several International Underwriters against
payment by the several International Underwriters through the International
Representatives of the respective aggregate purchase prices of the International
Securities being sold by the Company to or upon the order of the Company by wire
transfer payable in same-day funds to an account specified by the Company.
Delivery of the International Underwritten Securities and the International
Option Securities shall be made through the facilities of The Depository Trust
Company unless the International Representatives shall otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised after
the second business day prior to the Closing Date, the Company will deliver the
International Option Securities (at the expense of the Company) to the
International Representatives, at Seven World Trade Center, New York, New York,
on the date specified by the International Representatives (which shall be
within two Business Days after exercise of said option), certificates for the
International Option Securities in such names and denominations as the
International Representatives shall have requested for the respective accounts
of the several International Underwriters, against payment by the several
International Underwriters through the International Representatives of the
purchase price thereof to or upon the order of the Company by wire transfer
payable in same-day funds to an account specified by the Company. If settlement
for the International Option Securities occurs after the Closing Date, the
Company will deliver to the International Representatives on the settlement date
for the International Option Securities, and the obligation of the International
Underwriters to purchase the International Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions,
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<PAGE>
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof.
It is understood and agreed that the Closing Date shall occur
simultaneously with the "Closing Date" under the U.S. Underwriting Agreement,
and that the settlement date, if any, shall occur simultaneously with the
"settlement date" under the U.S. Underwriting Agreement.
4. Offering by Underwriters. It is understood that the several
-------------------------
International Underwriters propose to offer the International Securities for
sale to the public as set forth in the International Prospectus.
5. Agreements.
-----------
(a) The Company agrees with the several International Underwriters
that:
(i) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectuses or any Rule 462(b) Registration
Statement unless the Company has furnished you a copy for your review prior
to filing and will not file any such proposed amendment or supplement to
which you reasonably object. Subject to the foregoing sentence, if the
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectuses is otherwise required under Rule
424(b), the Company will cause the Prospectuses, properly completed, and
any supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the International Representatives of
such timely filing. The Company will promptly advise the International
Representatives (A) when the Registration Statement, if not effective at
the Execution Time, shall have become effective, (B) when the Prospectuses,
and any supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration
Statement shall have been filed with the Commission, (C) when, prior to
termination of the offering of the Securities, any amendment to the
Registration Statement shall have been filed or become effective, (D) of
any request by the Commission or its staff for any amendment of the
Registration Statement, or any Rule 462(b) Registration Statement, or for
any supplement to the Prospectuses or of any additional information, (E) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (F) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such
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<PAGE>
stop order or the suspension of any such qualification and, if issued, to
obtain as soon as possible the withdrawal thereof.
(ii) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which either of the Prospectuses as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to
amend the Registration Statement or supplement either of the Prospectuses
to comply with the Act or the rules thereunder, the Company promptly will
(i) prepare and file with the Commission, subject to the second sentence of
paragraph (a) of this Section 5, an amendment or supplement which will
correct such statement or omission or effect such compliance and (ii)
supply any supplemented Prospectuses to you in such quantities as you may
reasonably request.
(iii) As soon as practicable, the Company will make generally
available to its security holders and to the International Representatives
an earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule 158
under the Act.
(iv) The Company will furnish to the International Representatives
and counsel for the International Underwriters, without charge, four (4)
signed copies of the Registration Statement (including exhibits thereto)
and to each other International Underwriter a copy of the Registration
Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an International Underwriter or dealer may be required by the
Act or otherwise required, as many copies of each International Preliminary
Prospectus and the International Prospectus and any supplement thereto as
the International Representatives may reasonably request. The Company will
pay the expenses of printing or other production of all documents relating
to the offering.
(v) The Company will cooperate with the International
Representatives and counsel for the International Representatives in
connection with endeavoring to obtain qualification of the Securities for
sale under the laws of such jurisdictions as the International
Representatives may designate, will maintain such qualifications in effect
so long as required for the distribution of the International Securities
and will pay any fee of the National Association of Securities Dealers,
Inc., in connection with its review of the offering; provided, however,
that the Company shall not be required to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not otherwise so subject.
(vi) The Company will not, for a period of 180 days following the
Execution Time, without the prior written consent of Salomon Brothers
International Limited, offer, sell or contract to sell, or otherwise
dispose of (or enter into any
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<PAGE>
transaction which is designed to, or could be expected to, result in the
disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company) directly or indirectly, or announce the offering
of, any other shares of Ordinary Shares or any securities convertible into,
or exchangeable for, shares of Ordinary Shares; provided, however, that the
-----------------
Company may issue and sell Ordinary Shares pursuant to any employee or
director stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the Execution Time and described in the
Prospectuses; and the Company may issue Ordinary Shares issuable upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time or pursuant to the Buy-Sell Agreement as disclosed in the
Prospectuses.
(b) Each International Underwriter agrees that (i) it is not
purchasing any of the International Securities for the account of any United
States or Canadian Person, (ii) it has not offered or sold, and will not offer
or sell, directly or indirectly, any of the International Securities or
distribute any International Prospectus to any person in the United States or
Canada, or to any United States or Canadian Person, and (iii) any dealer to whom
it may sell any of the International Securities will represent that it is not
purchasing for the account of any United States or Canadian Person and agree
that it will not offer or resell, directly or indirectly, any of the
International Securities in the United States or Canada, or to any United States
or Canadian Person or to any other dealer who does not so represent and agree;
provided, however, that the foregoing shall not restrict (A) purchases and sales
- -----------------
between the U.S. Underwriters on the one hand and the International Underwriters
on the other hand pursuant to the Agreement Between U.S. Underwriters and
International Underwriters, (B) stabilization transactions contemplated under
the Agreement Between U.S. Underwriters and International Underwriters,
conducted through Salomon Brothers International Limited (or through the
Representatives and International Representatives) as part of the distribution
of the Securities, and (C) sales to or through (or distributions of
International Prospectuses or International Preliminary Prospectuses to) persons
not United States or Canadian Persons who are investment advisors, or who
otherwise exercise investment discretion, and who are purchasing for the account
of any United States or Canadian Person.
(c) The agreements of the International Underwriters set forth in
paragraph (b) of this Section 5 shall terminate upon the earlier of the
following events:
(i) a mutual agreement of the Representatives and the International
Representatives to terminate the selling restrictions set forth in
paragraph (b) of this Section 5 and in Section 5(b) of the U.S.
Underwriting Agreement; or
(ii) the expiration of a period of 30 days after the Closing Date,
unless (A) the International Representatives shall have given notice to the
Company and the Representatives that the distribution of the International
Securities by the International
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<PAGE>
Underwriters has not yet been completed, or (B) the Representatives shall
have given notice to the Company and the International Underwriters that
the distribution of the U.S. Securities by the U.S. Underwriters has not
yet been completed. If such notice by the Representatives or the
International Representatives is given, the agreements set forth in such
paragraph (b) shall survive until the earlier of (1) the event referred to
in clause (i) of this subsection (c) or (2) the expiration of an additional
period of 30 days from the date of any such notice.
(d) Each International Underwriter severally represents and agrees
that:
(i) it has not offered or sold and will not offer or sell in the
United Kingdom, by means of any document, any International Securities
other than to persons whose ordinary business it is to buy or sell shares
or debentures, whether as principal or agent or in circumstances which do
not constitute an offer to the public within the meaning of the Companies
Act 1985;
(ii) it has complied and will comply with all applicable provisions
of The Financial Services Act 1986 with respect to anything done by it in
relation to the International Securities, in, from or otherwise involving
the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on
to any person in the United Kingdom any document received by it in
connection with the issue of the International Securities if that person is
of a kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1992 or a person to whom the
document may otherwise lawfully be issued or passed on.
6. Conditions to the Obligations of the International Underwriters.
---------------------------------------------------------------
The obligations of the International Underwriters to purchase the International
Underwritten Securities and the International Option Securities, as the case may
be, shall be subject to the accuracy of the representations and warranties on
the part of the Company contained herein as of the Execution Time, the Closing
Date and any settlement date pursuant to Section 3 hereof, to the accuracy of
the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of their respective
obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives and the International
Representatives agree in writing to a later time, the Registration
Statement will become effective not later than (i) 6:00 PM New York City
time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 9:30 AM on the Business Day following the day on which the
public offering price was determined, if such determination occurred after
3:00 PM New York City time on such date;
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<PAGE>
if filing of either of the Prospectuses, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectuses, and any such
supplement, will be filed in the manner and within the time period required
by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
(b) The Company shall have furnished to the International
Representatives the opinion of W.S. Walker & Company, Cayman Islands counsel for
the Company, dated the Closing Date, to the effect that:
(i) each of the Company and its subsidiaries (individually a
"Subsidiary" and collectively the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and conduct
its business as described in the Prospectuses, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification, except where such
breach, violation or imposition would not individually or in the aggregate
have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each Significant
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectuses, all outstanding shares of capital stock of the Subsidiaries
are owned directly or indirectly by the Company free and clear of any
perfected security interest and, to the knowledge of such counsel, after
due inquiry, any other security interests, claims, liens or encumbrances;
(iii) the outstanding shares of Ordinary Shares have been duly and
validly authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder by the Company have been duly and validly
authorized, and, when issued and delivered to and paid for by the
International Underwriters pursuant to this Agreement and by the U.S.
Underwriters pursuant to the U.S. Underwriting Agreement, will be fully
paid and nonassessable; the certificates for the Securities are in valid
and sufficient form; and the holders of outstanding shares of capital stock
of the Company are not entitled to preemptive or other rights to subscribe
for the Securities;
(iv) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be disclosed
in the Registration Statement which is not
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<PAGE>
adequately disclosed in the Prospectuses, and there is no franchise,
contract or other document of a character required to be described in the
Registration Statement or Prospectuses, or to be filed as an exhibit
thereto, which is not described or filed as required; and the summaries of
legal and regulatory matters and proceedings under the heading "Description
of Ordinary Shares" fairly summarize the matters therein described;
(v) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein or in the
U.S. Underwriting Agreement nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or its
subsidiaries pursuant to, (i) the charter or by-laws of the Company or its
subsidiaries or (ii) the terms of any indenture, contract, lease, mortgage,
deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which their respective
property is subject, or (iii) any statute, law, rule, regulation, judgment,
order or decree applicable to the Company or its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or its subsidiaries or
their respective properties, except where such breach, violation or
imposition would not individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken
as a whole;
(vi) The Company's agreement to the choice of law provisions set
forth in Section 15 hereof and in Section 14 of the U.S. Underwriting
Agreement will be recognized by the courts of the Cayman Islands; the
Company can sue and be sued in its own name under the laws of the Cayman
Islands, the irrevocable submission of the Company to the non-exclusive
personal jurisdiction of a New York Court, the waiver by the Company of any
objection to the venue of a proceeding of a New York Court and the
agreement of the Company that this Agreement shall be governed by and
construed in accordance with the laws of the State of New York are legal,
valid and binding; and judgment obtained in a New York Court arising out of
or in relation to the obligations of the Company under this Agreement and
the U.S. Underwriting Agreement, not being a sum payable in respect of
taxes or other charges of a like nature or a fine or other penalty, is
enforceable against the Company in the courts of the Cayman Islands; and
(vii) The Company is not entitled to any immunity on the basis of
sovereignty or otherwise in respect of its obligations under this Agreement
or the U.S. Underwriting Agreement and could not successfully interpose any
such immunity as a defense in any suit or action brought or maintained in
respect of its obligations under this Agreement or the U.S. Underwriting
Agreement.
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<PAGE>
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the laws of the
Cayman Islands, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the U.S. Underwriters and (B)
as to matters of fact, to the extent they deem proper, on certifi cates of
responsible officers of the Company and public officials. Reference to the
Prospectuses in this paragraph (b) include any supplements thereto at the
Closing Date.
(c) The Company shall have furnished to the International
Representatives the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
counsel for the Company, dated the Closing Date, to the effect that:
(i) each of the Company and its subsidiaries incorporated in the
United States (individually a "Domestic Subsidiary" and collectively the
"Domestic Subsidiaries") has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction in
which it is chartered or organized, with full corporate power and authority
to own its properties and conduct its business as described in the
Prospectuses, and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction which requires
such qualification, except where such breach, violation or imposition would
not individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each Domestic
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise set forth in the
Prospectuses, all outstanding shares of Ordinary Shares of the Domestic
Subsidiaries are owned by the Company, directly or indirectly, free and
clear of any perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) the Company's authorized equity capitalization is as set forth
in the Prospectuses; the Ordinary Shares of the Company conform in all
material respects to the description thereof contained in the Prospectuses;
the Securities being sold hereunder by the Company are duly authorized for
listing, subject to official notice of issuance, on the American Stock
Exchange; and, except as set forth in the Prospectuses, to such counsel's
knowledge, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of Ordinary Shares or ownership
interests in the Company are outstanding;
(iv) to the knowledge of such counsel, there is no pending or
threatened
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<PAGE>
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement which is not adequately disclosed in the Prospectuses, and there
is no franchise, contract or other document of a character required to be
described in the Registration Statement or Prospectuses, or to be filed as
an exhibit thereto, which is not described or filed as required; the
descriptions contained in the Prospectuses under the heading "Taxation"
constitute fair summaries of those statues and regulations discussed
therein applicable to the offering of the U.S. Securities;
(v) the Registration Statement has become effective under the Act;
any required filing of the Prospectuses, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or threatened
and the Registration Statement and each of the Prospectuses (other than the
financial statements and other financial information contained therein, as
to which such counsel need not express any opinion) comply as to form in
all material respects with the applicable requirements of the Act and the
rules thereunder; and such counsel has no reason to believe that on the
Effective Date or at the Execution Time the Registration Statement contains
or contained any untrue statement of a material fact or omitted or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses as of their
date and on the Closing Date include any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (in each case, other than the financial statements and
other financial information contained therein, as to which such counsel
need not express any opinion);
(vi) this Agreement and the U.S. Underwriting Agreement have been
duly authorized, executed and delivered by the Company;
(vii) the Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Prospectuses, will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended;
(viii) no consent, approval, authorization, filing with or order of
any court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the blue sky laws of any
jurisdiction (and the securities laws of any jurisdiction outside the
United States) in connection with the purchase and
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<PAGE>
distribution of the Securities by the International Underwriters in the
manner contemplated in this Agreement and in the Prospectuses and such
other approvals (specified in such opinion) as have been obtained;
(ix) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions contemplated herein or in the
U.S. Underwriting Agreement nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or its
subsidiaries pursuant to, (i) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or its
subsidiaries is a party or bound or to which their respective property is
subject, or (ii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or its subsidiaries or
any of its or their respective properties, except where such breach,
violation or imposition would not individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole; and
(x) Except as set forth in the Prospectuses, no holders of securities
of the Company have rights to the registration of such securities under the
Securities Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York or the Federal laws of the United States, to the extent they deem
proper and specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the International Underwriters and (B) as to matters of fact, to the extent
they deem proper, on certificates of responsible officers of the Company and
public officials. Reference to the Prospectuses in this paragraph (b) include
any supplements thereto at the Closing Date.
(d) The Company shall have furnished to the International
Representatives the opinion of Quintanilla & Soria, Bolivian counsel for the
Company, dated the Closing Date, with respect to matters of title and to
corporate status in Bolivia and other related matters as the International
Representatives may reasonably require.
(e) The Company shall have furnished to the International
Representatives the opinion of Bufete Gutierrez-Falla, Honduran counsel for the
Company, dated the Closing Date, with respect to matters of title and to
corporate status in Honduras and other related matters as the International
Representatives may reasonably require.
(f) The Company shall have furnished to the International
Representatives
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<PAGE>
the opinion of Rodriguez-Mariategui & Vidal, Peruvian counsel for the Company,
dated the Closing Date, with respect to matters of title and corporate status in
Peru and other related matters as the International Representative may
reasonably require.
(g) The International Representatives shall have received from
Winston & Strawn, counsel for the International Underwriters, such opinion or
opinions, dated the Closing Date, with respect to the issuance and sale of the
International Securities, the Registration Statement, the Prospectuses (together
with any supplement thereto) and other related matters as the International
Representatives may reasonably require, and the Company shall have furnished to
such counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(h) The Company shall have furnished to the International
Representatives a certificate of the Company, signed by the Chairman of the
Company and the Vice President of Finance and Chief Financial Officer of Apex
Corporation, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectuses, any supplements to the Prospectuses and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the same
effect as if made on 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 Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectuses (exclusive of any supplement thereto), there has been
no material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the Prospectuses (exclusive of any supplement thereto).
(i) At the Execution Time and at the Closing Date, Price Waterhouse,
LLP shall have furnished to the International Representatives letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the International Representatives, confirming that
they are independent accountants within the meaning of the Act and the
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the audited financial statements and financial
statement
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<PAGE>
schedules included in the Registration Statement and the Prospectuses and
reported on by them comply in form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71 of the unaudited interim financial information
for the nine month period ended September 30, 1997, and as at September 30,
1996; carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the
stockholders, directors and audit committees of the Company and the
Subsidiaries; and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to December 31, 1996,
nothing came to their attention which caused them to believe that :
(1) any unaudited financial statements included in the
Registration Statement and the Prospectuses do not comply in form in
all material respects with applicable accounting requirements of the
Act and with the published rules and regulations of the Commission
with respect to registration statements on Form S-1; and said
unaudited financial statements are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in
the Registration Statement and the Prospectuses;
(2) with respect to the period subsequent to September 30, 1997,
there were any changes, at a specified date not more than five days
prior to the date of the letter, in the accumulated deficit of the
Company and its subsidiaries or capital stock of the Company or
decreases in the shareholders' equity of the Company as compared with
the amounts shown on the September 30, 1997, consolidated balance
sheet included in the Registration Statement and the Prospectuses, or
for the period from October 1, 1997 to such specified date there were
any decreases, as compared with the corresponding period in the
preceding year; in interest income or in total or per share amounts of
interest income of the Company and its subsidiaries, except in all
instances for changes or decreases set forth in such letter, in which
case the letter shall be accompanied by an explanation by the Company
as to the significance thereof unless said explanation is not deemed
necessary by the International Representatives;
(3) The unaudited amounts of [describe the capsule information
-22-
<PAGE>
and its location] do not agree with the amounts set forth in
the unaudited financial statements for the same periods or were
not determined on a basis substantially consistent with that of
the corresponding amounts in the audited financial statements
included in the Registration Statement and the Prospectuses;
(4) the information included in the Registration
Statement and Prospectuses in response to Regulation S-K, Item
301 (Selected Financial Data), Item 302 (Supplementary
Financial Information) and Item 402 (Executive Compensation) is
not in conformity with the applicable disclosure requirements
of Regulation S-K; and
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature (which
is limited to accounting, financial or statistical information derived
from the general accounting records of the Company and its
subsidiaries) set forth in the Registration Statement and the
Prospectuses agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
References to the Prospectuses in this paragraph (i)
include any supplement thereto at the date of the letter.
(j) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectuses (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (i) of this Section 6 or (ii) any change, or
any development involving a prospective material change, in or affecting the
condition (financial or otherwise), earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectuses (exclusive of any supplement thereto) the
effect of which, in any case referred to in clause (i) or (ii) above, is, in the
sole judgment of the International Representatives, so material and adverse as
to make it impractical or inadvisable to proceed with the offering or delivery
of the Securities as contemplated by the Registration Statement (exclusive of
any amendment thereof) and the Prospectuses (exclusive of any supplement
thereto).
(k) On or prior to the Execution Time, the American Stock
Exchange shall have approved the International Underwriters' participation in
the distribution of the International Securities to be sold hereunder.
(l) At the Execution Time, the Company shall have furnished
to the International Representatives a letter substantially in the form of
Exhibit __ hereto from each
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<PAGE>
officer and director of the Company addressed to the International
Representatives, in which each such person agrees not to offer, sell, contract
to sell, pledge or otherwise dispose of, or file a registration statement with
the Commission in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act with respect to, any shares of Ordinary Shares of
the Company or any securities convertible into or exercisable or exchangeable
for such Ordinary Shares or publicly announce an intention to effect any such
transaction, for a period of 180 days after the date of this Agreement, other
than (i) any shares of Ordinary Shares to be sold hereunder, (ii) any option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus to which this Agreement relates and (iii) other
than shares of Ordinary Shares disposed of as bona fide gifts approved by
Salomon Brothers International Limited.
(m) Prior to the Closing Date, the Company shall have
furnished to the International Representatives such further information,
certificates and documents as the International Representatives may reasonably
request.
(n) The closing of the purchase of the U.S. Underwritten
Securities to be issued and sold by the Company pursuant to the U.S.
Underwriting Agreement shall occur concurrently with the closing described
herein.
If any of the conditions specified in this Section 6 shall
not have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the International Representatives and
counsel for the International Underwriters, this Agreement and all obligations
of the International Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the International Representatives. Notice of such
cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall
be delivered at the office of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel
for the Company, at 590 Madison Avenue, New York, New York, on the Closing Date.
7. Reimbursement of International Underwriters' Expenses. If
-----------------------------------------------------
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the International Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the International Underwriters, the
Company will reimburse the International Underwriters severally through Salomon
Brothers International Limited on demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in
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<PAGE>
connection with the proposed purchase and sale of the International Securities.
8. Indemnification and Contribution. (a) The Company
--------------------------------
agrees to indemnify and hold harmless each International Underwriter, the
directors, officers, employees and agents of each International Underwriter and
each person who controls any International Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Securities
as originally filed or in any amendment thereof, or in any U.S. or International
Preliminary Prospectus or in either of the Prospectuses, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that (i) the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any International Underwriter
through the International Representatives specifically for inclusion therein,
and (ii) such indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any International Underwriter (or any person controlling
such International Underwriter) from whom the person asserting such loss, claim,
damage, or liability purchased the International Securities which are the
subject thereof if such person did not receive a copy of the International
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendment or supplement thereto) at or prior to the confirmation of the sale
of such International Securities to such person in any case where such delivery
is required by the Act and the untrue statement or omission of a material fact
contained in such preliminary prospectus was corrected in the Prospectuses (as
so amended or supplemented). This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each International Underwriter severally agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity to each International Underwriter, but only
with reference to written information relating to such International Underwriter
furnished to the Company by or on behalf of such International Underwriter
through the International Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability
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<PAGE>
which any International Underwriter may otherwise have. The Company acknowledges
that the statements set forth in the last paragraph of the cover page regarding
delivery of the International Securities, the stabilization legend in block
capital letters on page (ii) and, under the heading "Underwriting" or ["Plan of
Distribution",] (i) the sentences related to concessions and reallowances and
(ii) the paragraph related to stabilization in any U.S. or International
Preliminary Prospectus and the Prospectuses constitute the only information
furnished in writing by or on behalf of the several International Underwriters
for inclusion in any U.S. or International Preliminary Prospectus or the
Prospectuses.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than pursuant to the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided however, that such counsel shall be reasonably satisfactory to the
- -------- ------
Party Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
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<PAGE>
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the International Underwriters
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the International Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company and by the International Underwriters from the offering of the
International Securities; provided, however, that in no case shall any
-------- -------
International Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the International Securities) be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Securities purchased by such International Underwriter
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the International Underwriters shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and of the
International Underwriters in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by it, and
benefits received by the International Underwriters shall be deemed to be equal
to the total underwriting discounts and commissions, in each case as set forth
on the cover page of the International Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company, or the
International Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the International Underwriters
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
International Underwriter within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of an International
Underwriter shall have the same rights to contribution as such International
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by an International Underwriter. If any one or
---------------------------------------
more International Underwriters shall fail to purchase and pay for any of the
International Securities agreed to be purchased by such International
Underwriter or International Underwriters
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<PAGE>
hereunder and such failure to purchase shall constitute a default in the
performance of its or their obligations under this Agreement, the remaining
International Underwriters shall be obligated severally to take up and pay for
(in the respective proportions which the amount of International Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount
of International Securities set forth opposite the names of all the remaining
International Underwriters) the International Securities which the defaulting
International Underwriter or International Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
-------- -------
International Securities which the defaulting International Underwriter or
International Underwriters agreed but failed to purchase shall exceed 10% of the
aggregate amount of International Securities set forth in Schedule I hereto, the
remaining International Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the International
Securities, and if such nondefaulting International Underwriters do not purchase
all the International Securities, this Agreement will terminate without
liability to any nondefaulting International Underwriter or the Company. In the
event of a default by any International Underwriter as set forth in this Section
9, the Closing Date shall be postponed for such period, not exceeding five
Business Days, as the International Representatives shall determine in order
that the required changes in the Registration Statement and the Prospectuses or
in any other documents or arrangements may be effected. Nothing contained in
this Agreement shall relieve any defaulting International Underwriter of its
liability, if any, to the Company and any nondefaulting International
Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to
-----------
termination in the absolute discretion of the International Representatives, by
notice given to the Company prior to delivery of and payment for the
International Securities, if at any time prior to such time (i) trading in the
Company's Ordinary Shares shall have been suspended by the Commission or the
American Stock Exchange or trading in securities generally on the New York Stock
Exchange or the American Stock Exchange shall have been suspended or limited or
minimum prices shall have been established on either of such Exchanges, (ii) a
banking moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the International Representatives, impractical
or inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the International Prospectus (exclusive of any supplement.
11. Representations and Indemnities to Survive. The
------------------------------------------
respective agreements, representations, warranties, indemnities and other
statements of the Company or its officers and of the International Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
International Underwriter or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the International Securities. The provisions of Sections 7
and 8 hereof shall survive the
-28-
<PAGE>
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing
-------
and effective only on receipt, and, if sent to the International
Representatives, will be mailed, delivered or telefaxed to the Salomon Brothers
International Limited General Counsel (fax no.: (212) 783-1752) and confirmed to
the General Counsel, care of Salomon Brothers International Limited, at Victoria
Plaza, 111 Buckingham Palace Road, London SW1W 0SB ENGLAND, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
Thomas S. Kaplan (facsimile number ) and confirmed to him at Apex Silver Mines
Corporation, 1700 Lincoln Street, Suite 3050, Denver, Colorado 80203, attention
of the Legal Department.
13. Successors. This Agreement will inure to the benefit of
----------
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 8 hereof,
and no other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and
--------------
construed in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in one or
------------
more counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for
--------
convenience only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
-----------
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in New York City.
"Effective Date" shall mean each date and time that the
Registration Statement, any post-effective amendment or amendments thereto and
any Rule 462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Execution Time" shall mean the date and time that this
Agreement is
-29-
<PAGE>
executed and delivered by the parties hereto.
"International Preliminary Prospectus" shall have the meaning
set forth under "U.S. Preliminary Prospectus."
"Preliminary Prospectus" shall have the meaning set forth
under "U.S. Preliminary Prospectus."
"Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution Time
or, if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration
statement referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any Rule
430A Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules
under the Act.
"Rule 430A Information" shall mean information with respect
to the Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the initial registration statement.
"U.S. Preliminary Prospectus" and the "International
Preliminary Prospectus", respectively, shall mean any preliminary prospectus
with respect to the offering of the U.S. Securities and the International
Securities, as the case may be, referred to in paragraph (i) above and any
preliminary prospectus with respect to the offering of the U.S. Securities and
the International Securities, as the case may be, included in the Registration
Statement at the Effective Date that omits Rule 430A Information; and the U.S.
Preliminary Prospectus and the International Preliminary Prospectus are
hereinafter collectively called the "Preliminary Prospectuses".
"United States or Canadian Person" shall mean any person who
is a national
-30-
<PAGE>
or resident of the United States or Canada, any corporation, partnership, or
other entity created or organized in or under the laws of the United States or
Canada or of any political subdivision thereof, or any estate or trust the
income of which is subject to United States or Canadian Federal income taxation,
regardless of its source (other than any non-United States or non-Canadian
branch of any United States or Canadian Person), and shall include any United
States or Canadian branch of a person other than a United States or Canadian
Person. "U.S." or "United States" shall mean the United States of America
(including the states thereof and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction.
-31-
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the several International Underwriters.
Very truly yours,
Apex Silver Mines Limited
By:
--------------------------------
Chairman
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers International Limited
PaineWebber International
ABN AMRO Rothschild
Smith Barney Inc.
By: Salomon Brothers International Limited
By:
...........................................
Vice President
For themselves and the other
several International Underwriters
named in Schedule I to the foregoing
Agreement.
-32-
<PAGE>
SCHEDULE I
----------
Number of Shares
to be
Underwriters Purchased
- ------------ ----------------------
Salomon Brothers International Limited. . . . . . .
PaineWebber International. . . . . . .
ABN AMRO Rothschild. . . . . . .
Smith Barney Inc. . . . . . .
-------------
Total . . . . . . . . . 1,800,000
=========
<PAGE>
EXHIBIT __
[Letterhead of officer or director of the Company]
Apex Silver Mines Limited
-------------------------
Public Offering of Ordinary Shares
----------------------------------
, 1997
Salomon Brothers International Limited
PaineWebber International
ABN AMRO Rothschild
Smith Barney Inc.
As Representatives of the several International Underwriters,
c/o Salomon Brothers International Limited
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
International Underwriting Agreement (the "Underwriting Agreement"), between
Apex Silver Mines Limited, a Cayman Islands corporation (the "Company"), and
each of you as representatives of a group of Underwriters named therein,
relating to an underwritten public offering of Ordinary Shares, $.01 par value
(the "Ordinary Shares"), of the Company.
In order to induce you and the other International Underwriters to enter
into the Underwriting Agreement, the undersigned will not, without the prior
written consent of Salomon Brothers International Limited, offer, sell, contract
to sell, pledge or otherwise dispose of, or file a registration statement with
the Commission in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act with respect to, any shares of capital stock of
the Company or any securities convertible into or exercisable or exchangeable
for such capital stock, or publicly announce an intention to effect any such
transaction, for a period of 180 days after the date of this Agreement, other
than (i) any shares of Ordinary Shares to be sold hereunder, (ii) any option or
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectus to which this Agreement relates and (iii) shares
of Ordinary Shares disposed of as bona fide gifts approved by Salomon Brothers
International Limited.
<PAGE>
If for any reason the Underwriting Agreement shall be terminated prior to
the Closing Date (as defined in the Underwriting Agreement), the agreement set
forth above shall likewise be terminated.
Yours very truly,
[Signature of officer or director]
[Name and address of officer or director]
<PAGE>
EXHIBIT 1.3
PLACEMENT AGENCY AGREEMENT
November __, 1997
Apex Silver Mines Limited
Caledonian Houses, Ground Floor
Mary Street
George Town, Grand Cayman
Cayman Islands, British West Indies
Ladies and Gentlemen:
This placement agency agreement (the "AGREEMENT") outlines the terms upon
which Salomon Brothers Inc, PaineWebber Incorporated, Scotia Capital Markets
(USA) Inc. and Smith Barney Inc. (collectively, the "PLACEMENT AGENTS") are
engaged by Apex Silver Mines Limited, a Cayman Islands corporation (the
"COMPANY"), to act as its financial advisors and exclusive placement agents in
connection with the offering by the Company (the "CONCURRENT OFFERING") of up to
an aggregate of ________ Shares (the "CONCURRENT SHARES") of Ordinary Shares,
par value $.01 per share (the "ORDINARY SHARES"), of the Company. The Concurrent
Offering of Concurrent Shares is registered on Registration Statement No.
333-34685 (as such Registration Statement may be amended from time to time, the
"REGISTRATION STATEMENT") under the Securities Act of 1993, as amended (the
"ACT"), filed by the Company with the Securities and Exchange Commission (the
"COMMISSION"). The Company will also enter into (i) an underwriting agreement
with the Placement Agents, as representatives of the several underwriters to be
named in Schedule I thereto and (ii) an underwriting agreement with certain
international underwriters as representatives of the several underwriters to be
named in Schedule I thereto (collectively, the "UNDERWRITERS"), relating to the
offering of Ordinary Shares by the Underwriters (the "INITIAL PUBLIC OFFERING"
and, together with the Concurrent Offering, the "OFFERINGS"). The Initial Public
Offering is also registered on the Registration Statement. To the extent
designated herein, portions of the underwriting agreements relating to the
Initial Public Offering, in the forms filed as Exhibit 1.1 and Exhibit 1.2 to
the Registration Statement and attached hereto as Annex A and Annex B (as such
Underwriting Agreements may be amended from time to time with the Placement
Agents' consent, the "UNDERWRITING AGREEMENTS"), shall be deemed to be
incorporated by reference herein and form a part hereof. Notwithstanding
anything else herein to the contrary, it is expressly understood and agreed that
the closing of the Concurrent Offering is conditioned on the occurrence of the
Closing Date. All capitalized terms not defined herein shall have the meanings
ascribed to them in the Underwriting Agreements.
1
<PAGE>
SERVICES
1. The Company hereby appoints the Placement Agents as the Company's
exclusive placement agents in connection with the Concurrent Offering and,
subject to the terms and conditions contained or incorporated by reference
herein, the Placement Agents hereby accept such appointment.
2. The Placement Agents agree to provide advisory services to the Company
as to the structure of the Concurrent Offering and to act as the Company's
placement agents in all states of the United States and in the District of
Columbia. Except as specifically set forth herein, the Placement Agents do not
assume any additional duties or responsibilities with respect to the Concurrent
Offering and no other duties shall be implied from this Agreement. The Company
acknowledges that purchasers of the Concurrent Offering are not, and will not be
treated as, "customers" of the Placement Agents for purposes of the rules of the
National Association of Securities Dealers, Inc. (the "NASD") and that the
Placement Agents shall have no responsibility for the performance or
non-performance of any purchaser in the Concurrent Offering or for the
performance or non-performance of the Company.
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
3. The Company hereby makes to the Placement Agents the agreements,
representations and warranties set forth in Sections 1 and 5 of the Underwriting
Agreements.
4. The Company agrees with the Placement Agents:
(a) to provide the Placement Agents with such copies of the
Registration Statement, Prospectus, any preliminary prospectus and such other
documents and instruments as the Placement Agents may reasonably request;
(b) to prohibit directors, officers, employees and agents of the
Company from soliciting offers to purchase the Shares and to prevent the
distribution of any document, instrument or other materials relating to the
Concurrent Offering, in each case, without the prior approval of the Placement
Agents, which approval will not be unreasonably withheld; and
5. The Company further agrees with the Placement Agents that the Company
will pay all costs, expenses, fees and taxes incident to (i) the preparation,
printing, filing and distribution under the Act of the Registration Statement
(including financial statements and exhibits), of each preliminary prospectus
and all amendments
2
<PAGE>
and supplements to any of them prior to or during the period specified in
Section 5 of the Underwriting Agreements to the Placement Agents and the
Purchasers (including potential purchasers), (ii) the printing and delivery of
the Prospectus and all amendments or supplements to it during the period
specified in Section 5 of the Underwriting Agreements to the Placement Agents
and the Purchasers (including potential purchasers), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky Memoranda
and all other agreements, memoranda, correspondence and other documents printed
and delivered in connection with the offering of the Concurrent Shares
(including in each case any disbursements of counsel for the Placement Agents
relating to such printing and delivery), (iv) the registration or qualification
of the Concurrent Shares for offer and sale under the securities or Blue Sky
laws of the several states (including in each case the fees and disbursements of
counsel for the Placement Agents relating to such registration or qualification
and memoranda relating thereto), (v) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the Concurrent
Offering, (vi) the listing of the Concurrent Shares on the American Stock
Exchange, (vii) furnishing such copies of the Registration Statement, the
Prospectus and all amendments and supplements thereto as may be requested for
use in connection with the offering or sale of the Concurrent Shares by the
Company to the Purchasers, and (viii) all other costs and expenses incident to
the performance of its obligations hereunder and the Subscription Agreements
which are not otherwise specifically provided for in this Section.
6. The obligations of the Placement Agents hereunder and the closing of
the sale of the Concurrent Shares in the Concurrent Offering (the "CONCURRENT
TIME OF DELIVERY") shall be subject to the satisfaction of the conditions set
forth in Section 6 of the Underwriting Agreements. Furthermore, (i) the
Concurrent Time of Delivery shall be conditioned upon the occurrence of the
Closing Date and (ii) the obligations of the Placement Agents hereunder shall be
conditioned upon resolution to the reasonable satisfaction of the Placement
Agents of all legal and regulatory issues related to the Concurrent Offering.
For purposes of this Section 6, all references to "Underwriters" and
"Underwritten Securities" together with "Option Securities" in the introductory
paragraph of Section 6 of the Underwriting Agreements shall be deemed to refer
to the Placement Agents and Concurrent Shares, respectively. Also for purposes
of this Section 6, (a) the opinions of (i) Akin, Gump, Strauss, Hauer & Feld,
L.L.P., (ii) W.S. Walker & Company, (iii) Quintanilla & Soria, (iv) Bufete
Gutierrez-Falla, (v) Rodriguez-Mariategui & Vidal, and (vi) Winston & Strawn,
(b) the letter or letters of Price Waterhouse LLP and (c) the certificates of
directors of the Company and officers of Apex Silver Mines Corporation (provided
for in Section 6(h) of the Underwriting Agreements), shall each also be
addressed and furnished to the Placement Agents at the Concurrent Time of
Delivery and all references in Section 6 of the Underwriting
3
<PAGE>
Agreements to "your reasonable satisfaction," "satisfactory to you," "judgment
of the Representatives" or similar language shall be deemed to refer to a
determination by the Placement Agents.
FEES
7. As compensation for their services under this Agreement, the Placement
Agents will receive at the Concurrent Time of Delivery a fee (the "PLACEMENT
FEE") from the Company equal to ____% of the Initial Public Offering Price
multiplied by the number of Ordinary Shares sold in the Concurrent Offering, by
wire transfer in immediately available funds to a bank account or accounts
designated by the Placement Agents. Payment of such Placement Fee shall be a
condition of the Concurrent Time of Delivery. In the event the Concurrent
Offering is terminated by the Placement Agents because of any failure or refusal
on the part of the Company to comply with the terms or to fulfill any of the
conditions of this Agreement, the Company agrees to reimburse the Placement
Agents for all out-of-pocket expenses (including the fees and disbursements of
counsel) reasonably incurred by them.
INDEMNIFICATION AND EXCULPATION
8. The Company (the "INDEMNIFYING PARTY") agrees to indemnify and hold
harmless the Placement Agents, their affiliates and their parents and their
affiliates, and the respective directors, officers, agents and employees of the
Placement Agents, their affiliates and their parents and their affiliates, and
each person, if any, who controls any of the Placement Agents within the
meaning of the Act or the Exchange Act from and against any losses, claims,
damages, judgments, assessments, costs and other liabilities (or actions or
proceedings in respect thereof) to which the Placement Agents or such entity or
person may become subject related to or arising out of (i) the Placement Agents'
engagement hereunder including, without limitation, the use or content of the
Registration Statement, any preliminary prospectus or the Prospectus, or any
amendment or supplement thereto, or (ii) the activities of the Company in
connection with the Offerings, and will reimburse the Placement Agents and each
such entity or person for all reasonable legal and other expenses as incurred in
connection with investigating, preparing, pursuing or defending any such loss,
claim, damage, judgment, assessment, cost, liability, action, investigation or
proceeding whether or not in connection with pending or threatened litigation
in which either the Placement Agents or any such entity or person is a party;
provided, however, that the Company shall not be liable in the case of clause
(i) for losses, claims, damages, judgments, assessments, costs, liabilities or
expenses that (x) a court of competent jurisdiction shall have found in a final
judgment which is no longer subject to appeal or
4
<PAGE>
further review to have arisen solely from the gross negligence or willful
misconduct of either of the Placement Agents or (y) are caused by any untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the Placement Agents furnished in writing to the Company
by the Placement Agents specifically for use in the Registration Statement, any
preliminary prospectus or any Prospectus or any amendment or supplement thereto.
In case any proceeding shall be instituted involving any person in respect
to whom indemnity may be sought, such person (the "INDEMNIFIED PARTY") shall
promptly notify the indemnifying party in writing; provided, however, that
failure to so notify the indemnifying party shall not relieve the indemnifying
party from any liability the indemnifying party may have on account of this
indemnity or otherwise, except to the extent the indemnifying party shall have
been materially prejudiced by such failure. The indemnifying party, upon the
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may reasonably designate in such proceedings and shall pay as
incurred the fees and expenses of such counsel related to such proceeding. In
any such proceeding, any indemnified party shall the right to retain its own
counsel at its own expense, except that the indemnifying party shall pay as
incurred the reasonable fees and expenses of counsel retained by the indemnified
party in the event that (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel, (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of all such
parties by the same counsel would constitute a real or perceived conflict of
interest in the reasonable opinion of the indemnified party, due to actual or
potential differing interests between them or (iii) the indemnifying party has
failed to assume the defense and employ counsel. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent (which consent shall not be unreasonably withheld), but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party to the extent set forth in this
Agreement. The indemnifying party will not, without the prior written consent
of the indemnified party, settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action or
proceeding in respect of which indemnification or contribution may be sought
hereunder unless such settlement, compromise, consent or termination includes an
unconditional release of the indemnified party from any and all liability with
respect to such action or proceeding.
In the event a claim for indemnification as described herein is unavailable
or insufficient, then the Company shall contribute
5
<PAGE>
to the aggregate losses, claims, damages or liabilities to which the Placement
Agents, their affiliates and their parents and their affiliates, and the
respective directors, officers, agents, employees or controlling persons may be
subject in such amount as is appropriate to reflect the relative benefits
received by the Company on the one hand and the party seeking contribution on
the other and the relative fault of the Company on the one hand and the party
seeking contribution on the other, as well as any relevant equitable
contributions; provided, however, that in no event shall the Company contribute
less than the amount necessary to ensure that the Placement Agents and such
entities and persons, in the aggregate, are not liable for any losses, claims,
damages, judgments, assessments, costs and other liabilities in excess of the
amount of the Placement Fee actually received by the Placement Agents hereunder.
The relative benefits received by the Company and on the one hand and the
Placement Agents on the other shall be deemed to be in the same proportion as
the total net proceeds from the Concurrent Offering (before deducting expenses)
received by the Company bear to the Placement Fee paid to the Placement Agents
by the Company.
The provisions of this Agreement relating to reimbursement, indemnification
and contribution shall survive termination, modification or completion of the
engagement of the Placement Agents and shall be binding upon any successors or
assigns of the Company.
9. The Company also agrees that the Placement Agents, their affiliates and
their parents and their affiliates and the respective directors, officers,
agents, employees of the Placement Agents, their affiliates and their parents
and their affiliates, shall have no liability to the Company or its shareholders
for or in connection with any matter referred to in this Agreement, except in
the case of clause (i) of Section 8, to the extent that any losses, claims,
damages, judgments, assessments, costs, liabilities or expenses incurred by the
Company are determined by a court of competent jurisdiction in a final judgment
which is no longer subject to appeal or further review to have arisen solely
from the gross negligence or willful misconduct of the Placement Agents.
OTHER
10. The Company represents and warrants that no person or organization
other than the Placement Agents are, as a result of any action by the Company,
entitled to compensation for services as a finder, broker, placement agent or
investment banker in connection with the Concurrent Offering.
11. The Company agrees that to the extent any Concurrent Shares are not
sold in the Concurrent Offering, the Placement Agents shall have the right, in
its sole discretion, to cause such Concurrent Shares to be sold by the
Underwriters in the Initial
6
<PAGE>
Public Offering.
12. This Agreement shall be deemed to be effective as of the date hereof
and the term of this engagement shall be from the date hereof until the earlier
of (i) termination of the Concurrent Offering, and (ii) the completion of the
Offerings. Notwithstanding the foregoing, if at any time the Company violates
any of its covenants and agreements contained herein or if any of the conditions
set forth in Section 6 are not satisfied, the Placement Agents shall have the
right to terminate their obligations hereunder upon prior notice to the Company.
In the event of any termination of this Agreement or if for any reason the
Concurrent Offering is terminated, the Company shall be responsible for (i) the
reimbursement of all fees, disbursements, costs and expenses, as provided in
Section 5, and (ii) its obligations arising under Section 8.
13. The Company agrees that the Placement Agents shall have the right to
advertise their participation in the Concurrent Offering in "tombstone" or other
appropriate financial advertisements in newspapers, magazines, trade periodicals
or other publications. The Placement Agents agree that such tombstone or other
advertisements shall not be published without the prior approval of the Company,
provided that such approval is not unreasonably withheld or delayed.
14. The invalidity or unenforceability of any provison of this Agreement
shall in no way offset the validity or enforceability of any other provision.
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of New York. The terms and provisions of this
Agreement are solely for the benefit of the Company and the Placement Agents and
the other indemnified parties and their respective successors, assigns, heirs
and personal representatives, and no other person shall acquire or have any
right by virtue of this letter.
15. All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Placement Agents shall be delivered or sent by mail,
telex or facsimile transmission to in the case of the Placement Agents to:
Salomon Brothers Inc, Seven World Trade Center, New York, New York 10048; and in
the case of the Company to the address of the Company set forth in the
Registration Statement, Attention: Chairman. Any such statements, requests,
notices or agreement shall take effect upon receipt thereof.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
7
<PAGE>
Please confirm that the terms described here are in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter.
Very truly yours,
SALOMON BROTHERS INC
PAINEWEBBER INCORPORATED
SCOTIA CAPITAL MARKETS (USA) INC.
SMITH BARNEY INC.
By: Salomon Brothers Inc
By:
------------------------------
Vice President
AGREED AND CONFIRMED:
APEX SILVER MINES LIMITED
By:
--------------------------
Title:
-----------------------
8
<PAGE>
ANNEX A
[Attach form of U.S. Underwriting Agreement]
9
<PAGE>
ANNEX B
[Attach form of International Underwriting Agreement]
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF APEX SILVER
MINES APPEARS HERE]
NUMBER SHARES
- -------------------- ---------------------
AP
- -------------------- ---------------------
ORDINARY SHARES SEE REVERSE SIDE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS CUSIP G04074 10 3
OF THE GAYMAN ISLANDS
--------------------------------------------------------------------------
This Certifies that
is the owner of
--------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE ORDINARY SHARES, $0.01 PAR VALUE PER SHARE OF
Apex Silver Mines Limited transferable on the books of the Company in person
or by a duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be held subject to all the provisions of the Memorandum and Articles of
Incorporation of the Company and any amendments thereto, price of which was
on file with the Transfer Agent, to all of which the holder, by acceptance
hereby assents. This Certificate is not valid unless undersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of
its duly authorized Chairman and Secretary.
CALEDONIAN BANK & TRUST COMPANY
Dated:
[SEAL OF APEX SILVER MINES LIMITED APPEARS HERE]
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
CHAIRMAN SECRETARY
Countersigned and Registered
AMERICAN STOCK TRANSFER & TRUST COMPANY
By Transfer Agent
and Registrar
Authorized Signature
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIFGIFT MIN ACT-_____Custodian____
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors
in common Act ________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
shares
- -------------------------------------------------------------------------
of the capital represented by the within Certificate, and do hereby irrevocably
constitute and appoint
Attorney
- ----------------------------------------------------------------------
to transfer the said share on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-----------------------------
-----------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER
SIGNATURE(S) GUARANTEED:
------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS, AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad 15.
<PAGE>
EXHIBIT 5.1
W.S. WALKER & COMPANY
Attorneys-at-Law
CALEDONIAN HOUSE, P.O BOX 265
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS
TEL: (345) 949-0100 FAX: (345) 949-7886
Internet: [email protected]
Our Ref: MPL A181-09400
The Directors
Apex Silver Mines Limited
c/o Curacao Corporation Company N.V.
Kaya Flamboyan 9, P.O. Box 812
Willemstad, Curacao
Netherlands Antilles
14th November 1997
Dear Ladies and Gentlemen:
APEX SILVER MINES LIMITED
We have acted as counsel to Apex Silver Mines Limited (the "Company") in
connection with the Company's Registration Statement on Form S-1 (the
"Registration Statement") being filed with Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the contemplated registration by the Company of
10,350,000 ordinary shares, par value $0.01, (the "Securities") of the Company.
For the purposes of giving this opinion, we have examined the documents listed
in Schedule 1.
In giving this opinion we have relied upon the assumptions set out in Schedule
2 hereto, which we have not independently verified.
Capitalised terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Registration Statement.
We are Attorneys-at-Law in the Cayman Islands and express no opinion as to any
laws other than the laws of the Cayman Islands in force and as interpreted at
the date hereof.
Based upon the foregoing examinations and assumptions and upon such searches as
we have conducted and having regard to legal considerations which we deem
relevant, we are of the opinion that under the laws of the Cayman Islands that:
<PAGE>
1. the Company is duly incorporated, validly existing and in good standing
under the laws of the Cayman Islands.
2. The Securities have been duly and validly authorized and will be issued as
fully paid when an entry in respect of such Securities and the registered
owner thereof has been made in the register of members of the Company
confirming that they are fully paid.
3. The liability of a shareholder in respect of such Securities is limited to
the amount that the shareholder has agreed to pay for such Securities and
the Company cannot call for additional sums to be paid by the shareholders
in respect of such Shares.
This law firm is a partnership organized under the laws of the Cayman Islands.
Our opinion relates only to the laws of the Cayman Islands. We express no
opinion as to the law of any other jurisdiction.
This opinion is limited to the matters stated herein, and no opinion is implied
or may be inferred beyond the matters expressly stated. We assume herein no
obligation, and hereby disclaim any obligation, to make any inquiry after the
date hereof or to advise you of any future changes in the forgoing or of any
facts or circumstances that may hereafter come to our attention. Subject to the
forgoing sentence, this opinion letter is solely for your benefit and no other
persons shall be entitled to rely upon the opinions herein expressed.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement, to the reference to our name in the
Prospectus and to the reference to our firm under the caption "Legal Matters"
in the Registration Statement.
Yours faithfully,
W.S. WALKER & COMPANY
<PAGE>
Schedule 1
List of Documents Examined
(1) the Memorandum and Articles of Association of the Company;
(2) Resolutions adopted by the Board of Directors of the Company dated [ ]
authorizing issue of the Securities ("the Resolutions").
(3) the draft Prospectus included in the draft Registration Statement on Form
S-1;
(4) such other documents as we have considered necessary for the purposes of
rendering this opinion.
Schedule 2
Assumptions
The opinions hereinbefore given are based upon the following assumptions
insofar as each such assumption may relate to the opinions given:
1. All original documents are authentic, that all signatures and seals are
genuine, that all documents purporting to be sealed have been so sealed
and that all copies conform to their originals.
2. The Minute Book of the Company examined by us at the Registered Office of
the Company on [ ]th November 1997 contain a complete record of the
business transacted by it.
3. The corporate records of the Company examined by us at the Registered
Office of the Company on [ ]th November 1997 constitute its complete
corporate records and that all matters required by law to be recorded
therein are so recorded.
4. The Resolutions were duly adopted in accordance with the Articles of
Association of the Company. We confirm that the examination made by us
for the purpose of giving this opinion give us no reason to suppose that
the Resolutions were not so adopted or that the Resolutions have been
modified or rescinded.
5. The issuance and delivery of the Securities will not violate any
applicable law or result in a violation of any provision of any instrument
or agreement binding upon the Company, or any restriction imposed by any
court or governmental body having jurisdiction over the Company.
-3-
<PAGE>
EXHIBIT 10.28
BOARD DESIGNATION AGREEMENT
This BOARD DESIGNATION AGREEMENT, dated as of October 28, 1997, among
Silver Holdings LDC, a Cayman Islands limited duration company (the "Silver
Holdings"), Apex Silver Mines Limited, a Cayman Islands company (the "Company"),
Thomas S. Kaplan ("Kaplan"), Argentum LLC ("Argentum"), Aurum LLC ("Aurum"),
Litani Capital Management LDC ("Litani") and Consolidated Commodities Ltd.
("Consolidated", and collectively with Aurum and Litani, the "Other Investors").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Silver Holdings owns Ordinary Shares of Apex Silver Mines
LDC, par value $.01 per share (the "Sub Shares")
WHEREAS, in connection with the Buy-Sell Agreement, dated as of August
6, 1996, by and among the Company, Apex Silver Mines LDC and Litani Capital
Management LDC (the "Buy-Sell Agreement"), Silver Holdings may receive Ordinary
Shares of the Company, par value $.01 per share (the "Shares");
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Designation of Director.
-----------------------
(a) For so long as Silver Holdings continues to beneficially own
Shares (or Sub Shares which may be issued for Shares pursuant to the Buy-Sell
Agreement), representing not less than 1% of the issued and outstanding Shares
(the "Minimum Shares"), the Company will take all action necessary to cause its
Board of Directors to nominate and support the nomination of two individual
designated by Silver Holdings for election as a director of the Company and to
solicit proxies in favor of (and otherwise recommend to its shareholders) the
election of such nominee as director. For so long as Silver Holdings continues
to beneficially own the Minimum Shares, each of the Other Investors agrees that
it will vote all Shares it has voting power over, and will otherwise support the
election of the individuals designated by Silver Holdings for election as a
director of the Company.
(b) If, on any date during the term of office of any director
of the Company elected following his or her designation by Silver Holdings under
the terms of this Agreement, Silver Holdings shall cease to beneficially own the
Minimum Shares, Silver Holdings will, at the request of the Company, take all
reasonable actions necessary to cause such director to resign promptly from the
Board of Directors of the Company.
(c) In the event of the death, resignation or removal of a
director designated for nomination by Silver Holdings, the Company shall cause
another person designated by Silver Holdings to be elected as a director to fill
the
<PAGE>
resulting vacancy on the Board of Directors of the Company (which may include
the election of such replacement director by the remaining directors then in
office); provided, however, that any director of the Company designated for
-------- -------
nomination by Silver Holdings may be removed when (and only when) (i) such
removal is requested by Silver Holdings or (ii) as provided in the Company's
Memorandum and Articles of Association.
2. Adjustment Upon Changes in Capitalization. If at any time there
-----------------------------------------
is a change in the number of outstanding Shares or the class of Shares, by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment or if a stock dividend thereon is declared
with a record date prior to the termination of this Agreement, then the number
of Shares comprising the Minimum Shares shall be appropriately and equitably
adjusted.
3. Benefits of this Agreement; Transfers. Nothing in this Agreement
-------------------------------------
shall be construed to give to any person or entity, other than the parties
hereto, any legal or equitable right, remedy, or claim under this Agreement.
This Agreement is for the sole and exclusive benefit of, and shall be binding
upon, the parties hereto and their respective heirs, personal representatives,
successors and assigns. No transfer of Shares (or Sub Shares) by any Other
Investor shall be permitted (other than transfers to the general public) unless
such transferee agrees to be bound by the provisions of this Agreement.
4. Governing Law. The corporate law of the Cayman Islands will
-------------
govern all issues concerning the relative rights of the Company and its
stockholders. All other issues concerning this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law applicable to agreements made and to be
performed wholly within such jurisdiction.
5. Invalid Provisions. If any provision of this Agreement is held
------------------
to be invalid or unenforceable, such provision shall be automatically severed
from this Agreement and there shall be added to this Agreement a provision as
similar as possible to such severed provision as may be valid and enforceable,
and the validity and enforceability of the other provisions of this Agreement
shall not be affected thereby.
6. Captions. The captions, headings, and arrangements used in this
--------
Agreement are for convenience only and do not in any way limit or amplify the
terms and provisions hereof.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
SILVER HOLDINGS LDC
By: /s/ Paul Soros
-------------------------------
Name: Paul Soros
Title: Director
APEX SILVER MINES LIMITED
By: /s/ Thomas S. Kaplan
-------------------------------
Name: Thomas S. Kaplan
Title: Chairman
By: Thomas S. Kaplan
-------------------------------
Thomas S. Kaplan
ARGENTUM LLC
By: Caledonian Bank & Trust Limited,
as Secratary
By: /s/ Vijayabalan Muregesu
-------------------------------
Name: Vijayabalan Muregesu
Title: Manager-Banking
3
<PAGE>
AURUM LLC
By: /s/ Thomas S. Kaplan
-------------------------------
Name: Thomas S. Kaplan
Title: Trustee
LITANI CAPITAL MANAGEMENT LDC
By: /s/ Thomas S. Kaplan
-------------------------------
Name: Thomas S. Kaplan
Title:
CONSOLIDATED COMMODITIES LTD.
By: /s/ Peter Martin
-------------------------------
Name: Peter Martin
Title: President
4
<PAGE>
Exhibit 10.29
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
October 28, 1997, among Apex Silver Mines Limited, a Cayman Islands exempted
limited liability company (the "Company"), Silver Holdings LDC ("Silver
Holdings"), Argentum LLC ("Argentum"), Consolidated Commodities Ltd.
("Consolidated"), Thomas S. Kaplan ("Kaplan"), Litani Capital Management LDC
("Litani") and Aurum LLC ("Aurum"), (each of Silver Holdings, Argentum,
Consolidated, Kaplan, Litani and Aurum is referred to as a "Shareholder" and
collectively, the "Shareholders").
1. Certain Definitions.
-------------------
(a) The term "Holder" shall refer to (i) a Shareholder, (ii) each
successor or assignee of a Shareholder's rights hereunder, and (iii) each
transferee or assignee of all or a portion of the Shares of a Shareholder to the
extent such Shareholder shall specify such person pursuant to this clause (iii)
as a Holder.
(b) The term "Share" shall refer to the ordinary shares of the
share capital of the Company.
(c) The term "Registration Statement" shall refer to the
registration statement filed with the Securities and Exchange Commission with
respect to Restricted Shares.
(d) The term "Restricted Share" shall refer to each Share held by a
Shareholder until the date on which such Share (i) has been registered under the
Act and disposed of in accordance with the Registration Statement, (ii) is
distributed to the public pursuant to Rule 144 under the Act or is saleable
pursuant to Rule 144(k) under the Act or (iii) is transferred otherwise in
accordance with the Act such that the holder thereof has Shares that may be
freely and publicly resold without registration or an available exemption.
2. Demand Registrations.
--------------------
(a) Requests for Registration. Each of Silver Holdings and
-------------------------
Argentum may request at any time after 180 days after the Company's initial
public offering registration under the Securities Act of 1933, as amended (the
"Securities Act") of all or part of their Restricted Shares on Form S-1, or any
similar long-form registration statement ("Long-Form Registration") or, if
available, on Form S-2 or S-3, or any similar form of registration statement
("Short-Form Registration"). Each request for a Demand Registration (as defined
below) shall specify the approximate number of Restricted Shares requested to be
registered, the anticipated per share price range for such offering and the
proposed underwriter. Within ten days after receipt of any such request, the
Company will give written notice of such requested registration to the other
Shareholders and, subject to paragraph 2(c) below, will include in such
registration all Restricted Shares with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice. All registrations requested pursuant to this paragraph
2(a) are referred to herein as "Demand Registrations."
--------------------
<PAGE>
(b) Number of Demand Registrations. Each of Silver Holdings and
------------------------------
Argentum will each be entitled to request three (3) Long-Form Registrations and
each may request an additional three (3) Short-Form Registrations for which the
Company will pay all Registration Expenses. A registration will not count as a
Demand Registration until it has become effective; provided that in any event
--------
the Company will pay all Registration Expenses in connection with any initiated
registration whether or not it has become effective. If a Demand Registration is
a last Demand Registration permitted under this Section 2(b), then such
registration shall not count as a last Demand Registration (and such demanding
Shareholder will be entitled to one, and only one, additional request for a
Demand Registration) unless the party requesting such registration is able (and
so requests) to include in such registration that amount of Restricted Shares
which will result in at least 90% of all Restricted Shares having been
registered pursuant to the Demand Registrations and Piggyback Registration
available pursuant to this Agreement.
(c) Priority on Demand Registrations. The Company will not include
--------------------------------
in any Demand Registration any Shares which are not Restricted Shares without
the prior written consent of the demanding Shareholders. If a Demand
Registration is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the number of Restricted Shares
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Restricted Shares and other securities, if any,
which can be sold therein without adversely affecting the marketability of the
offering (the "Offering Quantity"), the Company will include in such
-----------------
registration securities in the following priority:
(i) first, before including any securities which are not Restricted
Shares, the Company will include all of the Restricted Shares requested to
be included by the demanding Shareholders, and if the number of Restricted
Shares requested to be included exceeds the Offering Quantity, then the
Company shall include only such demanding Shareholders' pro rata share of
the Offering Quantity, based on the amount of Restricted Shares held by the
demanding Shareholders; and
(ii) second, to the extent (and only to the extent) that the
Offering Quantity exceeds the aggregate amount of Restricted Shares which
are requested to be included in such registration, the Company shall
include in such registration Restricted Shares requested to be included by
other Shareholders, and if such number exceeds the Offering Quantity, then
the Company shall include only such Shareholders pro rata share of the
Offering quantity, based on the amount of Restricted Shares held by such
Shareholders;
(iii) third, to the extent (and only to the extent) that the Offering
Quantity exceeds the aggregate amount of Restricted Shares which are
requested to be included in such registration, the Company shall include in
such registration any other securities requested to be included in the
offering.
Any person other than a Shareholder who participates in Demand Registrations
which are not at the Company's expense must pay their share of the Registration
Expenses as provided in Section 6 hereof.
(d) Restrictions on Demand Registrations. The Company will not be
------------------------------------
obligated to effect any Demand Registration within 120 days after the effective
date of a previous Demand
-2-
<PAGE>
Registration. The Company may postpone upon one occasion in any 365 day period
for up to 90 days the filing or the effectiveness of a registration statement
for a Demand Registration if the Company's board of directors determines that
such Demand Registration would reasonably be expected to have a material adverse
effect on any proposal or plan by the Company or any of its subsidiaries to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction
provided, however, that in such event, the party requesting such Demand
- --------
Registration will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as one of the permitted
Demand Registrations hereunder and the Company will pay all Registration
Expenses in connection with such registration.
(e) Selection of Underwriters. The holder of a majority of the
-------------------------
Restricted Shares initiating any Demand Registration will have the right to
select the investment banker(s) and manager(s) to administer the offering,
subject to the Company's approval which will not be unreasonably withheld.
(f) Other Registration Rights. Except as provided in this
-------------------------
Agreement, the Company will not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of both Silver Holdings and Argentum.
3. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register
------------------
any of its securities under the Securities Act (other than pursuant to a Demand
Registration or a registration on Form S-4 or S-8 or any successor or similar
forms) and the registration form to be used may be used for the registration of
Restricted Shares (a "Piggyback Registration"), whether or not for sale for its
----------------------
own account, the Company will give prompt written notice to all the Holders of
its intention to effect such a registration and will include in such
registration all Restricted Shares with respect to which the Company has
received written requests for inclusion therein within 30 days after the receipt
of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of all the
------------------
Holders will be paid by the Company in all Piggyback Registrations
(c) Priority on Primary Registrations. If a Piggyback Registration
---------------------------------
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing (with a copy to each party
hereto requesting registration of Restricted Shares) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering (the "Company Offering Quantity"), the Company
-------------------------
will include in such registration securities in the following priority:
(i) first, the securities the Company proposes to sell;
(ii) second, before including any securities which are not
Restricted Shares, the Company will include all of the Restricted Shares
requested to be included by all of the Holders, and if the number of
Restricted Shares requested to be included exceeds the
-3-
<PAGE>
Company Offering Quantity, then the Company shall include only each
requesting Holder's pro rata share of the Company Offering Quantity, based
on the amount of Restricted Shares held by each Holder;
(iii) third, to the extent (and only to the extent) that the Company
Offering Quantity exceeds the aggregate amount of Restricted Shares which
are requested to be included in such registration, the Company shall
include in such registration any other securities requested to be included
in the offering.
(d) Other Registrations. If the Company has previously filed a
-------------------
Registration Statement with respect to Restricted Shares pursuant to paragraph 2
or pursuant to this paragraph 3, and if such previous registration has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-4 or S-8 or any successor form), whether on its own behalf
or at the request of any holder or holders of such securities, until a period of
at least 90 days has elapsed from the effective date of such previous
registration.
4. Holdback Agreements.
-------------------
(a) To the extent not inconsistent with applicable law, each Holder
agrees not to effect any public sale or distribution (including sales pursuant
to Rule 144) of equity securities of the Company, or any securities, options or
rights convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Restricted Shares are included (except as part of such
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree; provided that such restrictions shall not be
--------
more restrictive in duration or scope than restrictions imposed on (i) any
Person which has been granted registration rights by the Company, (ii) any
officer or director of the Company, or (iii) any 5% holder of Shares; and
provided, further, that nothing herein shall restrict, directly or indirectly,
- -------- -------
(i) bona fide pledge of Shares or the subsequent transfer upon default in
connection with any such pledge or (ii) charitable contribution. In addition,
each Shareholder may distribute Shares to its shareholders, partners or members
so long as such person or entity agrees to be bound by the terms of this
Agreement.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registrations on Form S-4 or S-
8 or any successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) to cause each holder of its Shares, or any
securities convertible into or exchangeable or exercisable for Shares, purchased
from the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
-4-
<PAGE>
5. Registration Procedures. In connection with the Registration
-----------------------
Statement, the following provisions shall apply:
(a) The Company shall furnish to each selling Holder, prior to the
filing thereof with the Securities and Exchange Commission, a copy of the
Registration Statement and each amendment thereof and each supplement, if any,
to the prospectus included therein and shall use its best efforts to reflect in
each such document, when so filed with the Commission, such comments as the
Holders reasonably may propose,
(b) The Company shall prepare and within 60 days (or 45 days with
respect to any Short-Form Registration) after the end of the period within which
requests for registration may be given to the Company file with the Commission a
registration statement with respect to such Restricted Shares and thereafter use
its best efforts to cause such registration statement to become effective.
(c) The Company shall prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period of either (i) not less than 180 days (subject
to extension pursuant to Section 5(p)) or, if such Registration Statement
relates to an underwritten offering, such longer period as in the opinion of
counsel for the underwriters a prospectus is required by law to be delivered in
connection with sales of Restricted Shares by an underwriter or dealer or (ii)
such shorter period as will terminate when all of the securities covered by such
Registration Statement have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
Registration Statement (but in any event not before the expiration of any
longer period required under the Securities Act), and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement.
(d) The Company shall advise the selling Holders, and, if requested
by such Holders, confirm such advice in writing (which advice pursuant to
clauses (ii) - (v) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
(i) when the Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post
effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
-5-
<PAGE>
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus or the filing of
any reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(e) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 5(d) hereof during the period for which the Company is
required to maintain an effective Registration Statement, the Company will (A)
use its best efforts to promptly obtain the withdrawal of any stop order or
order suspending the effectiveness of the Registration Statement and (B) prepare
a post-effective amendment to the Registration Statement or a supplement to the
related prospectus or file any other required document as soon as possible so
that, as thereafter delivered to purchasers of the Shares, the prospectus will
not include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and will comply with the Act and the
rules promulgated thereunder.
(f) The Company will furnish to each Holder included within the
coverage of the Registration Statement, without charge, copies of the
Registration Statement and any amendment thereto, including financial statements
and schedules, and, if the Holder so requests in writing, all exhibits
(including those incorporated by reference) in such number as such Holder may
reasonably request from time to time.
(g) The Company will deliver to each Holder included within the
coverage of the Registration Statement, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of the prospectus or any amendment
or supplement thereto by each Holder in connection with the offering and sale of
the Shares covered by the prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Shares pursuant to the
Registration Statement, the Company will use its best efforts to register or
qualify or cooperate with each Holder selling Shares pursuant to such
Registration Statement and their respective counsel in connection with the
registration or qualification of such securities for offer and sale under the
securities or blue sky laws of such jurisdictions as such counsel reasonably
requests in writing on behalf of such Holder and do any and all other acts or
things necessary or advisable to enable the offer and sale in such jurisdictions
of the Shares covered by the Registration Statement; provided, however, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
-6-
<PAGE>
(i) The Company will cooperate with each Holder to facilitate the
timely preparation and delivery of certificates representing Shares to be sold
pursuant each to the Registration Statement free of any restrictive legends and
registered in such names as Holder may request in writing prior to sales of
Shares pursuant to the Registration Statement.
(j) The Company will upon request provide each Holder selling
Shares pursuant to such Registration Statement with printed certificates for its
Shares in a form acceptable to such Holder.
(k) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to its security
holders as soon as practicable but in any event not later than eighteen months
after the effective date of the applicable Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of the Act or Rule 158
promulgated thereunder.
(l) The Company may require each Holder selling Shares pursuant to
the Registration Statement to furnish to the Company such information regarding
the Holder, the Shares beneficially owned by such Holder and the intended method
of distribution of such Shares as the Company may from time to time reasonably
require for inclusion in the Registration Statement, and the Company may exclude
from such registration the Shares of any Holder that fails to furnish such
information within a reasonable time after receiving such request.
(m) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and take
all such other action, if any, as Holders of a majority of Shares being sold or
the managing underwriters (if any) shall reasonably request in order to
facilitate the disposition of Shares pursuant to the Registration Statement;
provided, however, that the Company shall have no obligation to pay any
discounts or underwriting commission.
(n) The Company, if requested by Holders of a majority of the
Shares being sold, or the managing underwriters (if any) in connection with the
Registration Statement, shall use its best efforts to cause (i) its counsel to
deliver an opinion relating to the Registration Statement and the Shares, in
customary form (and covering such matters of the type customarily covered by
legal opinions of such nature) addressed to such Holders and the managing
underwriters, if any, thereof and dated the effective date of such Registration
Statement; (ii) its officers to execute and deliver all customary documents and
certificates requested by Holders of a majority of the Shares being sold or the
managing underwriters (if any); and (iii) its independent public accountants to
provide a comfort letter in customary form (and covering such matters of the
type customarily covered by comfort letter).
(o) The Company will use its best efforts to cause the Shares
covered by the Registration Statement to be listed on each securities exchange,
if any, or NASDAQ on which similar securities issued by the Company are then
listed, if so requested by Holders of a majority of Shares covered by the
Registration Statement, or by the managing underwriters, if any.
(p) The Company will make available for inspection by any Holder,
any underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Holder or underwriter, all financial and
-7-
<PAGE>
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent accountants
to supply all information reasonably requested by any such Holder, underwriter,
attorney, accountant or agent in connection with such registration statement.
(q) Each Holder agrees that upon receipt of any notice of the
Company pursuant to paragraphs (ii) through (v) of Section 5(d) hereof, such
Holder will discontinue disposition of such Shares pursuant to the Registration
Statement until such Holder's receipt of copies of the supplemental or amended
Prospectus contemplated by Section 5(c) hereof, or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
resumed. If the Company shall give any notice under Section 5(d)(ii) - (v)
during the registration period, such registration period shall be extended by
the number of days during such period from and including the date of the giving
of such notice to and including the date when each seller of Shares covered by
the Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 5(c) (if an amended
or supplemental prospectus is required) or (y) the Advice (if no amended or
supplemental Prospectus is required).
6. Registration Expenses. The Company will bear all expenses
---------------------
incurred in connection with the performance of its obligations under this
Agreement (except as otherwise provided in the proviso to Section 5(m) hereof)
and the Company will reimburse the Holders for the fees, disbursements and
expenses of one counsel (and any local counsel as reasonably required) chosen by
the Holders of a majority of the Shares to be sold pursuant to a Registration
Statement acting for the Holders in connection therewith.
7. Indemnification.
---------------
(a) The Company shall indemnify and hold harmless each of the
Holders of Shares to be included in such registration against any losses,
claims, damages or liabilities, joint or several, to which such Holder may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement under which such Shares
were registered under the Act, or any preliminary, final or summary prospectus
contained therein or furnished by the Company to any such Holder, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company shall reimburse such Holder for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such action
or claim as such expenses are incurred; provided, however, that the Company
shall not be liable to any such person in any such case to the extent that any
such loss, claim, damage or liability (or actions in respect thereof) arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement, or preliminary, final or
summary prospectus, or amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, such person expressly for use in connection therewith.
(b) The Company shall require, as a condition to including any
Shares in any Registration Statement filed pursuant to this Agreement and to
entering into any underwriting
-8-
<PAGE>
agreement with respect thereto, that the Company shall have received an
undertaking reasonably satisfactory to it from the Holder of such Shares and
from each underwriter named in any such underwriting agreement, severally and
not jointly, to (i) indemnify and hold harmless the Company and all other
Holders against any losses, claims, damages or liabilities to which the Company
or such other Holders may become subject under the Act, the Exchange Act, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, or
any preliminary, final or summary prospectus contained therein or furnished by
the Company to any such Holder, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Holder or underwriter expressly for use in
connection therewith and (ii) reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that no such Holder shall be required to undertake liability to any
person under this Section 7(b) for any amounts in excess of the dollar amount of
the proceeds to be received by such Holder from the sale of such Holder's Shares
pursuant to such registration.
(c) Promptly after receipt by an indemnified party under Sections
7(a) or 7(b) hereof written notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party pursuant to the indemnification provisions of or contemplated
by this Section 7, notify such indemnifying party in writing of the commencement
of such action; but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified party other
than under the indemnification provisions of or contemplated by Sections 7(a) or
7(b) hereof. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement thereof,
such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. Such indemnifying party shall not enter
into any settlement with a party without obtaining an unconditional release of
each indemnified party with respect to any and all claims against each
indemnified party. An indemnified party shall not enter into any settlement
without the consent of the indemnifying party which shall not be unreasonably
withheld.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Sections 7(a) or 7(b) are unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the
-9-
<PAGE>
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 7(d). The amount paid or payable by an indemnified party as
a result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), no Holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such Holder from the sale of any Shares (after deducting any fees,
discounts and commissions applicable thereto) exceeds the amount of any damages
which such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' and any underwriters' obligations in
this Section 7(d) to contribute shall be several in proportion to the principal
amount of Shares registered or underwritten, as the case may be, by them and not
joint.
(e) The obligations of the Company under this Section 7 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each officer, director and partner of
each Holder, agent and underwriter and each person, if any, who controls any
Holder, agent or underwriter within the meaning of the Act; and the obligations
of the Holders and any underwriters contemplated by this Section 7 shall be in
addition to any liability which the respective Holder or underwriter may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Restricted Shares on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
-10-
<PAGE>
8. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained the
written consent of Silver Holdings, Argentum and Holders of a majority of the
Shares of the other Shareholders. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of the Holders whose Shares are being sold
pursuant to the Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority of the
Shares being sold by such Holders pursuant to the Registration Statement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a
Holder, at the most current address given by such Holder to the Company in
accordance with the provisions of this Section 8(b) and (ii) if to the Company:
Apex Silver Mines Limited, c/o Curacao Corporation Company, N.V., Kaya Flamboyan
9, Willemstad, Curacao, Netherland Antilles (Telecopy: 011-599-9-322-001);
copy to Patrick J. Dooley, Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, New York, N.Y. 10022 (Telecopy: 212-872-1002). All such
notices and communications shall be deemed to have been duly given: when
delivered by hand, if personally delivered; three business days after being
delivered to a next-day air courier; when answered back, if faxed; and when
receipt is acknowledged by the recipient's telecopier machine, if telecopied.
(c) Successors And Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
(d) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
(e) Governing Law. This Agreement shall be governed by the laws of
-------------
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule that would cause the application of the law of any
jurisdiction other than the State of New York.
(f) Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Severability. The remedies provided herein are cumulative and
------------
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that
-11-
<PAGE>
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
[REST OF PAGE DELIBERATELY LEFT BLANK]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.
APEX SILVER MINES LIMITED
By: /s/ Thomas S. Kaplan
----------------------------
Name: Thomas S. Kaplan
Title: Chairman
SILVER HOLDINGS LDC
By: /s/ Paul Soros
----------------------------
Name: Paul Soros
Title: Director
ARGENTUM LLC
By: Caledonian Bank & Trust Limited,
as Secratary
By: /s/ Vijayabalan Muregesu
----------------------------
Name: Vijayabalan Muregesu
Title: Manager-Banking
CONSOLIDATED COMMODITIES LTD.
By: /s/ Peter Martin
----------------------------
Name: Peter Martin
Title: President
/s/ Thomas S. Kaplan
---------------------------------
Thomas S. Kaplan
<PAGE>
LITANI CAPITAL MANAGEMENT LDC
By: /s/ Thomas S. Kaplan
----------------------------
Name: Thomas S. Kaplan
Title:
AURUM LLC
By: /s/ Thomas S. Kaplan
----------------------------
Name: Thomas S. Kaplan
Title: Trustee
-14-
<PAGE>
EXHIBIT 10.30
AMENDED AND RESTATED VOTING TRUST AGREEMENT, amended and restated as of the
29th day of October, 1997 (this "Agreement"), between THOMAS KAPLAN, with an
address c/o Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022-
2585, Attn.: Steven E. Plotnick, Esq., as Trustee (hereinafter the "Trustee")
and CONSOLIDATED COMMODITIES LTD., a limited liability company formed under the
laws of Bermuda (hereinafter the "Beneficiary"), with an address c/o Arthur D.
Hanna & Co., No. 10 Deveaux Street, P.O. Box N-4877, Nassau, Bahamas, Attn.:
David Sean Hanna, Esq..
W I T N E S S E T H :
-------------------
WHEREAS, the Beneficiary is the holder of Three Million Nine Hundred
Thirty-Five Thousand Eight Hundred Twenty-Five (3,935,825) ordinary shares, par
value US $0.01 per share (each a "Share" and collectively the "Shares") of Apex
Silver Mines Limited, a Cayman Islands corporation (the "Company"); and
WHEREAS, in order to vest in the Trustee the sole right to vote the Shares
and all investment authority and power with respect to the Shares, the
Beneficiary is willing to deposit the Shares owned by it with the Trustee under
this Agreement for the period commencing on the date hereof and ending upon the
termination of this Agreement in accordance with its terms.
NOW, THEREFORE, the parties hereto agree as follows:
1. Delivery to Trustee of Certificates for Shares.
Simultaneously with the execution and delivery of this Agreement, the
Beneficiary shall deliver to the Trustee certificates representing an aggregate
of Three Million Nine Hundred Thirty-Five Thousand Eight Hundred Twenty-Five
(3,935,825) Shares, representing all of the Shares held by the Beneficiary,
endorsed in blank or accompanied by duly completed instruments of share transfer
executed by the Beneficiary. Immediately subsequent to the execution and
delivery of this Agreement and such instruments of share transfer, the Trustee
shall deliver a copy of this Agreement to the Company, shall surrender to the
Company said certificates and instruments of share transfer, and the Trustee and
Beneficiary shall take all further necessary or appropriate actions to cause the
Directors to enter the name of the Trustee in the register of Members in respect
thereof and to cancel said certificates and to issue to the Trustee a new
certificate, representing Three Million Nine Hundred Thirty-Five Thousand Eight
Hundred Twenty-Five (3,935,825) Shares, in the name of the Trustee. Said new
certificate shall be held by the Trustee, in trust, for the benefit of the
Beneficiary and the heirs, executors, successors and/or assigns of the
Beneficiary (each sometimes hereinafter referred to as a "Beneficiary"), subject
to the terms and conditions hereinafter set forth.
<PAGE>
2. Delivery to Trustee of Certificates for Additional Shares. Any and all
certificates for additional shares of the Company issued to the Beneficiary
while it is the Beneficiary under this Agreement shall be in like manner
endorsed and delivered to the Trustee together with a duly completed and
executed form of share transfer to be held by him subject to the terms and
conditions hereof. All such additional shares shall be deemed to be "Shares"
for all purposes of this Agreement.
3. Delivery of Trustee's Certificates. Upon the delivery to the Trustee
of the certificates and forms of share transfer referred to in paragraph 1
hereof, the Trustee shall deliver to the Beneficiary a certificate (the
"Trustee's Certificate") for the number of Shares delivered to the Trustee by
the Beneficiary, substantially in the form hereinafter set forth. Upon each
receipt of certificates for additional shares issued to a Beneficiary, the
Trustee shall deliver to such Beneficiary a Trustee's Certificate for the number
of shares so deposited, substantially in the form hereinafter set forth.
The Trustee's Certificate (the terms and provisions of which are a part of
this Agreement) shall be substantially in the following form:
TRUSTEE'S CERTIFICATE
This is to certify that the undersigned Trustee has received a
certificate or certificates issued in the name of Thomas Kaplan, Trustee,
evidencing the ownership of ___ shares of a nominal or par value of US
$0.01 each of Apex Silver Mines Limited, a Cayman Islands corporation (the
"Shares"), and that the Shares are held subject to all the terms and
conditions of that certain Agreement (the "Voting Trust Agreement"),
amended and restated as of October 29, 1997, by and between Consolidated
Commodities Ltd. and Thomas Kaplan, as Trustee. During the term of the
Voting Trust Agreement, the Trustee shall, as provided in the Voting Trust
Agreement, possess and be entitled to exercise the right to vote and
otherwise represent all of the Shares for all purposes, and to exercise all
investment authority and power with respect to all of the Shares for all
purposes, it being agreed that no voting right and no investment authority
or power shall pass to the holder hereof by virtue of the ownership of this
Certificate.
This Certificate is assignable with the right to issuance of a new
certificate of like tenor only upon the surrender to the Trustee of this
certificate properly endorsed. Upon the termination of the Voting Trust
Agreement, this certificate shall be surrendered to the Trustee by the
holder hereof upon delivery to the holder hereof of a certificate
representing the Shares not sold
2
<PAGE>
or otherwise disposed of by the Trustee pursuant to the Voting Trust
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
__ day of ___________, ____.
--------------------
Thomas Kaplan, Trustee
Each Trustee's Certificate may be transferred by endorsement by the person
to whom issued, or by his, her or its attorney-in-fact, or by the administrator
or executor of his, her or its estate, by delivery of such Trustee's Certificate
so endorsed to the Trustee; but such transfer shall not be evidence to or be
binding upon the Trustee until such Trustee's Certificate is surrendered to the
Trustee and the transfer is entered upon the "Trustee's Certificate Book", which
shall be kept by the Trustee to show the names of the parties by whom and to
whom transferred, the numbers of the certificates, the number of shares and the
date of transfer. No new Trustee's Certificate shall be issued until the
Trustee's Certificate for the shares represented thereby shall have been
surrendered to and cancelled by the Trustee, and the Trustee shall preserve the
certificates so cancelled as vouchers. In case any Trustee's Certificate shall
be claimed to be lost of destroyed, a new Trustee's Certificate may be issued in
lieu thereof, upon such proof of loss as may be required by the Trustee.
4. Voting and Investment Authority and Power of Trustee.
a. During the term of this Agreement, the Trustee shall have the sole
and exclusive voting and investment authority and power with respect to the
Shares held by the Trustee hereunder. The Trustee shall have the power to vote
the Shares held by the Trustee at all regular and special meetings of the
shareholders of the Company and may vote for, do or assent or consent to and
shall have all the powers, rights and privileges of a shareholder of the
Company.
b. The Trustee may vote in person or by proxy, and a proxy in writing
signed by the Trustee shall be sufficient authority to the person named therein
to vote all the Shares held by the Trustee hereunder at any meeting, regular or
special, of the shareholder of the Company.
c. The Trustee shall have complete investment authority and power with
respect to the Shares held by the Trustee hereunder, including, without
limitation, the authority and power to sell or otherwise dispose of any or all
of the Shares on such terms and subject to such conditions, as the Trustee in
his sole discretion shall deem appropriate. The Beneficiary and each holder of
Trustee's Certificates hereby appoints the Trustee as his, her or its attorney-
in-fact to execute any documents or instruments
3
<PAGE>
necessary (in the determination of the Trustee) to effect such sale or
disposition. Without limiting the foregoing, each holder of Trustee's
Certificates hereby agrees, following written notification from the Trustee of
any such contemplated sale or other disposition of Shares, to surrender to the
Trustee at the time and place indicated in such notice, his, her or its
Trustee's Certificates. The Trustee, promptly following the closing of any such
sale or other disposition of Shares, shall issue and deliver to each such holder
of Trustee's Certificates: (a) a replacement Trustee's Certificate, reflecting
such holder's pro rata interest in the unsold Shares, as shown on the books of
the Trustee, and (b) such holder's pro rata interest in the net proceeds of any
such sale or other disposition of Shares (after deduction of expenses incurred
in connection with such sale or other disposition), as shown on the books of the
Trustee. Upon such surrender of such Trustee's Certificates, and such payment of
such net proceeds, this Agreement shall terminate as to the shares so sold or
otherwise disposed of.
5. Distribution of Cash Dividends.
(a) The Trustee shall distribute directly any cash dividends or
distributions declared and paid on the Shares deposited hereunder (other than
dividends or distributions made in the form of voting securities of the Company)
to the holders of Trustee's Certificates in proportion to their respective
interests therein as shown on the books of the Trustee, such distribution to be
equivalent to the dividends or distribution which each respective holder would
have been entitled to receive had the Shares not been deposited hereunder.
(b) The Trustee shall receive and hold, subject to the terms of this
Agreement, any voting securities of the Company issued in respect thereof by
reason of any dividend, distribution, capital reorganization, stock split,
combination or the like and shall issue and deliver Trustee's Certificates
therefor to the holders of the Trustee's Certificates in proportion to their
respective interests therein as shown on the books of the Trustee.
6. Term of Agreement. This Agreement and the trust hereby created shall
terminate on December 31, 1998. Until termination in accordance with the terms
of this Agreement, neither this Agreement nor the trust hereby created shall be
revocable or amendable, in whole or in part, except as provided in Section 12,
below.
7. Liability for Willful Misconduct. The Trustee shall not be liable for
any error of judgment or mistake of fact or law, or for any act or omission
undertaken in good faith in connection with his powers and duties under this
Agreement, except for his own willful misconduct or gross negligence. The
Trustee shall not be liable for acts or omissions of any employee or agent of
the Company. The Trustee shall not be liable for acting in reliance on any
notice, request, consent, certificate, instruction, or other
4
<PAGE>
paper or document or signature believed to be genuine and to have been signed by
the proper party or parties. The Trustee may consult with legal and other
counsel of his choosing, and any act or omission undertaken by the Trustee in
good faith in accordance with the opinion of legal or other counsel shall be
binding and conclusive on the parties to this Agreement.
8. Binding Agreement. Every registered holder of a Trustee's Certificate,
and every bearer of a Trustee's Certificate properly endorsed in blank or
properly assigned, by the acceptance or holding thereof, shall be deemed
conclusively for all purposes to have assented to this Agreement and to all of
its terms, conditions and provisions and shall be bound thereby with the same
force and effect as if such holder or bearer had executed this Agreement.
Without limiting the foregoing, this Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
9. Severability. The invalidity of any term or provision of this
Agreement shall not affect the validity of the remainder of this Agreement.
10. Governing Law. Regardless of the place of execution, delivery,
performance or any other aspect of this Agreement, this Agreement and all of the
rights of the parties under this Agreement shall be governed by, construed under
and enforced in accordance with the substantive law of New York without regard
to conflicts of law principles.
11. No Waiver. No waiver of any covenant or condition or the breach of any
covenant or condition of this Agreement shall be deemed to constitute a waiver
of any subsequent breach of such covenant or condition nor justify or authorize
a nonobservance upon any occasion of such covenant or condition or any other
covenant or condition of this Agreement.
12. Entire Agreement. This Amended and Restated Voting Trust Agreement
takes the place of and supersedes in its entirety the existing Voting Trust
Agreement made as of the 1st day of August, 1997. This Agreement constitutes the
entire agreement between the parties hereto with regard to the subject matter
thereof, and shall not be modified or amended except in a writing executed by
both of the parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the Trustee and the Beneficiary have executed this
Agreement as of the date set forth above.
/s/ Thomas Kaplan
------------------------------
Thomas Kaplan, as Trustee
CONSOLIDATED COMMODITIES LTD.
By: /s/ Peter Martin
---------------------------
Name and Title
Peter Martin
President
6
<PAGE>
AMENDED AND RESTATED VOTING TRUST AGREEMENT, amended and restated as of the
29th day of October, 1997 (this "Agreement"), between THOMAS KAPLAN, with an
address c/o Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022-
2585, Attn.: Steven E. Plotnick, Esq., as Trustee (hereinafter the "Trustee")
and ARGENTUM LLC, a Limited Liability Company incorporated and existing under
the laws of the Cayman Islands (hereinafter the "Beneficiary"), with an address
c/o Arthur D. Hanna & Co., No. 10 Deveaux Street, P.O. Box N-4877, Nassau,
Bahamas, Attn.: David Sean Hanna, Esq..
W I T N E S S E T H :
-------------------
WHEREAS, the Beneficiary is the holder of Two Million Seven Hundred Thirty-
Nine Thousand One Hundred Fifty-Three and Ninety-Three One-Hundredths
(2,739,153.93) ordinary shares, par value US $0.01 per share (each a "Share" and
collectively the "Shares") of Apex Silver Mines Limited, a Cayman Islands
corporation (the "Company"); and
WHEREAS, in order to vest in the Trustee the sole right to vote the Shares and
all investment authority and power with respect to the Shares, the Beneficiary
is willing to deposit the Shares owned by it with the Trustee under this
Agreement for the period commencing on the date hereof and ending upon the
termination of this Agreement in accordance with its terms.
NOW, THEREFORE, the parties hereto agree as follows:
1. Delivery to Trustee of Certificates for Shares. Simultaneously with the
execution and delivery of this Agreement, the Beneficiary shall deliver to the
Trustee certificates representing an aggregate of Two Million Seven Hundred
Thirty-Nine Thousand One Hundred Fifty-Three and Ninety-Three One-Hundredths
(2,739,153.93) Shares, representing all of the Shares held by the Beneficiary,
endorsed in blank or accompanied by duly completed instruments of share transfer
executed by the Beneficiary. Immediately subsequent to the execution and
delivery of this Agreement and such instruments of share transfer, the Trustee
shall deliver a copy of this Agreement to the Company, shall surrender to the
Company said certificates and instruments of share transfer, and the Trustee and
Beneficiary shall take all further necessary or appropriate actions to cause the
Directors to enter the name of the Trustee in the register of Members in respect
thereof and to cancel said certificates and to issue to the Trustee a new
certificate, representing Two Million Seven Hundred Thirty-Nine Thousand One
Hundred Fifty-Three and Ninety-Three One-Hundredths (2,739,153.93) Shares, in
the name of the Trustee. Said new certificate shall be held by the Trustee, in
trust, for the benefit of the Beneficiary and the heirs, executors, successors
and/or assigns of the Beneficiary (each sometimes hereinafter referred to as a
<PAGE>
"Beneficiary"), subject to the terms and conditions hereinafter set forth.
2. Delivery to Trustee of Certificates for Additional Shares. Any and all
certificates for additional shares of the Company issued to the Beneficiary
while it is the Beneficiary under this Agreement shall be in like manner
endorsed and delivered to the Trustee together with a duly completed and
executed form of share transfer to be held by him subject to the terms and
conditions hereof. All such additional shares shall be deemed to be "Shares"
for all purposes of this Agreement.
3. Delivery of Trustee's Certificates. Upon the delivery to the Trustee of
the certificates and forms of share transfer referred to in paragraph 1 hereof,
the Trustee shall deliver to the Beneficiary a certificate (the "Trustee's
Certificate") for the number of Shares delivered to the Trustee by the
Beneficiary, substantially in the form hereinafter set forth. Upon each receipt
of certificates for additional shares issued to a Beneficiary, the Trustee shall
deliver to such Beneficiary a Trustee's Certificate for the number of shares so
deposited, substantially in the form hereinafter set forth.
The Trustee's Certificate (the terms and provisions of which are a part of
this Agreement) shall be substantially in the following form:
TRUSTEE'S CERTIFICATE
This is to certify that the undersigned Trustee has received a
certificate or certificates issued in the name of Thomas Kaplan, Trustee,
evidencing the ownership of ___ shares of a nominal or par value of US
$0.01 each of Apex Silver Mines Limited, a Cayman Islands corporation (the
"Shares"), and that the Shares are held subject to all the terms and
conditions of that certain Agreement (the "Voting Trust Agreement"),
amended and restated as of October 29, 1997, by and between Argentum LLC
and Thomas Kaplan, as Trustee. During the term of the Voting Trust
Agreement, the Trustee shall, as provided in the Voting Trust Agreement,
possess and be entitled to exercise the right to vote and otherwise
represent all of the Shares for all purposes, and to exercise all
investment authority and power with respect to all of the Shares for all
purposes, it being agreed that no voting right and no investment authority
or power shall pass to the holder hereof by virtue of the ownership of this
Certificate.
This Certificate is assignable with the right to issuance of a new
certificate of like tenor only upon the surrender to the Trustee of this
certificate properly
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<PAGE>
endorsed. Upon the termination of the Voting Trust Agreement, this
certificate shall be surrendered to the Trustee by the holder hereof upon
delivery to the holder hereof of a certificate representing the Shares not
sold or otherwise disposed of by the Trustee pursuant to the Voting Trust
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of _______________, ____.
______________________
Thomas Kaplan, Trustee
Each Trustee's Certificate may be transferred by endorsement by the person to
whom issued, or by his, her or its attorney-in-fact, or by the administrator or
executor of his, her or its estate, by delivery of such Trustee's Certificate so
endorsed to the Trustee; but such transfer shall not be evidence to or be
binding upon the Trustee until such Trustee's Certificate is surrendered to the
Trustee and the transfer is entered upon the "Trustee's Certificate Book", which
shall be kept by the Trustee to show the names of the parties by whom and to
whom transferred, the numbers of the certificates, the number of shares and the
date of transfer. No new Trustee's Certificate shall be issued until the
Trustee's Certificate for the shares represented thereby shall have been
surrendered to and cancelled by the Trustee, and the Trustee shall preserve the
certificates so cancelled as vouchers. In case any Trustee's Certificate shall
be claimed to be lost or destroyed, a new Trustee's Certificate may be issued in
lieu thereof, upon such proof of loss as may be required by the Trustee.
4. Voting and Investment Authority and Power of Trustee.
a. During the term of this Agreement, the Trustee shall have the sole
and exclusive voting and investment authority and power with respect to the
Shares held by the Trustee hereunder. The Trustee shall have the power to vote
the Shares held by the Trustee at all regular and special meetings of the
shareholders of the Company and may vote for, do or assent or consent to and
shall have all the powers, rights and privileges of a shareholder of the
Company.
b. The Trustee may vote in person or by proxy, and a proxy in writing
signed by the Trustee shall be sufficient authority to the person named therein
to vote all the Shares held by the Trustee hereunder at any meeting, regular or
special, of the shareholder of the Company.
c. The Trustee shall have complete investment authority and power with
respect to the Shares held by the Trustee hereunder, including, without
limitation, the authority and power to sell or otherwise dispose of any or all
of the Shares on such terms and
3
<PAGE>
subject to such conditions, as the Trustee in his sole discretion shall deem
appropriate. The Beneficiary and each holder of Trustee's Certificates hereby
appoints the Trustee as his, her or its attorney-in-fact to execute any
documents or instruments necessary (in the determination of the Trustee) to
effect such sale or disposition. Without limiting the foregoing, each holder of
Trustee's Certificates hereby agrees, following written notification from the
Trustee of any such contemplated sale or other disposition of Shares, to
surrender to the Trustee at the time and place indicated in such notice, his,
her or its Trustee's Certificates. The Trustee, promptly following the closing
of any such sale or other disposition of Shares, shall issue and deliver to each
such holder of Trustee's Certificates: (a) a replacement Trustee's Certificate,
reflecting such holder's pro rata interest in the unsold Shares, as shown on the
books of the Trustee, and (b) such holder's pro rata interest in the net
proceeds of any such sale or other disposition of Shares (after deduction of
expenses incurred in connection with such sale or other disposition), as shown
on the books of the Trustee. Upon such surrender of such Trustee's Certificates,
and such payment of such net proceeds, this Agreement shall terminate as to the
shares so sold or otherwise disposed of.
5. Distribution of Cash Dividends.
(a) The Trustee shall distribute directly any cash dividends or
distributions declared and paid on the Shares deposited hereunder (other than
dividends or distributions made in the form of voting securities of the Company)
to the holders of Trustee's Certificates in proportion to their respective
interests therein as shown on the books of the Trustee, such distribution to be
equivalent to the dividends or distribution which each respective holder would
have been entitled to receive had the Shares not been deposited hereunder.
(b) The Trustee shall receive and hold, subject to the terms of this
Agreement, any voting securities of the Company issued in respect thereof by
reason of any dividend, distribution, capital reorganization, stock split,
combination or the like and shall issue and deliver Trustee's Certificates
therefor to the holders of the Trustee's Certificates in proportion to their
respective interests therein as shown on the books of the Trustee.
6. Term of Agreement. This Agreement and the trust hereby created shall
terminate on December 31, 1998. Until termination in accordance with the terms
of this Agreement, neither this Agreement nor the trust hereby created shall be
revocable or amendable, in whole or in part, except as provided in Section 12,
below.
7. Liability for Willful Misconduct. The Trustee shall not be liable for
any error of judgment or mistake of fact or law, or for any act or omission
undertaken in good faith in connection with his powers and duties under this
Agreement, except for his own
4
<PAGE>
willful misconduct or gross negligence. The Trustee shall not be liable for acts
or omissions of any employee or agent of the Company. The Trustee shall not be
liable for acting in reliance on any notice, request, consent, certificate,
instruction, or other paper or document or signature believed to be genuine and
to have been signed by the proper party or parties. The Trustee may consult with
legal and other counsel of his choosing, and any act or omission undertaken by
the Trustee in good faith in accordance with the opinion of legal or other
counsel shall be binding and conclusive on the parties to this Agreement.
8. Binding Agreement. Every registered holder of a Trustee's Certificate,
and every bearer of a Trustee's Certificate properly endorsed in blank or
properly assigned, by the acceptance or holding thereof, shall be deemed
conclusively for all purposes to have assented to this Agreement and to all of
its terms, conditions and provisions and shall be bound thereby with the same
force and effect as if such holder or bearer had executed this Agreement.
Without limiting the foregoing, this Agreement shall be binding upon and inure
to the benefit of each of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
9. Severability. The invalidity of any term or provision of this Agreement
shall not affect the validity of the remainder of this Agreement.
10. Governing Law. Regardless of the place of execution, delivery,
performance or any other aspect of this Agreement, this Agreement and all of the
rights of the parties under this Agreement shall be governed by, construed under
and enforced in accordance with the substantive law of New York without regard
to conflicts of law principles.
11. No Waiver. No waiver of any covenant or condition or the breach of any
covenant or condition of this Agreement shall be deemed to constitute a waiver
of any subsequent breach of such covenant or condition nor justify or authorize
a nonobservance upon any occasion of such covenant or condition or any other
covenant or condition of this Agreement.
12. Entire Agreement. This Amended and Restated Voting Trust Agreement
takes the place of and supersedes in its entirety the existing Voting Trust
Agreement made as of the 27th day of August, 1997. This Agreement constitutes
the entire agreement between the parties hereto with regard to the subject
matter thereof, and shall not be modified or amended except in a writing
executed by both of the parties hereto.
5
<PAGE>
IN WITNESS WHEREOF, the Trustee and the Beneficiary have executed this
Agreement as of the date set forth above.
/s/ Thomas Kaplan
______________________________
Thomas Kaplan, as Trustee
ARGENTUM LLC
By: CALEDONIAN BANK & TRUST LTD.
Secretary
By: /s/ Vijayabalan Murugesu
---------------------------
Vijayabalan Murugesu
Manager - Banking
6
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 4 to the Registration Statement on Form S-1 of our report dated
August 29, 1997, relating to the financial statements of Apex Silver Mines
Limited, which appears in such Prospectus. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Denver, Colorado
November 17, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 (UNAUDITED) AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 OF APEX SILVER
MINES LIMITED.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 DEC-31-1996
<CASH> 8,806,284 25,949,771
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,307,601<F1> 26,103,996<F1>
<PP&E> 693,028 524,335
<DEPRECIATION> (12,903) (801)
<TOTAL-ASSETS> 15,140,415<F2> 26,797,304<F2>
<CURRENT-LIABILITIES> 1,356,058 2,485,994
<BONDS> 0 0
0 0
0 0
<COMMON> 136,015 130,792
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 15,140,415 26,797,304
<SALES> 0 0
<TOTAL-REVENUES> 607,072 574,470
<CGS> 0 0
<TOTAL-COSTS> 17,605,309 15,173,710
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (16,998,237) (14,599,240)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 2,875,927<F3>
<NET-INCOME> (16,998,237) (11,723,313)
<EPS-PRIMARY> (1.25) (1.11)
<EPS-DILUTED> (1.25) (1.11)
<FN>
<F1> TOTAL CURRENT ASSETS INCLUDE "PREPAID EXPENSES" OF $499,180 IN 1997 AND
$154,225 IN 1996.
<F2> TOTAL ASSETS INCLUDE "DEFERRED ORGANIZATIONAL COSTS" (NET) OF $141,479 FOR
1997 AND $169,774 FOR 1996.
<F3> CHANGES EQUALS A "MINORITY INTEREST" OF 2,875,927
</FN>
</TABLE>
