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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 20-F
(Mark One)
- ----- REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
OR
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
-----------------
OR
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________________ to _________________
Commission file number _________________________________________________________
Meridian Gold Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Canada
- --------------------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
5011 Meadowood Way, Reno, NV 89502
- --------------------------------------------------------------------------------
(address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
------------------- ------------------------
which registered
----------------
Common Shares, no par value New York Stock Exchange,
Toronto Stock Exchange
- ----------------------------------- ------------------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act:
N/A
- --------------------------------------------------------------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
Indicate the number of outstanding shares of each of the Company's classes of
capital or common stock as of the close of the period covered by the annual
report:
As of December 31, 1996, the Registrant had outstanding 73,597,495 Common
Shares and 10,000 Series 1 Preferred Shares
- --------------------------------------------------------------------------------
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 X Item 18
----- -----
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TABLE OF CONTENTS
-----------------
Glossary.......................................................................4
Cautionary Statement...........................................................5
PART I
Item 1. Description of Business.........................................6
Item 2. Description of Property........................................17
Item 3. Legal Proceedings..............................................25
Item 4. Control of Registrant..........................................27
Item 5. Nature of Trading Market.......................................27
Item 6. Exchange Controls and Other Limitations Affecting Security
Holders........................................................28
Item 7. Taxation.......................................................29
Item 8. Selected Financial Data........................................34
Item 9. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................35
Item 10. Directors and Officers of the Registrant.......................38
Item 11. Compensation of Directors and Officers.........................39
Item 12. Options to Purchase Securities From Registrant or Subsidiaries.41
Item 13. Interest of Management in Certain Transactions.................43
PART II
Item 14. Description of Securities to be Registered.....................43
PART III
Item 15. Defaults Upon Senior Securities................................43
Item 16. Changes in Securities and Changes in Security for Registered
Securities.....................................................43
PART IV
Item 17. Financial Statements...........................................44
Item 18 Financial Statements...........................................44
Item 19. Financial Statements and Exhibits..............................44
Signatures ...............................................................
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Except as otherwise indicated, all dollar amounts in this Annual Report
are expressed in United States dollars.
The information set forth in this Annual Report is as of December 31,
1996 unless an earlier or later date is indicated.
Except as otherwise indicated, the financial information set forth in
this Annual Report is presented in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP"). Differences between Canadian GAAP and
United States generally accepted accounting principles ("U.S. GAAP"), as
applicable to the Company, are set forth in Note 14 of the Notes to the
Consolidated Financial Statements of the Company. See "Item 17. Financial
Statements."
GLOSSARY
The following mining terms have the following meanings in this Annual
Report on Form 20-F (the "Annual Report"):
"carbon adsorption"...A process used to extract dissolved gold and
silver from solvents in leaching. Soluble complexes of
gold and silver physically adhere to activated carbon
particles without chemical reaction.
"cash cost of
production" ..........Includes site costs for all mining (except deferred mining
and deferred stripping costs), processing, administration
and resource taxes, but does not include capital,
exploration, depreciation and financing costs. Total cash
costs are divided by payable gold ounces and equivalent
gold ounces of by-product silver produced to arrive at net
cash cost of production per ounce.
"deposit".............A mineralized body which has been physically delineated by
sufficient drilling, trenching, and/or underground work,
and found to contain a sufficient average grade of metal
or metals to warrant further exploration and/or
development expenditures; such a deposit does not qualify
as a commercially mineable ore body or as containing ore
reserves, until final technical and economic factors have
been resolved.
"development".........The preparation of a known commercially mineable deposit
for mining.
"dore"................Unrefined metal bars consisting mainly of gold, with small
amounts of silver and other metal impurities which will be
further refined by contracted refineries.
"exploration".........The search for mineral deposits (reserves) which are not
in development or production.
"facies"..............Part of a rock body as differentiated from other parts by
appearance or composition.
"heap leaching" ......A process of extracting gold by placing broken ore on
sloping, impermeable pads and applying dilute cyanide
solution that dissolves
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a portion of the contained gold, which is then recovered
in a carbon column or Merrill-Crowe circuit.
"leach pad" ..........A large impermeable foundation or pad used as a base for
ore during heap leaching. The pad prevents the leach
solution from escaping from out of the circuit.
"mill" ...............A plant where ore is ground, usually to fine powder, and
the metals are extracted by physical and/or chemical
processes.
"mineralization"......Mineral-bearing rock; the minerals may have been either a
part of the original rock unit or injected at a later
time.
"opt".................Ounces per ton of ore.
"ore".................A metal or mineral bearing rock or a combination of these
of sufficient value as to quality and quantity to enable
it to be mined at a profit.
"ounces"..............Troy ounces.
"probable reserves"...Reserves for which quantity and grade and/or quality are
computed from information similar to that used for proven
reserves, but the sites for inspection, sampling and
measurement are further 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.
"production"..........The exploitation of a mineral deposit or reserve.
"proven reserves".....Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or
drill holes, and (b) the sites for inspection, sampling
and measurement are spaced so closely and the geological
character is so well defined that the size, shape, depth
and mineral content of reserves are well-established.
"reserve".............That part of a mineral deposit which could be economically
extracted or produced at the time of the reserve
determination.
"stripping ratio".....The ratio of tonnage of waste material removed to allow
the mining of one ton of ore in an open pit.
CAUTIONARY STATEMENT
Certain statements in this Annual Report constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or other future events, to be materially
different from any future results, performances or achievements or other events
expressly or impliedly predicted by such forward-looking statements. Such risks,
uncertainties and other factors are set forth in "Item 1. Description of
Business - Risk Factors" and elsewhere in this Annual Report, and include, but
are not limited to, factors associated with fluctuations in the market price of
precious metals, mining industry risks, recent operating losses, uncertainty of
title to properties, risk associated with foreign
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operations, environmental risks and hazards, proposed legislation affecting the
mining industry, litigation, governmental regulation of the mining industry,
volatility, properties without known mineable revenues, uncertainty as to
calculations of ore reserves, mineral deposits and ore grades, requirement of
additional financing, uninsured risks, risk of hedging strategies, competition,
dependence on key management personnel, potential volatility of market price of
common shares, dilution and certain anti-takeover effects.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
ORGANIZATION
Meridian Gold Inc. ("Meridian" or the "Company") is a Canadian precious
metals mining and exploration Company that was incorporated in February 1996
under the Canada Business Corporations Act, and whose business is more
specifically described under the heading "- Business of the Company" below. As
used in this Annual Report, "Meridian" or the "Company" includes, unless the
context otherwise requires, the Company's direct and indirect subsidiaries.
Meridian's predecessor, FMC Gold Company ("FMC Gold"), was formed as a
Delaware corporation in 1987 through a combination of FMC Corporation's North
American Precious Metals interests. In June 1987, FMC Gold issued 7.5 million
shares of common stock to the public and FMC Corporation held the remaining
shares. In May 1990, FMC Gold issued 8.0 million shares of common stock to
acquire Meridian Gold Company. FMC Corporation held the remaining 58.8 million
shares of common stock, or 80% of the outstanding shares of FMC Gold, at that
time. Meridian was incorporated in Canada in February 1996, and, upon completion
of a reincorporation in July 1996, Meridian became the successor to the business
of FMC Gold. In connection with this reincorporation, FMC Gold shareholders
received one share of Meridian common stock ("Common Shares") and a $0.02 per
share return of capital, totaling approximately $1.5 million, in exchange for
each share of FMC Gold common stock. Additionally, FMC Corporation sold its 80%
interest in Meridian through a public offering in Canada of Meridian's Common
Shares in July 1996. Concurrent with FMC Corporation selling its interest in
Meridian, FMC Corporation made a capital contribution to Meridian totaling
approximately $3.7 million. The FMC Gold shares were subsequently canceled.
The Company's registered office is located at 1090 West Georgia St.,
Vancouver, British Columbia VGE 3V7, and the executive office is located at 5011
Meadowood Way, Reno, Nevada 89502.
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ORGANIZATIONAL CHART
The organizational structure of the Company and its subsidiaries,
including Meridian Gold Company (formerly FMC Gold), is as set forth below:
--------------------------
Meridian Gold Inc.
(Canada)
--------------------------
--------------------------
Meridian Gold Canada Inc.
(Canada)
--------------------------
--------------------------
Meridian Gold Company
(Delaware)
--------------------------
------------------------- ------------------------- ---------------
100% 100% 100% 90%
- --------------------- ------------------- -------------------
Meridian Jerritt Meridian Meridian Rossi
Canyon Corp. Beartrack Co. Corp. (Delaware)
(Delaware) (Montana)
- --------------------- ------------------- -------------------
30% interest in 100% interest 100% interest 10%
Jerritt Canyon in Beartrack in Rossi
mine mine
---------------
Minera Meridian
Ltda. (Chile)
---------------
100% interest
in El Penon
and certain
early-stage
exploration
properties
BUSINESS OF THE COMPANY
The Company and its predecessor organization, FMC Gold, have been
engaged in the mining and exploration of gold and other precious metals since
1981. Meridian's principal revenue producing properties are its Beartrack Mine
(100% ownership) located near Salmon, Idaho, and the Jerritt Canyon mine (30%
ownership) located near Elko, Nevada. The Company also has advanced stage
exploration programs underway in Chile (the El Penon property) and in Nevada
(the Rossi property), and several early stage exploration programs located in
Chile, Idaho and Nevada.
The Company and its predecessors have produced over 3.4 million ounces
of gold from five mine sites since 1981. Since 1986, the Company has
continuously produced at least 150,000 ounces of gold annually from mining
operations either directly or through joint ventures. In 1996, the Company
produced 202,000 ounces of gold from the Beartrack and Jerritt Canyon mines.
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As of December 31, 1996, Meridian had total proven and probable reserves
of approximately 1.4 million ounces of gold, consisting of 848,000 ounces at
Beartrack and 571,000 ounces at Jerritt Canyon.
The Company's strategy is to expand its proven and probable reserves as
well as its mining and processing operations by (i) developing existing
producing properties and pursuing advanced stage exploration properties, (ii)
discovering new properties through its exploration program and (iii) making
selective acquisitions. The Company and its predecessors have spent a total of
approximately $61.4 million on exploration activities in the last five years,
approximately $3.7 million of which has been capitalized. The Company's
predecessor established exploration offices in Santiago, Chile in 1993, which
resulted in the discovery of gold at El Penon, and has also established a small
business development group in Vancouver, British Columbia to identify
acquisition opportunities and develop strategic alliances with junior mining
companies to expand the Company's gold reserves and production. As of December
31, 1996, the Company had $85.6 million of working capital, of which $82.6
million consisted of cash and cash equivalents. The Company believes these
financial resources will enable it to pursue its growth strategy.
RESERVES, PRODUCTION AND EXPLORATION
RESERVES
The Company's internal estimates of proven and probable reserves as of
December 31, 1996 and December 31, 1995 are as follows:
GOLD ORE RESERVES (PROVEN AND PROBABLE) (1)
December 31, 1996 December 31, 1995
------------------------ ------------------------------
Ore Tons Grade Gold (3) Ore Tons Grade Gold (3)
-------- ----- -------- -------- ----- --------
(2) (opt) (oz) (2) (opt) (oz)
(in thousands, except grades)
Beartrack (4) 25,600 0.033 848 22,792 0.034 784
Jerritt Canyon (30%) 2,800 0.204 571 3,402 0.188 638
----- ------
Total 1,419 1,422
- ----------
(1) Reserves estimates for December 31, 1996 and 1995 were based on assumed
prices of $400 per ounce of gold. Meridian's ore reserves are relatively
insensitive to a moderate change in gold price.
(2) Based on optimized mine plans, which incorporate as necessary the
impacts of dilution and access for Meridian's operations.
(3) Contained ounces exceed recoverable ounces due to metal losses
experienced during the extraction process. Precious metal recoveries are
dependent on the process used, grade of ore and metallurgy. Estimated
recoveries are as follows: Jerritt Canyon mill ore - 90%; Beartrack heap
leach ore - 67%. These estimated recoveries have not been reflected in
the table above.
(4) At December 31, 1996, the Beartrack mine had approximately 9.1 million
tons containing 77,000 ounces of gold on the heap leach pad. These
ounces have not been included in Beartrack's ore reserves.
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PRODUCTION
Production data for the Company for the years ended December 31, 1996
and December 31, 1995 are as follows:
PRODUCTION DATA
Year Ended December 31
-----------------------
1996 1995
---- ----
(in thousands)
Ore Processed (thousands of tons)
Beartrack ................................... 4,375 3,901
Jerritt Canyon (30%) ........................ 800 884
Ore Grade (ounces per ton)
Beartrack ................................... 0.026 0.034
Jerritt Canyon (30%) ........................ 0.131 0.129
Recoveries
Beartrack ................................... 90% 90%
Jerritt Canyon (30%) ........................ 88% 86%
Gold Production (thousands of ounces)
Beartrack ................................... 109 49
Jerritt Canyon (30%) ........................ 93 98
Cash Cost of Production ($ per gold equivalent
ounce)
Beartrack ................................... $190 $166
Jerritt Canyon (30%) ........................ $297 $250
EXPLORATION
The following table presents the Company's historical exploration
expenditures for the years ended December 31, 1996 and December 31, 1995. The
amounts stated for Jerritt Canyon represent the Company's 30% interest in the
Jerritt Canyon Joint Venture.
EXPLORATION EXPENDITURES
Year Ended December 31
----------------------
1996 1995
---- ----
(in thousands)
Beartrack........................................ $1,305 $ 39
Jerritt Canyon................................... 1,571 635
Rossi............................................ 1,969 1,459
Other U.S. exploration........................... 1,502 1,782
El Penon (1)..................................... 5,795 4,567
Other foreign exploration........................ 1,215 2,344
----- -----
Total.............................................. $13,357 $10,826
- ----------
(1) Does not include capitalized exploration costs at El Penon of
approximately $0.8 million in 1995.
REFINING AND MARKETING
Substantially all of the Company's products are sold to and refined by
two European refiners. The Company believes that, because of the availability of
several alternative refiners, each able to supply all of such services needed by
the Company, no adverse effect would result should the Company lose the services
of any of its current refiners.
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HEDGING POLICY
Prior to initiation of production at Beartrack, the Company purchased
options to sell approximately one-third of the expected Beartrack gold
production at a fixed price of $400 per ounce through the year 2001. The options
were originally purchased for $4.0 million and the cost is recognized in the
period in which the revenues related to the hedged production are recorded. The
options expire according to the following schedule:
OUNCES OF GOLD SUBJECT TO EXPIRATION DATE
OPTIONS
----------------------------- --------------------------
33,000 December 29, 1997
33,000 December 29, 1998
32,000 December 29, 1999
32,000 December 27, 2000
27,000 December 27, 2001
-------
157,000
=======
The Company does not presently intend to engage in further hedging
transactions with respect to its production of precious minerals, but may decide
to do so in the future.
RISK FACTORS
The following is a brief discussion of those distinctive or special
characteristics of Meridian's operations and industry which may have a material
impact on, or constitute risk factors in respect of, Meridian's future financial
performance:
FLUCTUATIONS IN THE MARKET PRICE OF PRECIOUS METALS
The profitability of the Company's operations will be directly related
to the market price of gold and other precious metals. The prices of gold and
other precious metals have fluctuated widely, particularly in recent years, and
are affected by numerous factors beyond the Company's control, including
expectations of inflation, the relative exchange rate of the U.S. dollar,
speculative activities, global and regional demand and production, political and
economic conditions and production costs in major producing regions. The Company
is unable to predict the aggregate effect of these factors, all of which are
beyond the Company's control. If, as a result of a decline in the price of gold
or other precious metals, the Company's marginal revenues were to fall below and
remain below the marginal costs of production at any particular mine for any
significant period, the Company may experience losses at that mine and may
determine that it is not economically feasible to continue commercial production
at that mine.
MINING INDUSTRY RISKS
The exploration for and development of mineral deposits involves a high
degree of risk which even a combination of careful evaluation, experience and
knowledge may not eliminate. Few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to locate and
establish ore reserves, to develop metallurgical processes and to construct
mining and processing facilities at a particular site. It is impossible to
ensure that the exploration programs planned by the Company will result in a
profitable commercial mining operation. Whether a mineral deposit will be
commercially viable depends on a number of factors, including, the particular
attributes of the deposit, such as size, grade and proximity to infrastructure,
precious metal prices which are highly
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cyclical, and government regulations, including regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. Unusual or unexpected formations, formation pressures,
fires, power outages, labor disruptions, flooding, explosions, cave-ins, land
slides and the inability to obtain suitable or adequate machinery, equipment or
labor are other risks involved in the operation of mines and the conduct of
exploration programs.
RECENT OPERATING LOSSES
The Company has incurred net operating losses of $20.8 million and $9.8
million for the years ended December 31, 1996 and 1995, respectively. There can
be no assurances that the Company will achieve net operating profits in the
future.
UNCERTAINTY OF TITLE TO PROPERTIES
The validity of unpatented mining claims on U.S. public lands, which
constitute a large portion of the property holdings in which the Company has an
interest, is sometimes uncertain and may be contested. Due to the extensive
requirements and associated expense required to obtain and maintain mining
rights on U.S. public lands, the Company's property interests are subject to
various uncertainties which are common to the industry, with the attendant risk
that some titles, particularly on undeveloped properties, may be defective.
However, the Company is not currently aware of any existing title uncertainties
which would be material to the Company's overall operations or financial
condition with respect to the Company's operating properties or any other
property it currently has targeted for development. As a result of the potential
uncertainty of title to mining and exploration properties and the large number
of properties which are ultimately abandoned, expenditures with respect to any
particular property to establish the Company's rights therein are directly
related to the level of current interest in such property and the extent and
results of previous expenditures. The Company's level of interest in any
particular mining claim, and related title expenditures, will in turn vary
depending upon whether and the extent to which exploratory drilling and other
exploration activities have been or will be conducted, the results of such
drilling and other indices of mineralization at such claim as indicated through
other geological, geophysical, geostatistical and related procedures.
Expenditures to establish the Company's rights will generally not be significant
until such time as extensive drilling is planned, and such expenditures often
continue even after proven or probable reserves have been established.
The mining code of Chile provides for transfer of titled mineral rights
to a claimant, domestic or foreign, upon completion of a specified process. In
Chile, the law permits corporations to hold title to their mining concessions in
their names. However, under Chilean mining law, the beneficiary of a mining
exploration concession is required to take legal measures to transform its
mining exploration concession into a mining exploitation concession, in
accordance with the mining code. If such measures are not taken by the Company,
or if the annual fees for mining concessions are not paid each year, the Company
can lose its title over its mining concessions, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
In Chile, the Company maintains title in its name to its properties and
believes that it has completed the requisite title processes. Although the
Company believes it has taken reasonable measures to ensure proper title to its
mining concessions in Chile, there is no guarantee that title to any of its
mining concessions could not be challenged by a third party, which may have
valid claims underlying portions of the Company's interests.
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RISK ASSOCIATED WITH FOREIGN OPERATIONS
The Company currently has exploration projects and investments in Chile.
These projects and investments, as well as any other projects or investments
made or undertaken in the future in other developing nations, are subject to the
risks normally associated with conducting business in such countries, including
labor disputes and uncertain political and economic environments, as well as
risks of war and civil disturbances or other risks which may limit or disrupt
the projects, restrict the movement of funds or result in the deprivation of
contract rights or the taking of property by nationalization or expropriation
without fair compensation laws or policies of particular countries, foreign
taxation, limitations on ownership and on repatriation of earnings, and foreign
exchange controls and currency fluctuations. Although the Company has not
experienced any significant problem in its Chilean operations arising from such
risks, there can be no assurance that such problems will not arise in the
future. Foreign investments may also be adversely affected by changes in
Canadian laws and regulations relating to foreign trade, investment and
taxation.
ENVIRONMENTAL RISKS AND HAZARDS
All phases of the Company's operations are subject to environmental
regulation in the various jurisdictions in which it operates. Environmental
legislation is evolving in a manner which may 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. There
is no assurance that existing or future environmental regulation will not
materially adversely affect the Company's business, financial condition and
results of operations. Environmental hazards may exist on the properties on
which the Company holds interests which are unknown to the Company at present
and which have been caused by previous or existing owners or operators of the
properties.
Government approvals and permits are currently, or may in the future be,
required in connection with the Company's operations. To the extent such
approvals are required and not obtained, the Company may be curtailed or
prohibited from proceeding with planned exploration or development of
properties.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions thereunder, including orders
issued by regulatory or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions. Parties engaged in
mining operations, including the Company, may be required to compensate those
suffering loss or damage by reason or the mining activities and may have civil
or criminal fines or penalties imposed for violations of applicable laws or
regulations.
Amendments to current laws, regulations and permits governing operations
and activities of mining companies, or more stringent implementation thereof,
could have a material adverse impact on the Company and cause increases in
exploration expenses, capital expenditures or production costs or reduction in
levels of production at producing properties or require abandonment or delays in
development of new mining properties.
PROPOSED LEGISLATION AFFECTING THE MINING INDUSTRY
During the past several years, the United States Congress considered a
number of proposed amendments to the General Mining Law. In 1992, a holding fee
of $100 per claim was imposed upon unpatented mining claims located on federal
lands. Beginning in October 1994, a moratorium on processing of new patent
applications was approved. In addition, a
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variety of legislation is now pending before the United States Congress to amend
further the General Mining Law. The proposed legislation would, among other
things, change the current patenting procedures, limit the rights obtained in a
patent, impose royalties on unpatented claims, and enact new reclamation,
environmental controls and restoration requirements. The royalty proposals range
from a 2% royalty on "net profits" from mining claims to an 8% royalty on
modified gross income/net smelter returns. The extent of any such changes that
may be enacted is not presently known, and the potential impact on the Company
as a result of future congressional action is difficult to predict. If enacted,
the proposed legislation could adversely affect the economics of development of
operating mines on the federal unpatented mining claims held by the Company. A
majority of the Company's proven and probable ore reserves in the U.S. are
located on unpatented U.S. federal lands. The Company's financial performance
could therefore be materially and adversely affected by passage of all or
pertinent parts of the proposed legislation.
LITIGATION
The operations of the Company's Beartrack mine may be adversely affected
by the results of litigation initiated by the Pacific Rivers Council and the
Wilderness Society and by the Sierra Club Legal Defense Fund, Inc. The Company
believes that neither of these actions, relating to the Endangered Species Act
and other environmental matters, will ultimately affect mining operations at
Beartrack in any manner that would be materially adverse to the Company.
However, there can be no assurance that the outcome of these actions will not
materially adversely affect the Company's business, financial condition and
results of operations. See "Item 3. Legal Proceedings."
GOVERNMENTAL REGULATION OF THE MINING INDUSTRY
The exploration activities of the Company are subject to various laws
governing prospecting, development, production, taxes, labor standards and
occupational health, mine safety, toxic substances and other matters. Mining and
exploration activities are also subject to various laws and regulations relating
to the protection of the environment. Although the Company believes that its
exploration activities are currently carried out in accordance with all
applicable rules and regulations, no assurance can be given that new rules and
regulations will not be enacted or that existing rules and regulations will not
be applied in a manner which could limit or curtail production or development.
Amendments to current laws and regulations governing the operations and
activities of the Company or more stringent implementation thereof could have a
material adverse effect on the Company's business, financial condition and
results of operations.
PROPERTIES WITHOUT KNOWN MINEABLE RESERVES
Certain of the Company's properties are in the exploration stage and it
has not yet been determined whether these properties contain ore reserves that
are economically recoverable. The activities of the Company will continue to be
directed towards the search, evaluation and development of mineral deposits.
There is no assurance that the expenditures of the Company will result in
discoveries of commercial ore bodies. Furthermore, there can be no assurance
that the Company's estimates of future exploration expenditures will prove
accurate, and actual expenditures may be significantly higher than currently
anticipated.
UNCERTAINTY AS TO CALCULATIONS OF ORE RESERVES, MINERAL DEPOSITS AND ORE
GRADES
There is a significant degree of uncertainty attributable to the
calculation of ore reserves, mineral deposits and corresponding ore grades. The
Company has calculated its proven and probable reserves internally. Until the
ore is actually mined and processed, ore
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reserves, mineral deposits and ore grade must be considered as estimates only.
Consequently, there can be no assurance that any ore reserve, mineral deposits
or ore grade information contained in this Annual Report will prove accurate. In
addition, the quantity of ore reserves and mineral deposits may vary depending
on mineral prices and other factors. Any material change in reserves, ore grades
or stripping ratios may affect the economic viability of the Company's projects.
Furthermore, reserve and mineral deposit information should not be interpreted
as any assurance of mine life or of the potential profitability of existing or
future projects.
REQUIREMENT OF ADDITIONAL FINANCING
The development of the Company's properties will require substantial
additional financing. There can be no assurance that additional capital or other
types of financing will be available when needed or that, if available, the
terms of such financing will be favorable to the Company.
UNINSURED RISKS
The Company carries insurance to protect against certain risks in such
amounts as it considers adequate. Risks not insured against in each case include
environmental pollution, earthquake damage, mine floodings or other hazards
against which mining exploration corporations cannot insure or against which the
Company may elect not to insure because of high premium costs or other reasons.
Failure to have insurance coverage for any one or more of such risks or hazards
could have a material adverse effect on the Company's business, financial
condition and results of operations.
RISK OF HEDGING STRATEGIES
In order to mitigate some of the risks associated with fluctuating gold
prices, the Company has in the past, has presently, and may in the future use
various price hedging strategies, such as selling future contracts for gold, or
using call and put options, to lock in delivery prices for its gold production.
The Company continually evaluates the potential short- and long-term benefits of
engaging in such price hedging strategies based upon the then current market
conditions. No assurance can be given, however, that the use of price hedging
strategies will always benefit the Company. There is a possibility that the
Company could lock in forward deliveries at prices lower than the market price
at the time of delivery. In addition, the Company could fail to produce enough
gold to satisfy its forward delivery obligations, causing the Company to
purchase gold in the spot market at higher prices to fulfill its delivery
obligations. As of December 31, 1996, the Company had options to sell
approximately 157,000 ounces of its gold production from Beartrack at a fixed
gold price of $400 per ounce through the year 2001. See "Item 1. Description of
Business - Hedging Policy."
COMPETITION
Because mines have limited lives based on proven ore reserves, the
Company is continually seeking to replace and expand its reserves. The Company
competes with other mining companies in connection with the search for and
acquisition of properties producing or capable of producing gold and other
precious metals. Existing or future competition in the mining industry could
materially adversely affect the Company's prospects for mineral exploration and
success in the future.
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DEPENDENCE UPON KEY MANAGEMENT PERSONNEL
The Company is dependent upon a number of key management personnel. The
loss of the services of one or more of such personnel could have a material
adverse effect on the Company. The Company's ability to manage its exploration
and development activities, and hence its success, will depend in large part on
the efforts of these individuals. The Company faces intense competition for
qualified personnel, and there can be no assurance that the Company will be able
to attract and retain such personnel.
POTENTIAL VOLATILITY OF MARKET PRICE OF COMMON SHARES
Both the Canadian and U.S. stock markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Common Shares. In addition, the
market price of the Common Shares may be highly volatile. Factors such as the
price of gold and precious metals, announcements by competitors, changes in
stock market analyst recommendations regarding the Company, and general market
conditions affecting other exploration and mining companies may have a
significant effect on the market price of the Common Shares. Moreover, it is
likely that during future quarterly periods, the Company's results and
exploration activities may fluctuate significantly or may fail to meet the
expectations of stock market analysts and investors and, in such event, the
market price of the Common Shares could be materially adversely affected. In the
past, securities class action litigation has often been initiated following
periods of volatility in the market price of a company's securities. Such
litigation, if brought against the Company, could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DILUTION
The Company's Certificate and Articles of Amalgamation, as amended,
provide that the Company has an unlimited number of authorized Common Shares and
Preference Shares that may be issued. Under applicable Canadian law, shareholder
approval is not generally required for the Company to issue shares of either
class of capital stock. Moreover, the Company has various commitments that could
require the issuance of a substantial number of additional Common Shares as
follows: exercise of stock options outstanding as of December 31, 1996 under the
Meridian Gold Inc. 1996 Stock Option Plan (1,679,950 shares at December 31,
1996); and issuance of Common Shares pursuant to a Shareholders Rights Plan,
which is triggered by a "Take-over Bid" meeting certain criteria. See "Item 12.
Options to Purchase Security From Registrant or Subsidiaries."
CERTAIN ANTI-TAKEOVER EFFECTS
The Shareholders Rights Plan established by the Company in 1996 may have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company,
which may otherwise result in holders of the Common Shares receiving a premium
over the existing market price for their shares in a change of control
transaction. See "Item 12. Options to Purchase Securities from Registrant or
Subsidiaries."
PROPERTY INTERESTS IN THE UNITED STATES
Mineral interests in the United States are owned by U.S. federal and
state governments and private parties. In order for the Company to explore or
develop a
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prospective mineral property that is owned by a private party or by a state, it
must enter into a property or mineral rights acquisition agreement. The Company
may also acquire rights to explore for and produce minerals on U.S. federally-
owned lands. This acquisition is accomplished through the location of unpatented
mining claims upon unappropriated U.S. federal land pursuant to procedures
established principally by the General Mining Law of 1872, as amended (the
"General Mining Law") and the Federal Land Policy and Management Act of 1976 (or
the acquisition of previously located mining claims from a private party as
described above). These laws and regulations generally provide that a citizen of
the United States (including a U.S. corporation) may acquire a possessory right
to develop and mine valuable mineral deposits discovered upon unappropriated
U.S. federal lands, provided that such lands have not been withdrawn from
mineral location (which would include, for example, lands included in national
parks and military reservations and lands designated as part of the National
Wilderness Preservation System). This right can be freely transferred and is
protected against appropriation by the government without just compensation.
Also, the claim locator acquires the right to obtain a patent (or deed)
conveying fee title to his claim from the U.S. federal government upon
compliance with certain additional procedures.
The majority of the Beartrack proven and probable ore reserves are
located on patented mining claims owned by the Company. The remaining reserves
are located on unpatented mining claims owned or leased by the Company.
Substantially all of the Jerritt Canyon proven and probable ore reserves are
located on unpatented mining claims owned or leased by the Jerritt Canyon Joint
Venture. The Jerritt Canyon mill is located on land owned by the joint venture.
Substantially all of the Rossi gold exploration operations are being conducted
on unpatented mining claims owned by the Company.
PROPERTY INTEREST IN CHILE
In Chile, mineral rights are granted by ordinary courts of justice in
the form of mining concessions. Any person, whether a Chilean national or a
foreigner, may apply for the granting of mining concessions subject to
compliance with the requirements provided for in Chilean law. The holder of a
mining concession is protected by the ownership right on such concession. The
right over the concession, which is independent from the ownership right on the
surface land, is transferable and may be subject to mortgage. The mining
concession entitles its holder to dispose of all mineral resources contained
within its boundaries.
Mining concessions are of two types:
(i) An Exploration Concession, whereby the holder is legally
entitled to explore for mineral substances in a certain area for a
period of two years, at the expiration of which the concession may be
extended for an additional two year period if the area covered by the
concession is reduced by half and provided the applicable annual tax is
paid.
(ii) An Exploitation Concession, whereby the holder is legally
entitled to exploit mineral substances contained therein for an
indefinite period of time subject to payment of the annual tax.
The holder of an Exploration Concession has the exclusive right to
initiate the procedure to obtain an Exploitation Concession within the
boundaries and during the time period of the Exploration Concession. The holder
of each type of mining concession is entitled by law to impose easements on the
surface land in order to facilitate mining exploration or exploitation
activities. Any compensation to be paid to the owner of the surface land for the
easement is to be determined by mutual agreement or, failing such
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agreement, by the court. The acquisition of mineral interests in Chile is
normally initiated either through the filing of an application to the courts to
obtain the granting of new mining concessions or by acquiring existing mining
concessions.
The legal procedure to obtain the granting of a new mining concession is
regulated in detail in the Chilean Mining Code. A special characteristic of this
judicial procedure is that the applicant is required to be active and to
expedite the proceeding in order to comply with deadlines established in the
Chilean Mining Code for the performance of certain tasks to be fulfilled in
order to obtain the grant of the concession. The judge has an active role, and
the proceeding may transform into a contentious one in certain cases (i.e.,
third party opposition to the survey petition).
The acquisition of mineral interests from parties which already have
registered mining concessions is also considered to be a normal vehicle to
initiate mining activities in Chile. The execution of an option or promise
purchase contract regarding existing mining concessions may enable an interested
party to develop exploration or exploitation mining work in a given area already
legally protected. Chilean law also provides flexibility to the interested party
in acquiring a mining concession to enter into different contractual
arrangements (i.e., deferred installment payments or undertaking to carry out
exploration activities as payment of the purchase price), contemplating the
option to purchase or abandon the mining concession.
EMPLOYEES
As of December 31, 1996, the Company had a total of approximately 184
employees, with approximately 155 employees working on site at the Beartrack
property. At the Jerritt Canyon property located near Elko, Nevada, there are
approximately 622 employees, all of which are employees of the Jerritt Canyon
Joint Venture, not of the Company. None of the employees are covered by a
collective bargaining agreement. The Company believes that its relationship with
its employees is good.
ITEM 2. DESCRIPTION OF PROPERTY.
-----------------------
Included herein are certain forward-looking statements that involve
various risks, uncertainties and other factors. See "Cautionary Statement" on
Page 5 of this Annual Report.
Meridian has two principal producing properties, Beartrack (100%
ownership) located near Salmon, Idaho, and Jerritt Canyon (30% ownership)
located near Elko, Nevada. In addition, the Company has advanced stage
exploration programs underway in Chile (at El Penon) and in Nevada (at Rossi),
and early stage exploration programs underway in Chile, Idaho and Nevada.
BEARTRACK
HISTORY, LOCATION, SIZE AND ACCESS
The 100 percent-owned Beartrack mine is an open pit operation with a
heap leach facility located approximately 11 miles west of Salmon, Idaho, near
the historic mining town of Leesburg. The Beartrack property comprises
approximately 27 square miles of patented and unpatented mining claims. The
Company owns the mineral rights to approximately 85 percent of the present
proven and probable reserves at Beartrack by its ownership of patented mining
claims. The remaining reserves are being mined from unpatented mining claims
which the Company owns or leases, a portion of which is subject to a 3 percent
net smelter
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return on production. Access from Salmon, Idaho to the Beartrack property is by
34 miles of county and U.S. Forest Service gravel roads.
GEOLOGY
The Beartrack mine is located on the Panther Creek fault. Gold
mineralization is closely associated with the Panther Creek fault.
North-northeast lateral displacement along this fault of up to 2,000 feet
created a shear zone in arkosic sandstone of the Yellowjacket Formation and
porphyritic quartz monzonite, making it ideal for hosting mineralization.
Deformation and shearing along the fault reaches widths up to 600 feet. Gold
mineralization has been found intermittently for a distance of about 16,500 feet
along the Panther Creek fault shear zone. Several stages of silification,
brecciation and gold mineralization have occurred to create the ore deposits at
Beartrack. The gold mineralization occurs in a network of stockwork veins and
veinlets created by the shearing. The primary associated waste minerals are
silica, iron sulfides, pyrite, arsenopyrite and sericite.
MINING
The open pit mining operation at Beartrack commenced in August 1994 and
includes two pits, designated the North and South pits, and one waste rock dump.
Ore and waste rock are removed in horizontal lifts or benches 25 feet in height
with pit slopes ranging from 35 to 50 degrees. Mining operations within the pits
include drilling, blasting, loading and hauling. Drill holes are assayed to
determine whether the material will be treated as waste or ore. Ore and waste
rock are moved by 85-ton diesel haul trucks to the process area and waste rock
disposal areas, respectively. The waste rock dump has been constructed with a 40
million-ton capacity. Mine production is based on delivering approximately 4.5
million tons of ore per year to the process facility. The average stripping
ratio over the life of the mine is expected to be 1.2:1. No underground mining
is currently conducted at Beartrack.
HEAP LEACH FACILITY
The ore is processed in a cyanide heap leach facility. The heap leach
pad is constructed in four phases. Phases one and two have been constructed.
Each heap leach phase area is one continuous plastic lined pad surface
constructed on a prepared compacted clay foundation protected by a three foot
layer of 3/4 inch crushed ore. Each phase of the pad has a network of solution
collection pipes placed on top of the liner to collect the pregnant gold
solution from individual heap cells. Once the pad has been prepared for loading,
ore is dumped into place. Diluted sodium cyanide solution is applied on the heap
surface. One pond is used for normal operating conditions and a larger overflow
pond has been constructed to provide additional solution storage under unusual
circumstances, such as during periods of unusually large drawdowns. These ponds
are designed to provide sufficient storage capacity for all phases of heap
operations.
Pregnant solution is pumped from the pregnant solution pond through a
series of carbon adsorption tanks where contained values of gold and silver
adsorb on activated carbon. The loaded carbon is stripped and precious metals
recovered, melted and cast as dore. The dore bars are sold to an off-site
refinery for final production of gold and silver.
RECENT OPERATIONS
As of December 31, 1996, Beartrack contained approximately 25.6 million
tons of ore containing 848,000 ounces of proven and probable gold reserves,
compared to 22.8 million tons of ore containing proven and probable gold
reserves of 784,000 ounces as of December 31, 1995. Gold production in 1996 at
Beartrack was 109,000 ounces, an increase
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of 60,000 ounces over 1995, primarily as a result of the first full year of
production. Cash costs were as expected at $190 per ounce, almost $24 per ounce
higher than 1995, due mainly to the lower grade material mined in the North Pit.
The average grade of the ore mined was 0.026 ounces per ton, which was
an expected 24 percent lower than 1995, as a result of processing the lower
grade North Pit ores. These lower grades were anticipated by the geologic block
model developed in the feasibility study.
The $1.3 million drilling program in 1996 was the first exploration on
the project since 1992. This program resulted in finding more reserves than were
depleted in 1996 on the property. The reserves were expanded 8% at both the
North and South Pits.
During 1996, the Company constructed a $1 million water treatment
facility to remove sediments from site run-off and purify the water before
discharging it into Napias Creek.
JERRITT CANYON
HISTORY, LOCATION, SIZE AND ACCESS
The Jerritt Canyon mine, consisting of a number of underground and open
pit mines, is located 57 miles northwest of Elko, Nevada. The Company's
joint-venture partner, Independence Mining Company, Inc., a wholly-owned
subsidiary of Minorco (U.S.A.) Inc. ("IMC"), operates the mine. Since the
discovery of Jerritt Canyon by Meridian geologists in 1972, the mine has
produced over 4.5 million ounces of gold.
Development and mining activities take place at Jerritt Canyon on
various orebodies within the 120-square-mile claim block, which includes both
private and public lands. Property interests at Jerritt Canyon include owned or
leased unpatented claims and surface rights. Approximately 12.8 percent of the
Jerritt Canyon proven and probable reserves are subject to a net smelter return
royalty averaging 2.9 percent. The main access to the property is by a paved
state highway from Elko.
JOINT VENTURE AGREEMENT
Pursuant to the joint venture agreement governing the Jerritt Canyon
Joint Venture, IMC acts as manager of the project and conducts all mining and
processing, exploration, drilling and related operations. However, as a 30%
participant, the Company is actively involved in budgeting, production and
exploration planning, through which it has gained valuable experience. Each
participant has the right to take in kind or dispose of its individual interest
in all ore and minerals extracted from the Jerritt Canyon properties. Joint
venture costs are allocated to each participant in proportion to its interest.
The Company also pays to IMC a management fee of 2.5% of the Company's share of
the joint venture's gross revenues.
Although IMC has the authority to make most decisions with respect to
daily operations of Jerritt Canyon, approval of the Company is required for the
annual operating budget and exploration program, as well as any major capital
expenditures.
Pursuant to the joint venture agreement, a transfer of the interest of
either joint venture participant in the joint venture to any non-affiliate is
subject to a good faith right of first negotiations with the other for the sale
to the other party of such interest. Unless otherwise terminated by mutual
agreement, dissolution or insolvency, the joint venture agreement for Jerritt
Canyon will remain in effect for fifty years and for such longer periods as
exploration, development or production by the joint venture continues.
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GEOLOGY
Gold at Jerritt Canyon occurs in typical sediment-hosted type deposits
with many similarities to other Nevada sediment-hosted deposits, such as those
on the Carlin Trend and in the Crescent Valley area. Characteristics at Jerritt
Canyon which conform to the sediment-hosted gold model include:
. Element association Gold, Arsenic, Antimony, Mercury, Barium
. Gold ore grades 0.05 to more than 1.00 opt
. Alteration type Silification, argillization,
carbonization, decalcification,
dolomitization
. Host rocks Paleozoic carbonates and siltstones
. Vertical extent of mineralization Over 3,000 feet as measured
from different locations at Jerritt
Canyon
Major tectonic events have significantly contributed to building a
favourable geologic setting for the formation of major gold deposits. Roberts
Mountains thrusting placed western siliceous rocks over the favourable eastern
facies host rocks, providing an essentially impervious capping which probably
forced the ore solutions to disseminate into favourable beds and structures,
forming the major gold deposits being mined today. North-south compression
created west-northwest, east-northeast, northeast and north striking faults
which became ore channelways during the tertiary gold mineralization event.
Periodic mountain building events after the initial orogenies, continued to
impact the Jerritt Canyon area opening the faults, brecciating and folding the
strata, and in general creating a highly favourable condition for the depositing
of major disseminated gold deposits. The favourable gold host rocks at Jerritt
Canyon are carbonaceous dolomitic siltstones and micritic limestone of the
Roberts Mountains and Hanson Creek Unit III sedimentary formations. Units I and
II of the Hanson Creek Formation locally host significant gold deposition.
Strata in the Pogonip Group appear similar to ore hosting units in the Hanson
Creek Formation. The primary ore controls are high angle west-northwest,
east-northeast, and north-to-northeast faults. The west-northwest faults are the
strongest structures and usually cross the entire Independence Range. Permeable
siltstones, limestones and cherts in the Roberts Mountains and Hanson Creek
Formation provided lateral hosting and dispersion and dissemination of the
Jerritt Canyon gold ore fluids.
MINING
Mining at Jerritt Canyon commenced in 1981 and is conducted from both
open pit and underground sources. The selection of mining method depends upon
numerous factors, such as the depth of the deposit, the grade and quantity of
gold in the deposit, the ore-type of the deposit, and the economics of mining
and processing compared to the expected gold price during the orebody's life.
Current open pit mines include Saval Canyon and Burns Basin. The DASH
open pit mine is in development and prestripping began in mid-1996. Open pit
mining is conducted in ore zones ranging from relatively shallow to
approximately 800 feet in depth. Underground ore production began in 1994 and is
currently conducted in the Murray and West Generator mines. Two deposits, SSX
and Papillion, are under exploration and development for underground mining.
Open pit mining is conducted on orebodies which have relatively shallow
ore deposits. These orebodies provide the quantity and grades of ore which
provide the
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economic incentive for development and extraction. This ore source tends to be
of relatively low grade gold mineralization with lower total mining costs.
The open pit mining process begins with breaking the in-place rock at
the mine site. Blast holes are approximately 24 feet deep, 5 1/2 or 6 1/2 inches
in diameter, and are drilled on a 12 to 16 foot square pattern. The holes are
filled with explosives, which are detonated. The rock chips from these holes are
analyzed by the assay lab to assign boundaries to various mined rock
classifications. Following blasting, broken material is classified into four
categories (waste rock, sub-ore and two ore types) based on such factors as the
refractory nature of the ore and its grade. Waste rock is transported to waste
dumps, sub-ore grade material (which is mineralized but uneconomic at present
gold prices) is stockpiled, and the two types of ore are separately transported
to stockpiles designated for each of the two mills.
Over the past few years, underground mining has grown to be a major
source of ore. Today, the mill receives ore from two distinct underground
sources, the Murray and the West Generator mines. Established ore reserves for
the future of Jerritt Canyon are largely from underground sources where the
costs of development and extraction are greater than in traditional open pit
methods on a per ton of ore basis, which is mitigated somewhat by the higher ore
grades of the underground sources. The Company expects the shift to underground
resources to continue unless new open pittable ore reserves are discovered and
developed.
Underground mines at Jerritt Canyon are accessed by declines. The Murray
mine is accessed by two declines and the West Generator mine is accessed by a
single decline. Ore mining includes cut and fill methods, either slot and fill
or underhand drift and fill. Drifting and mining are conducted in either 15 by
15 foot or 12 by 12 foot openings. An engineered cemented backfill material is
used for ground support. The basic mine layouts comprise a main access decline,
at 12.5% gradient, suitable for truck haulage. At various elevations,
exploration drifts are cut along the axes of the deposit to implement
delineation drilling. Mining stopes are primarily transverse to the strike of
the deposit and mining begins at the centre of the ore zone. Primary stopes are
then mined to the ore extremities, followed by the secondary and the tertiary
stopes. The physical ore zone features include varying thickness, undulating
waste-ore contacts, assay walls, irregular continuity, and variable tonnage per
foot of strike length.
MILLING
Ore is hauled from the open pit mines, underground mines and sub grade
stockpiles and stockpiled at the mill for processing. The haul distance ranges
from 3 to 15 miles depending on the mine source.
At the Jerritt Canyon mill, there are two distinct extraction facilities
which process two categories of ore, the wet grinding chlorination circuit and
the dry grinding roasting circuit, each of which is independent of the other.
Each circuit has an annual average capacity of approximately 4,000 tons per day.
With changing ore characteristics, only the dry milling circuit is currently in
operation.
The less refractory, less carbonaceous ore is sent to the wet grinding
chlorination circuit to oxidize sulfur and carbon contained in the ore prior to
being leached in a conventional sodium cyanide carbon-in-leach ("CIL") circuit.
The ore-water mixture, or slurry, is treated by injecting chlorine gas into the
slurry to oxidize the refractory components. The tanks in which this process
takes place are operated in a vacuum to control any unreacted chlorine gas,
which is converted to bleach in a scrubbing system. The slurry,
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after oxidation, is neutralized and treated with cyanide for gold dissolution
and recovery by adsorption on carbon in CIL tanks.
The more refractory ore, which contains higher amounts of sulfur and
carbon, is processed in the dry grinding roasting circuit. This ore is crushed
and dried, and then finely ground and mixed with coal. This mixture is
introduced into the tops of two fluid-bed roasters. The ore is heated and
contacted with oxygen rich gases that oxidize the sulfide and carbon compounds.
The gases produced in the roasting process pass through a scrubbing system to
control emissions. The roasted ore goes to a quench tank to cool and then to a
thickener to increase the density of slurry before entering the CIL tanks.
Sodium cyanide is then used to dissolve the gold from the ore slurry and the
gold is absorbed onto activated carbon.
Gold from both CIL circuits is removed from the carbon using a carbon
stripping process which involves the use of hydrochloric acid, sodium hydroxide
and sodium cyanide. Gold metal is recovered from the stripping solution using
the Merrill-Crowe process, which utilizes zinc powder to precipitate the gold.
The gold precipitate is reacted with nitric acid to remove the excess zinc,
retorted to collect the minor quantity of contained mercury in the precipitate,
melted, and then cast into dore bars which are ultimately sold to outside
refineries for further processing into gold products.
Tailings from the milling process are deposited in a clay-lined
impoundment pond.
RECENT OPERATIONS
In 1996, Meridian's 30 percent share of gold production was 93,000
ounces, 5 percent lower than 1995 due primarily to the lower-grade stockpiles
being processed through the wet mill.
The wet mill was shut down in February 1997. Mining activities in 1996
were focused at the Murray and West Generator underground mines and at the Dash,
Burns Basin, and Saval Steer open pit mines.
Cash costs of production in 1996 increased 19 percent over the prior
year to $297 per ounce, mainly as a result of lower production and the inclement
weather in the first half of the year. By the fourth quarter of 1996, however,
cash costs had declined to $259 per ounce.
As of December 31, 1996, Meridian Gold's share of reserves was
approximately 2.8 million tons of ore containing 571,000 ounces, slightly less
than the 3.4 million tons of ore containing 638,000 ounces as of December 31,
1995. Approximately 61 percent of the current reserve is contained in
underground orebodies, with more than 64 percent of the total in underground
reserves at the Murray (New Deep) orebody.
There were two significant discoveries in 1996 - the Coulee resource and
the Burns Basin extension. The Coulee discovery is a geologic resource and has
not yet been classified as a proven and probable reserve. Permitting and
delineation drilling is underway at Coulee.
EL PENON
The El Penon property in Chile currently contains geologic resources of
gold and silver that have not yet been classified as a proven and probable
reserve. The resource is the result of a grass-roots discovery made by Meridian
geologists during the initial stages of opening a new exploration office in
Chile in 1993.
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The El Penon property is located in an area of low, rolling hills in
northern Chile, approximately 100 miles southeast of Antofagasta. Access is by a
25 mile long gravel road that connects the property with the Pan-American
Highway. The property is comprised of approximately 230 square miles of
contiguous mineral concessions situated in the Atacama Desert at an elevation of
5,900 feet. The El Penon project is situated on concessions either owned by the
Company outright or leased from a private Chilean company, Sociedad Minera
Soledad and an individual who is its main shareholder. In each case, to protect
its interest, the Company has filed two layers of concessions overlying the base
ownership concession. The Company has entered into option contracts to purchase
the concessions owned by the private Chilean company. In addition, the Company
has granted a net smelter return to the private Chilean company on production
from the leased property. The royalty is on a sliding scale, depending on the
price of gold, ranging from 1% to 3%. No royalty is payable on land claimed by
the Company, where approximately 75% of the mineralization currently known is
located.
Initial exploration, including geochemical and geophysical surveys,
geologic mapping, trenching and drilling, identified 13 target areas exhibiting
gold mineralization or geophysical anomalies. In six areas, known as Quebrada
Orito, Cerro Amatista, Cerro Martillo, Discovery Wash, El Valle and Tres Tontos,
significant intercepts of gold were encountered in drilling. The Company defines
a significant intercept to be one where gold mineralization of 0.20 ounces of
gold per ton over a continuous intercept of at least 13 feet (4 meters) is
encountered.
The resource at El Penon is part of a volcanic-hosted epithermal deposit
containing gold and substantial silver with virtually no base metals or
contaminants. The gold and silver occur in quartz vein zones and hydrothermal
breccias in several major deposits that extend along strike for at least 17,000
feet (3.25 miles). In all of the zones, the mineralization varies from
approximately 13 to 100 feet wide and extends to a depth of at least 800 feet.
Preliminary metallurgical results indicated high gold (88-93%) and silver
(85-92%) recoveries from grinding and cyanide leaching.
Exploration drilling in 1996 continued from early June until
mid-December. Multiple rigs drilled 266 additional reverse circulation and core
holes totaling 150,860 feet. The initial drilling concentrated on more fully
defining the Quebrada Orito deposit to advance this portion of the property to
feasibility stage.
Additional drilling along strike and to the north of the Quebrada Orito
deposit identified the Orito Norte zone. South of Quebrada Orito, a major new
extension was encountered with 30 holes over a strike length of at least 3,280
feet. This zone contains a significant new resource in a high-grade, steeply
dipping body similar to Quebrada Orito. Both of these new zones of
mineralization are still open at depth and along strike and represent major
extensions to the Quebrada Orito deposit.
Drilling at Cerro Martillo also continued to expand this deposit and
refine a parallel zone to the east, and is also still open at depth and along
strike.
The 1996 drilling successfully expanded all of the known mineralization
and discovered a major new extension, Orito Sur. The mineralization is still
open along strike and at depth in most areas. Meridian Gold expects that both
underground and open pit mining will take place at several of the gold zones
identified on the El Penon property.
Additional work at El Penon included the initiation of a decline into
the Quebrada Orito deposit in October 1996. This decline will enable bulk
samples, detailed underground
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sampling and drilling, and mining costs to be determined for the deposit. This
work will be completed in the third quarter of 1997.
A prefeasibility study being performed by the engineering firm of
Kvaerner Davy is in progress and the Company expects it to be completed in the
fourth quarter of 1997. This work will be combined with the underground data
acquired from the decline, as well as continued surface drilling, to produce a
final feasibility study by the end of 1997. This study is expected to result in
the conversion of a significant portion of the resource into a reserve category,
which will support a construction decision. The goal for El Penon is to commence
construction in early 1998 and initiate gold and silver production by mid 1999.
In 1996, the exploration drilling was focused on further defining the
known mineralized areas. The extensive property position hosts an abundance of
undrilled geological and geophysical targets. Meridian plans to explore and
develop new resources at El Penon as quickly as possible in 1997 and beyond.
Since the initial discovery of this property in 1993, Meridian has
drilled 577 holes on the property and has spent approximately $13 million in
exploration. Meridian continues to be encouraged by the rapid expansion and
development potential of the project.
ROSSI
The Rossi property is geographically situated between the Antelope and
Boulder Creek drainages in the low rolling hills of the Sheep Creek Range, 26
miles northwest of Carlin, Nevada. Access to the property is by all-season
gravel roads either through Boulder Valley or the Newmont Gold Company/Barrick
Gold Corporation owned mining areas. The property is approximately 3.5 and 5
miles northwest of the Meikle (Barrick Gold Corporation) and Post/Betze (Barrick
Gold Corporation/Newmont Gold Company) deposits respectively, and immediately
adjacent to the currently operating Dee gold mine (Rayrock Yellowknife
Resources, Inc.). The land position encompasses 10.7 square miles of unpatented
mining claims as well as patented mining claims on U.S. federally owned ground.
The Company has rights to 100% of the precious metal bearing ores on the Rossi
property.
Gold mineralization on the Rossi property is primarily hosted in the
Devonian Popovich Formation (Lower Rodeo Creek equivalent), which is also the
host at Meikle, Post/Betze, Gold Quarry, Deep Star, Dee and Bootstrap deposits.
The formation consists of limestone and limey mudstone with horizons of fossil
hash with are especially susceptible to mineralization. The Lower Popovich and
Upper Bootstrap commonly displays decalcification, dissolution and collapse
brecciation features in the mineralized areas. Mineralization and alteration
consist of intense silification, quartz veining, argillization and
decalcification. Gold is genetically related to arsenian pyrite which rims older
non-mineralized pyrite and is accompanied by anomalous silver, antimony and
mercury. The spatial distribution of gold is controlled by a complex
relationship between the intersection of northwest oriented Carlin Trend with
other north-south and northeast structures and the presence of permissive
Popovich host rocks. As is commonly the case in most of the deposits in the
northern portion of the Carlin Trend, the presence of intrusive filled
structures are also important keys to mineralization at Rossi. The orientation
of the structures suggests the influence of a wrench fault system; however, the
complete structural picture is undoubtedly much more complex.
The most promising area drilled to date referred to as the "Resource
Area," is located in the southern portion of the Company's claim block.
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At the Resource Area, additional deep holes extended the known
high-grade mineralization 600 feet along strike to the northwest. This deep high
grade mineralization occurs in 33 of 49 holes in an area 1,200 by 1,400 feet.
There are 54 intercepts that average 0.437 opt gold over an average thickness of
20.4 feet. The mineralization occurs at depths starting at 700 feet and
continuing to at least 2,100 feet.
At the Dunphy Road target, three holes tested the northern extensions of
the mineralized Bootstrap and Post-Betze faults onto the Rossi property. Several
holes encountered strong alteration, favorable lithologies, and structural
preparation, as well as wide intervals of low-grade gold mineralization (up to
140 feet of 0.033 ounces per ton). Only a small portion of this target has been
explored by drilling, but with this confirmation of mineralization, additional
drilling is planned for 1997.
All underground mining activities to date elsewhere on the Carlin Trend
have encountered higher grades and more tons than have been delineated from
surface drilling. Meridian will complete a follow-up drill program in 1997.
After completion of this work, the Resource Area will be evaluated for an
underground exploration program to better explore and define this high-grade
gold. The surface drilling has consistently encountered the mineralization, but
more detailed definition is still needed.
After completion of 1997 exploration drilling, a full resource update
will be completed, and the feasibility of an underground investigation of the
geologic resource will be determined. To date, the known Resource Area has
continued to provide consistent, high-grade mineralization. The decision to
explore the Resource Area from underground will be made in the third quarter of
1997.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
During the third quarter of 1994, the Pacific Rivers Council and the
Wilderness Society (collectively the "PRC"), in a lawsuit filed in the Federal
District Court in Idaho (Pacific Rivers Council v. Thomas), sought an injunction
against all ongoing and future forest activities including mining, which may
affect endangered salmon, within various national forests in Idaho including the
Salmon National Forest in which the Beartrack property is located. In that
lawsuit, the PRC sought to require the U.S. Forest Service to consult under the
Endangered Species Act (the "Act") with the National Marine Fisheries Service
("NMFS") regarding existing land resource management plans for the subject
forests and their potential impacts on endangered Snake River salmon. The
government defendants and the plaintiffs have subsequently negotiated a
stipulated dismissal of most of the lawsuit. Under the terms of the stipulation,
the parties dismissed from this litigation all projects which have undergone
site-specific consultation. The Company's Beartrack mine was identified by the
government defendants as a project for which consultation has been completed.
The Court issued an Order on Pending Claims on December 20, 1995 regarding the
remaining specified projects (not including the Beartrack mine) which have not
yet completed consultation. Under the terms of that Order, the Court has
retained jurisdiction in this lawsuit for further proceedings regarding those
projects. The Beartrack mine is not subject to or a part of the Court's Order.
In October 1994, the Sierra Club Legal Defense Fund, Inc. ("Sierra"), on
behalf of certain other organizations, filed a lawsuit in Federal District Court
for the Western District of Washington at Seattle against NMFS and other federal
agencies for violation of the Act, alleging the NMFS' biological opinion failed
to satisfy the requirements of the Act. Sierra, the federal agencies and the
Company, as intervener, each filed a motion for summary judgment. In November
1995, the Court ordered the federal agencies to reinitiate consultation under
Section 7 of the Act on the potential environmental impacts of the
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Beartrack mine project on listed salmon or the designated critical habitat for
salmon. The plaintiffs did not seek, and the Court did not impose, any
injunction or other restriction on the operation of the Beartrack mine pending
completion of such consultation. On November 17, 1995, the court closed the case
but retained jurisdiction to resolve any disputes that may arise concerning the
reinitiated consultation schedule or to resolve issues once the renewed
consultation is completed.
The Forest Service has submitted a revised biological assessment to
NMFS, the first step in the reinitiated consultation. Under Section 7(d) of the
Act, the Forest Service may require Meridian to cease an activity associated
with mine operations if that activity could preclude the development of
reasonable and prudent alternatives to the project pending the completion of the
reinitiated consultation. On July 3, 1996, the Forest Service completed its
Section 7(d) determination for the Beartrack mine operations and determined
that, for the following 12 months from that date, all ongoing and planned
significant activities at the mine could continue pending the reinitiated
consultation, with exception of: (1) proposed reconstruction of the leach pad
Run of the Mine Road, and (2) proposed use of the soil stockpile area associated
with development of Phase III of the heap leach pad. The Forest Service
recognized that these latter two activities may be authorized upon further
review by the Forest Service prior to completion of the reinitiated
consultation.
Under the Act's regulations, consultation must be completed within 135
days of the date consultation is initiated. An extension of 60 days can be
imposed by the agencies. Under the relevant statutory and regulatory
authorities, the results of a consultation can range from no impact on the
activities under review on the one hand to modest to significant impacts on the
other. In an extreme situation, a consultation could result in the cessation of
activities altogether, a potential result the Company believes to be remote in
the case of the Beartrack mine, which has been in operation and production since
mid-1995. The Company believes that the ongoing operation of the Beartrack mine
will not jeopardize listed salmon or adversely modify or destroy designated
critical habitat, and that upon completion of consultation, the mine will be
permitted to continue operation.
On February 16, 1996, the Company settled a dispute with a subcontractor
on the Beartrack project. The subcontractor made claims against the prime
contractor alleging overruns for work performed which exceeded the original
estimated costs for the project by approximately $8 million. These claims were
disputed by the prime contractor. Arbitration of the subcontractor's claims
against the prime contractor was concluded, and the Company agreed to pay a
settlement of $3.1 million as part of the overall arbitrated settlement. The
settlement was charged to property, plant and equipment and depreciated over the
remaining life of the Beartrack property.
The Company sought and obtained from the U.S. Army Corps of Engineers
(the "Corps") a permit authorizing dredging and filling of wetlands in
connection with construction of the Beartrack mine under Section 404 of the
Clean Water Act. That permit was set to expire on October 11, 1994. On June 16,
1994, the Company sought an extension of the permit under applicable
regulations. Under those regulations, the filing of a request for extension
operates to extend the permit until the agency acts upon the request for
extension. As of the date of this report, the Corps has not taken action upon
the Company's request.
The Company has certain other contingent liabilities resulting from
litigation, claims and commitments incident to the ordinary course of business.
Management believes that the probable resolution of such contingencies will not
materially affect the financial position or results of operations of the
Company.
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ITEM 4. CONTROL OF REGISTRANT.
---------------------
To the knowledge of the Company, Meridian is not directly or indirectly
owned or controlled by another corporation or by any foreign government, and the
Company is not aware of any arrangements which may at a subsequent date result
in a change in control of the Company. To the knowledge of the Company, as of
December 31, 1996, no person or entity owned of record, or beneficially,
directly or indirectly, more than 10% of the outstanding Common Shares.
As of December 31, 1996, the director and executive officers of the
Company, as a group (10 persons, excluding Jay A. Nutt) beneficially owned,
directly or indirectly, 22,700 Common Shares, representing less than 1% of the
total number of outstanding Common Shares of the Company.
ITEM 5. NATURE OF TRADING MARKET.
------------------------
The Common Shares of the Company have been listed and posted for trading
on the Toronto Stock Exchange (the "TSE") since July 31, 1996 (TSE Symbol: MNG)
and on the New York Stock Exchange (the "NYSE") since July 31, 1996 (NYSE
symbol: MDG). The Company's predecessor, FMC Gold, was also traded on the NYSE.
The following tables set forth the high and low closing sales prices for the
Common Shares on the TSE (in Canadian dollars) and on the NYSE (in U.S. dollars)
during the periods indicated:
TSE
(In Canadian Dollars)
------------------ ---------- ----------- --------------------
HIGH LOW VOLUME
------------------ ---------- ----------- --------------------
1996
------------------ ---------- ----------- --------------------
Third Quarter 6.75 5.45 112,000
------------------ ---------- ----------- --------------------
Fourth Quarter 6.10 5.40 59,000
------------------ ---------- ----------- --------------------
1997
------------------ ---------- ----------- --------------------
First Quarter 7.35 5 41,000
------------------ ---------- ----------- --------------------
April 6.50 6 19,420
------------------ ---------- ----------- --------------------
NYSE
(In U.S. Dollars)
------------------ ---------- ---------- ---------------------
HIGH LOW VOLUME
------------------ ---------- ---------- ---------------------
1996
------------------ ---------- ---------- ---------------------
Third Quarter 4 5/8 4 72,000
------------------ ---------- ---------- ---------------------
Fourth Quarter 4 1/2 4 11,000
------------------ ---------- ---------- ---------------------
1997
------------------ ---------- ---------- ---------------------
First Quarter 5 1/4 3 5/8 31,000
------------------ ---------- ---------- ---------------------
April 4 3/4 4 1/4 37,550
------------------ ---------- ---------- ---------------------
The closing price of the Common Shares on the TSE on April 30, 1997 was
Canadian $6.50, and on the NYSE was U.S. $4 3/4. As of April 30, 1997, there
were 73,601,495 Common Shares of Meridian issued and outstanding. Based on the
records of Meridian's registrar and transfer agent, The Trust Company of Bank of
Montreal, as of April 30, 1997, there were 373 registered holders of Meridian's
Common Shares resident in the United
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States, holding 16,277,478 Common Shares. This number represents approximately
22% of the total issued and outstanding Common Shares of Meridian on such date.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
------------------------------------------------------------------
CAPITAL
There are no governmental laws, decrees or regulations in Canada, other
than withholding taxes, restricting the remittance of interest, dividends or
other payments to non-resident holders of shares of the Company. See information
under "Item 7. Taxation" for a discussion of the Canadian withholding tax
applicable to such payments.
CHANGE OF CONTROL
The acquisition of control of the Company, a Canadian business, by
non-Canadians may be subject to the provisions of the Investment Canada Act
(Canada).
Under the Investment Canada Act (Canada), the acquisition by a
non-Canadian of control of a Canadian business which exceeds certain size
thresholds is reviewable and subject to approval by the Minister of the Industry
(the "Minister"). Such approval is to be granted where the Minister is satisfied
that the acquisition is likely to be of net benefit to Canada. The Investment
Canada Act (Canada) contains certain rules for determining whether a corporation
or other entity or individual is a Canadian or a non-Canadian. In addition, the
applicable transaction size thresholds are significantly higher if the acquiror
is a "WTO investor," which is defined in the Investment Canada Act (Canada) to
mean an entity controlled by nationals of, or individuals who are nationals of,
World Trade Organization member states.
The Investment Canada Act (Canada) sets out a number of rules and
presumptions relating to when control is or is not acquired:
(a) The acquisition of less than one-third of the outstanding voting
shares of the Company would be deemed not to constitute the
acquisition of control of the Company;
(b) The acquisition of more than one-third, but less than a majority,
of the voting shares of the Company would be presumed (subject to
rebuttal) to constitute the acquisition of control of the
Company. The presumption may be rebutted by showing that control
in fact of the Company is not, or would not be, exercised as a
result of such acquisition of voting shares;
(c) The acquisition of a majority of the voting interests of the
Company would be deemed to constitute an acquisition of control
of the Company; and
(d) The acquisition of all or substantially all of the assets of the
Company would be deemed to constitute an acquisition of control
of the Company.
Where an investment is reviewable, the non-Canadian making the
investment must file an application in the prescribed form with Industry Canada.
Except in limited circumstances, the Investment Canada Act (Canada) prohibits
reviewable direct investments from being implemented prior to approval being
obtained pursuant to the statutorily prescribed review procedure.
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The Investment Canada Act (Canada) also provides that if an acquisition
is made in contravention of it, a court may make an order providing for certain
civil penalties, including requiring the non-Canadian acquiror to divest the
shares of the Company. The Investment Canada Act (Canada) also contains certain
criminal penalties in respect of the provision of false information.
ITEM 7. TAXATION.
--------
CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES
The Company believes that the following is a summary of the principal
Canadian federal income tax considerations generally applicable to holders of
Common Shares who, for purposes of the Income Tax Act (Canada) (the "Canadian
Tax Act"): (i) will hold Common Shares as capital property; (ii) deal at arm's
length with the Company; (iii) do not and will not have a fixed base or
permanent establishment in Canada; (iv) are not and will not be resident or
deemed to be resident in Canada at any time while they hold Common Shares; (v)
do not use or hold, and are not deemed to use or hold Common Shares in
connection with carrying on a business in Canada; and (vi) in the case of a
non-resident of Canada who carries on an insurance business in Canada and
elsewhere, the Common Shares are not "designated insurance property" pursuant to
the amendments to the Canadian Tax Act and Regulations publicly announced by the
Minister of Finance prior to the date hereof (the "Proposed Amendments") and are
not effectively connected with an insurance business carried on in Canada at any
time (a "non-resident holder"). This summary does not apply to a non-resident
holder with respect to whom the Company is a foreign affiliate within the
meaning of the Canadian Tax Act.
Certain recent amendments to the Canadian Tax Act (the "mark-to-market
rules") relating to financial institutions (including certain financial
institutions, registered securities dealers and corporations controlled by one
or more of the foregoing) will deem such financial institutions not to hold
their Common Shares as capital property for purposes of the Canadian Tax Act.
Shareholders that are financial institutions should consult their own tax
advisors to determine the tax consequences to them of the application of the
mark-to-market rules.
This summary is based on the current provisions of the Canadian Tax Act,
the Regulations thereunder, the current provisions of the Canada-United States
Income Tax Convention, 1980 (the "Tax Treaty"), and the current published
administrative practices of Revenue Canada, Customs, Excise and Taxation
("Revenue Canada"). This summary takes into account the Proposed Amendments and
assumes that all the Proposed Amendments will be enacted in their present form.
However, no assurances can be given that the Proposed Amendments will be enacted
in the form proposed, or at all.
Except for the foregoing, this summary does not take into account or
anticipate any changes in law, whether by legislative, administrative or
judicial decision or action, nor does it take into account provincial,
territorial or foreign income tax legislation or considerations, which may
differ from the Canadian federal income tax considerations described herein.
This summary is of a general nature only and is not intended to be, nor
should it be construed to be, legal, business or tax advice to any particular
holder of Common Shares.
DIVIDENDS
Dividends paid or credited to a non-resident holder on the Common Shares
will be subject to a non-resident withholding tax under the Canadian Tax Act at
the rate of 25%, although such rate may be reduced under the provisions of an
applicable income tax treaty.
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<PAGE>
For example, under the Tax Treaty, the rate is generally reduced to 15% in
respect of dividends paid to a person who is the beneficial owner and who is
resident in the United States for purposes of the Tax Treaty (and who owns less
than 10% of the Company's voting stock). Under the Tax Treaty, dividends paid to
certain religious, scientific, charitable and other tax exempt organizations and
certain pension organizations that are resident in, and exempt from tax in, the
United States are exempt from Canadian withholding tax. Provided that certain
administrative procedures are observed by the holder, the Company will not be
required to withhold tax on dividend payments to such organizations.
DISPOSITION OF COMPANY COMMON SHARES
A non-resident holder will not be subject to tax under the Canadian Tax
Act on any capital gain realized on a disposition or deemed disposition of
Common Shares provided such shares are not "taxable Canadian property" to such
holder at the time of disposition. Generally, the Common Shares will not be
taxable Canadian property to a non-resident holder described above, provided
that such shares are listed on a prescribed stock exchange (which currently
includes the TSE and the NYSE), and the holder, persons with whom such holder
does not deal at arm's length, or the holder and such persons, has not owned (or
had under option) 25% or more of the issued shares of any class or series of the
capital stock of the Company at any time within five years preceding the date in
question.
Even if the Common Shares are taxable Canadian property to a
non-resident holder, the Tax Treaty will generally exempt such a holder who is
resident in the United States for purposes of the Tax Treaty from tax in respect
of the disposition provided the value of the Common Shares is not derived
principally from real property situated in Canada. The Company is of the view
that the value of the Common Shares is not currently derived principally from
real property situated in Canada.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The Company believes that the following general summary accurately
describes all material United States Federal income tax consequences under
current law which are generally applicable to a U.S. Holder (as defined below)
of Common Shares. This discussion does not address all potentially relevant
United States Federal income tax matters and it does not address consequences
peculiar to persons subject to special provisions of United States Federal
income tax law, such as those described below as excluded from the definition of
a U.S. Holder. In addition, this discussion does not cover any state, local or
foreign tax consequences. (See "Certain Canadian Federal Income Tax
Consequences" above).
The following discussion is based upon the sections of the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, published
Internal Revenue Service ("IRS") rulings, published administrative positions of
the IRS and court decisions that are currently applicable, any or all of which
could be materially and adversely changed, possibly on a retroactive basis, at
any time. In addition, this discussion does not consider the potential effects,
both adverse and beneficial, of any proposed legislation. The following
discussion is for general information only and it is not intended to be, nor
should it be construed to be, legal or tax advice to any holder or prospective
holder of Common Shares and no opinion or representation with respect to the
United States Federal income tax consequences to any such holder or prospective
holders is made. Accordingly, holders and prospective holders of Common Shares
should consult their own tax advisors about the Federal, state, local, and
foreign tax consequences of purchasing, owning and disposing of Common Shares,
Purchase Warrants and Common Shares issuable upon exercise of the Purchase
Warrants.
30
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U.S. HOLDERS
As used herein, a "U.S. Holder" includes a holder of Common Shares who
is a citizen or resident of the United States, a corporation created or
organized in or under the laws of the United States or of any political
subdivision thereof, any entity which is taxable as a corporation for U.S. tax
purposes and which is organized under the laws of the United States or any
political subdivision thereof, and any other person or entity whose ownership of
Common Shares is effectively connected with the conduct of a trade or business
in the United States. A U.S. Holder does not include persons subject to special
provisions of United States Federal income tax law, such as tax-exempt
organizations, qualified retirement plans, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
broker-dealers, nonresident alien individuals or foreign corporations whose
ownership of Common Shares is not effectively connected with the conduct of a
trade or business in the United States and shareholders who acquired their stock
through the exercise of employee stock options or otherwise as compensation.
This discussion is limited to U.S. Holders who hold their Common Shares as
capital assets.
DISTRIBUTIONS ON COMMON SHARES
U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to Common Shares are required to include in their gross
income for United States Federal income tax purposes, the gross amount of such
distributions to the extent that the Company has current or accumulated earnings
and profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holder's United States Federal income tax
liability or, alternatively, may be deducted in computing the U.S. Holder's
United States Federal taxable income by those who itemize deductions. (See more
detailed discussion under the heading "Foreign Tax Credit" below). To the extent
that such distributions exceed current or accumulated earnings and profits of
the Company, they will be treated first as a tax free return of capital up to
the U.S. Holder's adjusted basis in the Common Shares and thereafter as gain
from the sale or exchange of the Common Shares. Preferential tax rates for net
capital gains are applicable to a U.S. Holder which is an individual, estate or
trust. There are currently no preferential tax rates for long-term capital gains
for a U.S. Holder which is a corporation or is an entity taxable as a
corporation.
Dividends paid on the Common Shares will not generally be eligible for
the dividends received deduction provided to corporations receiving dividends
from certain United States corporations or foreign corporations doing business
in the United States.
FOREIGN TAX CREDIT
A U.S. Holder who pays (or has withheld from distributions) Canadian
income tax with respect to the ownership of Common Shares may be entitled, at
the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim a
credit because a credit reduces United States Federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to tax. This election is made on a year-by-year basis and applies to all
foreign taxes paid by (or withheld from amounts paid to) the U.S. Holder during
that year. There are significant and complex limitations which apply to the
credit, among which is the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holder's United States income tax liability that
the U.S. Holder's foreign source income bears to his or her worldwide taxable
income. In the determination of the application of this limitation, the various
items of income and deduction must be classified into foreign and domestic
sources. Complex rules govern this classification process. There are further
limitations on the foreign
31
<PAGE>
tax credit for certain types of income such as "passive income", "high
withholding tax interest", "financial services income", and certain other
classifications of income. The availability of the foreign tax credit and the
application of the limitations on the credit are fact specific and holders and
prospective holders of Common Shares should consult their own tax advisors
regarding their individual circumstances.
DISPOSITION OF COMMON SHARES
A U.S. Holder will recognize a gain or loss upon the sale of Common
Shares equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received, and (ii) and shareholder's tax basis
in the Common Shares. This gain or loss will be a capital gain or loss if the
Common Shares are a capital asset in the hands of the U.S. Holder, and will be a
short-term or long-term capital gain or loss depending upon the holding period
of the U.S. Holder. Gains and losses are netted and combined according to
special rules in arriving at the overall capital gain or loss for a particular
tax year. Deductions for net capital losses are subject to significant
limitations. For U.S. Holders who are individuals, any unused portion of such
net capital loss may be carried over to be used in later tax years until such
net capital loss is thereby exhausted. For U.S. Holders that are corporations
(other than corporations subject to Subchapter S of the Code), an unused net
capital loss may be carried back three years from the loss year and carried
forward five years from the loss year to be offset against capital gains until
such net capital loss is thereby exhausted.
CURRENCY EXCHANGE GAINS OR LOSSES
U.S. Holders generally are required to calculate their taxable incomes
in United States dollars. Accordingly, a U.S. Holder who purchases Common Shares
with Canadian dollars will be required to determine the tax basis of such shares
in United States dollars based on the exchange rate prevailing on the settlement
date of the purchase (and may be required to recognize the unrealized gain or
loss, if any, in the Canadian currency surrendered in the purchase transaction).
Similarly, a U.S. Holder receiving dividends or sales proceeds from Common
Shares in Canadian dollars will be required to compute the dividend income or
the amount realized on the sale, as the case may be, in United States dollars
based on the exchange rate prevailing at the time of receipt, in the case of
dividends, and on the settlement date, in the case of sales, on an established
securities exchange. Any gain or loss recognized on a disposition of Canadian
currency in connection with the described transactions generally will be treated
as an ordinary gain or loss.
OTHER CONSIDERATIONS
In the following circumstances, the above sections of this discussion
may not describe the United States Federal income tax consequences resulting
from the holding and disposition of Common Shares:
FOREIGN PERSONAL HOLDING COMPANY
If at any time during a taxable year more than 50% of the total combined
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of the Company's gross income for
such year was derived from certain passive sources (e.g., from dividends
received from its subsidiaries), the Company would be treated as a "foreign
personal holding company." In that event, U.S. Holders that hold Common Shares
would be required to include in gross income for such year their allocable
portions of such passive income to the extent the Company does not actually
distribute such income.
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FOREIGN INVESTMENT COMPANY
If 50% or more of the combined voting power or total value of the
Company's outstanding shares are held, directly or indirectly, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)) and the Company is found to be engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that the Company might be
treated as a "foreign investment company" as defined in Section 1246 of the
Code, causing all or part of any gain realized by a U.S. Holder selling or
exchanging Common Shares to be treated as ordinary income rather than a capital
gain. These rules should not apply because the Company's activities do not
consist primarily of investing, reinvesting or trading in securities or
commodities.
PASSIVE FOREIGN INVESTMENT COMPANY
As a foreign corporation with U.S. Holders, the Company could
potentially be treated as a passive foreign investment company ("PFIC"), as
defined in Section 1296 of the Code, depending upon the percentage of the
Company's income which is passive, or the percentage of the Company's assets
which is producing passive income. U.S. Holders who receive certain dividends
on, or who dispose of, shares of a PFIC are subject to an additional tax and to
an interest charge based on the value of deferral of tax on undistributed
earnings of the PFIC for the period during which the shares of the PFIC are
owned, in addition to treatment of any gain realized on the disposition of
shares of the PFIC as ordinary income rather than a capital gain. However, if
the U.S. Holder makes a timely election to treat a PFIC as a qualified electing
fund ("QEF") with respect to such shareholder's interest therein, the
above-described rules generally will not apply. Instead, the electing U.S.
Holder would include annually in his gross income his pro rata share of the
PFIC's ordinary earnings and net capital gain regardless of whether such income
or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to
defer the payment of United States Federal income tax on such income inclusions.
Special rules apply to U.S. Holders who own their interests in a PFIC through
intermediate entities or persons. Once a foreign corporation is classified as a
PFIC, it is generally always classified as a PFIC, even if subsequent events
would otherwise change the corporation's status as a PFIC.
In determining whether a foreign corporation has the requisite
proportion of passive income or assets, a look-through rule is applied to the
foreign corporation's 25% or more owned subsidiaries (both direct and indirect),
under which a proportionate share of the assets of such subsidiaries are treated
as owned by the foreign parent corporation. Under this look through rule, the
Company would be treated as owning all of the assets of its direct and indirect
subsidiaries. Where the Company is treated as owning all of the assets of its
direct and indirect subsidiaries, it is unlikely that the Company would be
treated as a PFIC.
However, the PFIC rules are exceedingly complex, and each U.S. Holder is
encouraged and expected to consult his or her own tax advisor regarding the
effect of the Company's potential PFIC status on the U.S. Holder.
CONTROLLED FOREIGN CORPORATION
If more than 50% of the voting power of all classes of stock or the
total value of the stock of the Company is owned, directly or indirectly, by
citizens or residents of the United States, United States domestic partnerships
and corporations, or estates or trusts other than foreign estates or trusts,
each of whom owns 10% or more of the total combined voting power of all classes
of stock of the Company ("United States shareholder"), the Company could be
33
<PAGE>
treated as a "controlled foreign corporation" under Subpart F of the Code. This
classification would effect many complex results including the required
inclusion by such United States shareholders in income of their pro rata shares
of "Subpart F income" (as specially defined by the Code) of the Company. In
addition, under Section 1248 of the Code, any gain from the sale or exchange of
stock by a U.S. Holder of Common Shares who is or was a United States
shareholder at any time during the five year period ending with the sale or
exchange is treated as ordinary dividend income to the extent of earnings and
profits of the Company attributable to the stock sold or exchanged. Because of
the complexity of these rules, and because it is not clear that these rules
would apply to the U.S. Holders of Common Shares (these rules apply only to
owners of 10% of the Company's shares), a more detailed review of these rules is
outside of the scope of this discussion.
The foregoing summary is a general discussion of the United States
Federal income tax considerations to U.S. Holders of Common Shares under current
law. It does not discuss all the tax consequences that may be relevant to
particular holders in light of their circumstances or to holders subject to
special rules, such as tax-exempt organizations, qualified retirement plans,
financial institutions, insurance companies, real estate investment trusts,
regulated investment companies, broker-dealers, nonresident alien individuals or
foreign corporations whose ownership of Common Shares is not effectively
connected with the conduct of a trade or business in the United States,
shareholders who acquired their stock through the exercise of employee stock
options or otherwise as compensation, and any other non-U.S. Holders. In
addition, U.S. Holders may be subject to state, local or foreign tax
consequences. This discussion is not intended to be, nor should it be construed
to be, legal or tax advice to any holder or prospective holder of Common Shares
and no opinion or representation with respect to the United States Federal
income tax consequences to any such holder or prospective holder is made.
Holders and prospective holders should therefore consult their own tax advisors
with respect to their particular circumstances. This discussion is limited to
U.S. Holders who hold their Common Shares as capital assets.
ITEM 8. SELECTED FINANCIAL DATA.
-----------------------
The following selected financial data, for the years 1992 through 1996,
have been derived from the Company's (and its predecessor, FMC Gold's)
consolidated financial statements, including the consolidated balance sheets at
December 31, 1996 and 1995 and the related consolidated statements of
operations, statements of cash flows, and statements of changes in stockholder's
equity for each of the three years ended December 31, 1996, and the notes
thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in millions, except per share data)
Summary of Earnings
<S> <C> <C> <C> <C> <C>
Sales $76.2 $57.4 $63.4 $118.9 $150.0
Costs and expenses
Cost of sales 56.2 30.1 38.8 78.6 94.4
Depreciation, depletion, and amortization 21.0 21.2 15.3 18.5 25.8
Exploration costs 13.4 10.8 10.9 14.2 12.1
Selling, general and administrative expenses 6.4 5.1 6.5 6.9 7.5
Write-downs and other charges - - - 60.6 -
Total costs and expenses 97.0 67.2 71.5 178.8 139.8
- -------------------------------------------- ------- -------- -------- ------- --------
Operating income (loss) (20.8) (9.8) (8.1) (59.9) 10.2
Interest income 4.9 5.9 8.7 8.3 6.0
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Gain on sale of assets - 1.7 - - -
- -------------------------------------------- ------- -------- -------- ------- --------
Income (loss) before income taxes (15.9) (2.2) 0.6 (51.6) 16.2
Provision (benefit) for income taxes - (4.5) (2.1) 2.2 1.8
- -------------------------------------------- ------- -------- -------- ------- --------
Net income (loss) $(15.9) $ 2.3 $ 2.7 $(53.8) $14.4
- -------------------------------------------- ------- -------- -------- ------- --------
Earnings (loss) per common share $(0.22) $0.03 $0.04 $(0.73) $0.20
- -------------------------------------------- ------- -------- -------- ------- --------
Number of common shares used in earnings
per share computations (thousands) 73,563 73,484 73,484 73,484 73,484
- -------------------------------------------- ------- -------- -------- ------- --------
Total Assets at December 31 $214.6 $225.2 $235.1 $238.6 $291.9
- -------------------------------------------- ------- -------- -------- ------- --------
Total Dividends $ 1.5 $ 3.7 $ 3.7 $ 3.7 $ 3.7
- -------------------------------------------- ------- -------- -------- ------- --------
</TABLE>
See "Item 1. Description of Business" for additional information about the
Company's 1996 reorganization.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
-------------
Reference is made to the Consolidated Financial Statements of the
Company which form part of this Annual Report and on which the following
discussion is based. The Consolidated Financial Statements, furnished pursuant
to Item 17, are presented in accordance with Canadian GAAP which, in the case of
the Company, do not differ materially from U.S. GAAP except for certain
different disclosures required under U.S. GAAP as outlined in Note 14 of the
Notes to the Consolidated Financial Statements.
The Consolidated Financial Statements include the operations of the
Company, as well as Meridian Gold Canada Inc., Meridian Gold Company, Meridian
Rossi Corp., Meridian Jerritt Canyon Corporation, Meridian Beartrack Company and
Minera Meridian Ltda., the Company's direct and indirect subsidiaries.
Included herein are certain forward-looking statements that involve
various risks, uncertainties and other factors. See "Cautionary Statement" on
page 5 of this Annual Report.
RESULTS OF OPERATIONS
1996 COMPARED WITH 1995
Sales increased to $76.2 million from $57.4 million in 1995 reflecting a
full year's production from the Beartrack mine, which started production in July
1995, partly offset by a slight decrease in production from the Company's 30
percent interest in the Jerritt Canyon mine. Gold production of 202,000 ounces
increased 34 percent from 1995 levels, reflecting a 60,000 ounce increase at the
Beartrack mine during its first full year of production, offset in part by a
5,000 ounce reduction at Jerritt Canyon. The lower production at Jerritt Canyon
was a result of processing the remaining low grade stockpiles through the wet
mill.
The average realized price of gold increased to $392 per ounce from $389
in 1995, reflecting higher market prices during the first half of 1996 and the
benefit of hedging positions on Beartrack gold production.
Cost of sales increased to $56.2 million in 1996 from $30.1 million in
1995 due to the full year of production at Beartrack, higher mining costs at
Jerritt Canyon, and an additional charge of $5.6 million for a change in
engineering estimates associated with the Royal Mountain King mine which was
shut down in July 1994. Average cash costs of
35
<PAGE>
production increased to $239 per gold equivalent ounce from $221 per gold
equivalent ounce in 1995. Beartrack cash costs increased to $190 per gold
equivalent ounce from $166 in 1995 due to processing the expected lower grade
ores from the North Pit. Jerritt Canyon cash costs per gold equivalent ounce of
$297 were $47 per ounce higher than 1995 due to lower production and inclement
weather in the first half of the year.
Exploration spending of $13.4 million in 1996 increased from the $10.8
million investment made in 1995, reflecting the Company's commitment to bring
advanced stage opportunities closer to a production decision. Spending continues
to be focused on the El Penon project in northern Chile and the Rossi project on
the Carlin Trend in Nevada. Additional exploration spending was also committed
to increasing reserves around the Beartrack and Jerritt Canyon operations.
Selling, general and administrative expenses increased to $6.4 million in 1996
from $5.1 million in 1995, primarily due to a reserve of $2.0 million against a
note receivable from Arimetco Inc. related to the November 1995 purchase of
Paradise Peak. Arimetco Inc. filed for Chapter 11 bankruptcy in January 1997.
Net loss was $15.9 million in 1996 compared with net income of $2.3
million in 1995. The Company did not recognize a tax benefit for 1996. The 1995
income resulted from $4.5 million of tax benefits associated with the
utilization of net operating loss carrybacks which were made available through
the previously existing tax sharing agreement with FMC Corporation.
1995 COMPARED WITH 1994
Sales decreased to $57.4 million from $63.4 million in 1994, reflecting
the winding down of residual heap leach production at Paradise Peak and the July
1994 shutdown of Royal Mountain King, offset by the start-up of the Beartrack
mine in July 1995 and slightly higher precious metals prices. Gold production
declined 7 percent and silver production declined 82 percent. At Jerritt Canyon,
the Company's 30 percent share of gold production was even with 1994 production
of 98,000 ounces as higher mill ore grades offset slightly lower throughput and
recoveries. At Paradise Peak, gold production declined to 4,000 ounces in 1995
due to residual heap leaching operation. The Royal Mountain King mine was shut
down in July 1994, producing 26,000 ounces of gold prior to closing. Partly
offsetting the lost production at Paradise Peak and Royal Mountain King was the
start up of the Beartrack mine, where gold production reached 49,000 ounces in
1995. Silver production in 1995 continued to decline to 27,000 ounces compared
with 154,000 ounces in 1994, as the Paradise Peak heap leach operation came to a
close.
The average realized price of gold increased to $389 per ounce from $384
in 1994, reflecting higher market prices and the benefit of hedging positions on
gold production from Beartrack.
On November 30, 1995, the Company sold the stock of FMC Paradise Peak
Company to Arimetco, Inc. for $2.0 million in cash, a $2.0 million unsecured
promissory note and the assumption by Arimetco of all reclamation liabilities.
The Company recorded a pre-tax gain on the transaction of $6.2 million, of which
$1.7 million resulted from the sale of assets and $4.5 million represented the
reversal of the accrued reclamation liability through cost of sales.
Cost of sales decreased to $30.1 million in 1995 from $38.8 million in
1994 due to lower cash mining and milling costs at Jerritt Canyon, the 1994
shutdown of Royal Mountain King and the reversal of the accrued reclamation
costs at Paradise Peak. Partly offsetting these reductions was the incremental
production cost at Beartrack. Average cash costs of production decreased to $221
per gold equivalent ounce from $246 in 1994, reflecting the
36
<PAGE>
addition of lower-cost production from Beartrack. Jerritt Canyon cash costs per
gold equivalent ounce decreased to $250 from $283 due to lower mining and
milling costs per ton. Beartrack cash costs per gold equivalent ounce were $166.
Cash costs at Paradise Peak increased to $155 per gold equivalent ounce in 1995
from $124 in 1994 as costs were spread over significantly fewer ounces of
production.
Exploration spending of $10.8 million in 1995 was essentially unchanged
from $10.9 million in 1994. Spending was primarily focused on the El Penon
project in northern Chile and the Rossi project on the Carlin Trend in Nevada.
Selling, general and administrative expenses decreased to $5.1 million in 1995
from $6.5 million in 1994 due to lower allocated costs from FMC Corporation, and
continued cost reduction efforts. Costs allocated from FMC Corporation are
determined as a percentage of the Company's revenues relative to FMC Corporation
consolidated revenue, multiplied by FMC Corporation corporate overhead. Interest
income decreased to $5.9 million in 1995 from $8.7 million in 1994 due to lower
cash balances on loans to FMC Corporation as well as lower interest rates.
Net income was $2.3 million in 1995 compared with net income of $2.7
million in 1994. The Company recognized tax benefits of $4.5 million in 1995 and
$2.1 million in 1994 associated with the utilization of net operating loss
carrybacks. The tax benefits were made available through the Company's tax
sharing agreement with FMC Corporation. Earnings per share were $0.03 for 1995,
slightly lower than 1994.
TAXES
As a result of the merger and reincorporation in July 1996, the Company
has established new tax bases in all of the Company's assets.
LIQUIDITY AND CAPITAL RESOURCES
Cash to meet the Company's operating needs, finance capital expenditures
and fund exploration activities was provided from operations and existing cash
reserves. At December 31, 1996, cash and cash equivalents totaled $82.6 million,
primarily in the form of short-term Euro-deposits which have varying maturities
and are payable on demand.
Capital expenditures decreased to $13.9 million in 1996 from $36.9
million in 1995. Capital expenditures in 1996 related to Beartrack were $4.7
million versus $25.1 million in 1995, as mine development was completed. $9.0
million of mine development and equipment additions were made at Jerritt Canyon
in 1996.
Expected cash requirements for 1997 include approximately $20 million
for planned capital expenditures, primarily associated with mine development at
Jerritt Canyon and heap leach pad expansion at Beartrack. Exploration spending
for 1997 is expected to approximate $20 million. The Company expects to fund
these requirements from cash flow from operations and existing cash and cash
equivalents.
Should mine development at any of the Company's existing exploration
properties prove beneficial, significant cash requirements may be necessary. The
Company believes that any unexpected cash requirements could be funded by
existing cash reserves or borrowings from third parties.
OUTLOOK
Annual production is estimated to be approximately 200,000 ounces in
1997 based upon continued operation of the Beartrack and Jerritt Canyon mines.
Beartrack should again
37
<PAGE>
produce a higher proportion of the total production. Beartrack cash costs are
expected to increase slightly in 1997 due to higher processing costs and
slightly lower grades, while Jerritt Canyon cash costs are expected to decline
due to lower mining costs. Exploration at both operations as well as the
Company's advanced-stage opportunities in Chile and Nevada continue to be
successful in delineating mineralization and are particularly encouraging.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following table provides the names of the directors and executive
officers of the Company as of December 31, 1996, the offices held by them, and
their terms of office. Directors are elected for one year terms and until their
successors have been duly elected, and officers serve at the pleasure of the
Board of Directors.
NAME AND RESIDENCE POSITION WITH COMPANY DIRECTOR OR
------------------ --------------------- -----------
OFFICER SINCE
-------------
Michael J. Callahan (1) Director 1996
Winnetka, Illinois
John A. Eckersley (1) Director 1996
West Vancouver, BC
Brian J. Kennedy (1) Director, President and 1996
Reno, Nevada Chief Executive Officer
Dr. David S. Robertson Director, Chairman of the 1996
(1) Board
North York, Ontario
John C. White (1) Director 1996
Oakville, Ontario
Christopher D.S. Bates Vice-President, 1996
Vancouver, BC Business Development
Donald L. Beckwith Vice-President, 1996
Reno, Nevada Operations
Edward H. Colt Vice-President, 1996
Reno, Nevada Finance and
Chief Financial Officer
Richard C. Lorson Vice-President, 1996
Reno, Nevada Exploration
Jay A. Nutt (2) Controller 1996
Reno, Nevada
Robert T. Stuart Corporate Secretary 1996
Toronto, Ontario
- ----------
(1) Member of Audit Committee
(2) Resigned from the Company on January 31, 1997
38
<PAGE>
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
--------------------------------------
During the fiscal year ended December 31, 1996, the Company and its
subsidiaries paid a total of $957,144 in cash compensation to its directors and
executive officers (10 people, excluding Jay A. Nutt). That amount does not take
into account stock options granted to or exercised by such individuals and other
non-cash compensation, as more fully described below.
Pursuant to applicable Canadian securities legislation, the Company is
required to disclose to shareholders compensation paid to its executive
officers. The following reflects certain information regarding executive officer
compensation that has been disclosed to shareholders of the Company under
applicable Canadian law.
SUMMARY COMPENSATION TABLE
The Company's Chief Executive Officer and each of the four most
highly-compensated officers who was serving as an executive officer on December
31, 1996 (the "Named Executive Officers"), each of whom was employed with the
Company's predecessor prior to beginning service with the Company, were all
appointed to their respective positions with the Company during or after July
1996. Accordingly, the following table and notes summarize the compensation of
the Named Executive Officers for the fiscal year ended December 31, 1996.
<TABLE>
LONG-TERM
---------
ANNUAL COMPENSATION(1) COMPENSATION
---------------------------- ------------
NAME AND TITLE SALARY BONUS(2) OTHER(3) OPTION GRANTS ALL OTHER (1)
------ ----- ----- ------------- ---------
<S> <C> <C> <C> <C> <C>
Brian J. Kennedy (4) (5) 170,278 105,000 2,675 250,000 250,000
President and Chief
Executive Officer
Donald L. Beckwith (5) 128,394 48,769 22,342 113,300 105,000
Vice-President,
Operations
Edward H. Colt (6) 125,000 3,125 - 113,300 65,000
Vice-President, Finance
and Chief Financial
Officer
Christopher D.S. Bates 150,000 25,875 - 105,000 -
Vice-President,
Business Development
Richard C. Lorson, 108,215 30,012 500 113,300 -
Vice President,
Exploration
</TABLE>
- ----------
(1) All figures, other than numbers of options granted, are expressed in U.S.
dollars, except for those relating to Mr. Bates, which are expressed in
Canadian dollars. Salaries for Messrs. Colt, Bates and Lorson have been
annualized to reflect as if each served in his current capacity for the full
year.
(2) Bonuses paid reflect, among other factors, the number of months of service
of the Named Executive Officer in 1996, as follows: Mr. Kennedy and Mr.
Beckwith, 12 months; Mr. Lorson, 9 months; Mr. Bates, 6 months and Mr. Colt,
one month.
(3) Consists of matching payments pursuant to a 401(k) Thrift Plan established
by a subsidiary of the Company, and, in the case of Mr. Beckwith only,
certain payments relating to unused vacation entitlements.
39
<PAGE>
Excludes any prerequisites and other personal benefits not greater than the
lesser of Cdn. $50,000 and 10% of the Named Executive Officer's total annual
salary and bonus.
(4) On July 31, 1996, Mr. Kennedy was issued 10,000 non-voting Preferred Shares,
Series 1 of the Company, with a face amount of U.S. $100,000, which amount
is included under "All Other" compensation.
(5) "All Other" compensation includes, in the case of Messrs. Kennedy and
Beckwith, certain incentive payments made in 1996 by the former parent of
FMC Gold Company, the Company's predecessor.
(6) "All Other" compensation for Mr. Colt consists of certain payments in
connection with his hiring.
LONG-TERM INCENTIVE PLAN
There were no awards or payouts to the Named Executive Officers during
the fiscal year ended December 31, 1996 under any arrangements of the Company
which would constitute a long-term incentive plan.
GRANTS OF OPTIONS
The following table provides information concerning the grants of
options under the Company's 1996 Stock Option Plan to the Named Executive
Officers during the fiscal year ended December 31, 1996.
OPTIONS % OF EXERCISE VALUE AT EXPIRATION
------- ---- -------- -------- ----------
NAME GRANTED TOTAL PRICE(1) GRANT DATE(2) DATE
- ---- ------- ----- ----- ---------- ----
Brian J. Kennedy 250,000 15.0 3.65 3.65 July 31, 2006
Donald L. Beckwith 113,300 6.8 3.65 3.65 July 31, 2006
Edward H. Colt 113,300 6.8 4.50 4.50 Nov. 18, 2006
Christopher D.S. 105,000 6.3 5.00 5.00 July 31, 2006
Bates
Richard C. Lorson 113,300 6.8 3.65 3.65 July 31, 2006
- ------------
(1) Exercise prices are expressed in U.S. dollars, except for those relating to
Mr. Bates, which are expressed in Canadian dollars. All exercise prices are
the closing price of the Common Shares of the Company on either the TSE or
NYSE on the trading day prior to the grant date.
(2) This figure is the closing price of the Common Shares of the Company on
either the TSE or NYSE on the grant date, or, for options granted on July
31, 1996, the initial public offering price (U.S. $3.65/Cdn. $5.00).
OPTIONS EXERCISES AND YEAR-END OPTION VALUES
The following table provides information concerning (i) options
exercised by any Named Executive Officer during the fiscal year ended December
31, 1996; and (ii) the number and value at December 31, 1996 of unexercised
options held by the Named Executive Officers. In the table, "exercisable"
options are those for which the vesting period or conditions, if any, have been
met, and "in-the-money" options are those where the exercise price was less than
the market price of the Common Shares of the Company at December 31, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
OPTIONS EXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
---------------------- ------------------------ -------------------------
SECURITIES AGGREGATE NOT NOT
---------- --------- --- ---
NAME ACQUIRED VALUE(1) EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
- ---- -------- ----- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Kennedy - - 109,800 250,000 - 118,750
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Donald L. Beckwith 38,600 86,850 29,000 113,300 - 53,818
Edward H. Colt - - - 113,300 - -
Christopher D.S. - - - 105,000 - 49,875
Bates
Richard C. Lorson 6,000 14,250 600 113,300 - 53,813
</TABLE>
- ----------
(1) All figures relating to "value" are expressed in U.S. dollars.
PENSION PLANS
The Named Executive Officers are covered by a defined benefit pension
plan of Meridian Gold Company, the Company's principal operating subsidiary. The
following table provides information concerning the total annual retirement
benefit payable under these arrangements at retirement (normally at age 65).
YEARS OF SERVICE(1)
--------------------------------------------------------------
FINAL EARNINGS 10 15 20 25 30
- -------------- ------ ------ ------ ------ ----
100,000 13,535 20,302 27,070 33,837 40,604
150,000 21,035 31,552 42,070 52,587 63,104
200,000 28,536 42,804 57,072 71,340 85,608
250,000 36,035 54,052 72,070 90,087 108,104
- ----------
(1) All figures are expressed in U.S. dollars.
Compensation covered by this plan includes only the remuneration
appearing in the "Salary" and "Bonus" columns in the Summary Compensation Table.
Benefits are not subject to any deduction for social security or other offset
amounts. The Named Executive Officers have the following number of years of
service credited: Mr. Kennedy - 23, Mr. Bates - 1, Mr. Beckwith - 16, Mr. Colt -
1, and Mr. Lorson - 15. Credited years of service, in the case of Messrs.
Kennedy, Beckwith and Lorson, include service with FMC Gold, the Company's
predecessor.
EMPLOYMENT CONTRACTS
Each of the Named Executive Officers has entered into an employment
contract with the Company or Meridian Gold Company. Each of these contracts has
a term of five years, with an automatic renewal for five years. Compensation is
comprised of base salary, bonus and stock options, generally at the discretion
of the Board of Directors of the Company, together with certain benefits. The
employment contracts also provide for certain payments to the employee upon
certain defined events of termination of employment (including termination or a
change in responsibility after a change of control of the Company). These
payments range from 18 months to 24 months of the employee's regular monthly
compensation.
ITEM 12 OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
--------------------------------------------------------------
In 1989, the stockholders of FMC Gold approved the FMC Gold Company 1988
Long-term Incentive Compensation Plan, which authorized the Board of Directors
to grant awards, payable in the form of cash and non-qualified stock options, to
key employees if certain specific performance objectives were met over a
four-year period ended December 31, 1991.
The stock options granted in 1988 bear an exercise price ranging from
$9.625 to $11.25, the fair market value at the date of grant, and expire May 6,
1998. During 1992,
41
<PAGE>
additional options for 223,000 shares of common stock were granted at an
exercise price of $4.25 which was fair market value at date of grant with an
expiration date of April 2007.
In the 1996 reincorporation merger, each outstanding option to purchase
shares of FMC Gold common stock was converted by FMC Gold and the Company into
an option to purchase an equal number of Company Common Shares.
On June 7, 1996, the Company's Board of Directors adopted the Meridian
Gold Inc. 1996 Stock Option Plan (the "Plan"), which provides for the granting
of options to purchase Common Shares (the "Option Shares") to certain directors,
officers and employees of the Company (the "Participants"). The aggregate number
of Option Shares which may be reserved for issuance under this Plan shall not
exceed 3,750,000. On July 23, 1996, the Stockholders of FMC Gold approved the
adoption of the Plan. The purpose of the Plan is to develop the interest and
incentive of eligible employees, officers and directors of the Company in its
growth and development by giving such Participants an opportunity to purchase
Common Shares on a favorable basis, thereby advancing the interests of the
Company, enhancing the value of the Common Shares for the benefit of all
shareholders and increasing the ability of the Company to attract and retain
skilled and motivated individuals in the service of the Company. The Option
Shares granted during 1996 were granted at exercise prices ranging from $3.65 to
$4.50 which was fair market value at date of grant, and with expiration dates in
2006.
At December 31, 1996 options to purchase 1,679,950 Common Shares were
outstanding with terms up to ten years from the date of grant at an exercise
price equal to the market price prevailing at the time of the grants, as
detailed in the following table:
NUMBER OF OPTION PRICE
COMMON SHARES $ PER SHARE
- --------------------------------- ------------------ --------------
Outstanding December 31, 1993 396,300 4.250-10.625
Granted in 1994 -
Exercised or surrendered, 1994 -
- --------------------------------- ------------------ --------------
Outstanding, December 31, 1994 396,300 4.250-10.625
Granted in 1995 -
Exercised or surrendered, 1995 65,500 4.250-10.625
- --------------------------------- ------------------ --------------
Outstanding, December 31, 1995 330,800 4.250-10.625
Granted in 1996 1,544,150 3.650-4.500
Exercised or surrendered, 1996 195,000 3.650-10.625
- --------------------------------- ------------------ --------------
Outstanding, December 31, 1996 1,679,950 3.650-10.625
- --------------------------------- ------------------ --------------
Exercisable, December 31, 1996 176,100 4.250-10.625
- --------------------------------- ------------------ --------------
As of December 31, 1996, the directors and officers of the Company, as a
group (10 persons, excluding Jay A. Nutt), held options to purchase an aggregate
of 874,300 Common Shares.
In 1996, the Company established a Shareholder Rights Plan. The Plan has
a term of three years and expires on July 31, 1999. In implementing the Plan,
one Right was distributed for each common share outstanding on July 31, 1996, as
well as each common share to be issued prior to the Separation Time. The
"Separation Time" is defined as the eighth trading day after the earlier of (i)
the first date of public announcement that a person or group other than certain
exempt persons (an "Acquiring Person"), together with affiliates or associates,
has acquired, or obtained the right to acquire, 20% or more of any class of
voting shares of the Company; or (ii) the date of commencement or announcement
of a Take-over Bid (as defined in the Shareholder Rights Plan Agreement).
42
<PAGE>
A "Take-over Bid" means an offer to acquire voting shares of the Company
(or securities convertible into such shares) which, if successful, would result
in the person making such an offer ("the Offeror") beneficially owning 20% or
more of any class of the voting shares of the Company (including any such shares
held by the Offeror prior to the offer). A "Permitted Bid" and a "Competing
Permitted Bid" are Take-over Bids that are made by means of an offering circular
and (i) are made to all shareholders; (ii) are open for a period of not less
than 60 days; and (iii) contain certain withdrawal rights and extension terms.
The Shareholder Rights Plan Agreement provides that, until the
Separation Time, the Rights will be transferred with and only with the common
shares. After the Separation Time, separate Rights Certificates will be mailed
to holders of record of the common shares as of the Separation Time.
After the Separation Time and prior to the Expiration Time, the Rights
are exercisable by the holders. Each Right will entitle the holder to purchase
one common share for the Exercise Price (as defined in the Shareholder Rights
Plan Agreement).
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
----------------------------------------------
None of the directors or officers of the Company, nor any associate or
affiliate of any such person, has or had any direct or indirect material
interest, since January 1, 1996, in respect of any matter that has materially
affected or will materially affect the Company or any of its subsidiaries.
None of the directors or officers of the Company, nor any associate or
affiliate of any such person, has been indebted to the Company or any of its
subsidiaries at any time since January 1, 1996, other than amounts owing for
purchases subject to usual trade terms, for ordinary travel and expense advances
and for other transactions in the ordinary course of business.
PART II
ITEM 14. SECURITIES TO BE REGISTERED.
---------------------------
None.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
-------------------------------
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
------------------------------------------------------------
SECURITIES.
----------
None.
43
<PAGE>
PART IV
ITEM 17. FINANCIAL STATEMENTS.
--------------------
See Consolidated Financial Statements and Exhibits listed in Item 19
hereof and filed as part of this Annual Report. The financial statements of the
Company have been prepared on the basis of Canadian GAAP. A reconciliation to
U.S. GAAP appears in Note 14 thereto.
ITEM 18. FINANCIAL STATEMENTS.
--------------------
Not applicable.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets of the Company as at December 31, 1996 and
December 31, 1995, and consolidated statements of operations, cash flows and
changes in shareholders' equity for the years ended December 31, 1996, 1995 and
1994, together with the Auditor's report thereon and notes thereto.
EXHIBITS
The following exhibits are filed as part of this Annual Report:
2.1* Form of certificate representing Common Shares of the Company (filed
with the Company's Registration Statement on Form 8-B (No. 001-12003))
2.2* Form of certificate representing Instalment Receipts of the Company
(filed with the Company's Registration Statement on Form 8-B (No. 001-
12003))
2.3* Articles of Amalgamation, as amended (filed with the Company's
Registration Statement on Form S-4 (No. 333-9171))
2.4 By-laws, as amended
2.5 Executive Employment Agreement dated July 1, 1996 between the Company
and Christopher D.S. Bates
2.6 Executive Employment Agreement dated July 31, 1996 between the Company
and Donald L. Beckwith
2.7 Executive Employment Agreement dated December 1, 1996 between the
Company and Edward H. Colt
2.8 Executive Employment Agreement dated July 31, 1996 between the Company
and Brian J. Kennedy
2.9 Executive Employment Agreement dated July 31, 1996 between the Company
and Richard C. Lorson
44
<PAGE>
2.10* Meridian Gold Inc. 1996 Stock Option Plan (filed with the Company's
Registration Statement on Form S-4 (No. 333-9171))
2.11* Shareholder Rights Plan (filed with the Company's Registration Statement
on Form 8-B (No. 001-12003))
2.12* Instalment Receipt Agreement (filed with the Company's Registration
Statement on Form 8-B (No. 001-12003))
2.11* Joint Venture Agreement between Freeport Exploration Company and FMC
Corporation (filed with FMC Gold Company's Registration Statement on
Form S-1 (No. 33-14429))
- ----------
* Incorporated by reference pursuant to Rule 12b-32 under the Securities
and Exchange Act of 1934, as amended
45
<PAGE>
AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS,
MERIDIAN GOLD INC.:
We have audited the accompanying consolidated balance sheets of Meridian Gold
Inc. and subsidiaries (formerly FMC Gold Company) as of December 31, 1996 and
1995, and the related consolidated statements of operations, cash flows, and
changes in stockholders' equity for each of the years in the three-year period
ended December 31, 1996 which, as described in Note 1, have been prepared on the
basis of accounting principles generally accepted in Canada. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada and in the United States. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meridian Gold Inc.
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1996 in conformity with accounting principles generally
accepted in Canada.
/s/KPMG Peat Marwick LLP
- -----------------------------
KPMG Peat Marwick LLP
February 18, 1997
MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements and all of the data included
in this annual report have been prepared by and are the responsibility of the
management of the company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada
and reflect management's best estimate and judgements based on currently
available information. The company has developed and maintains systems of
internal accounting controls in order to assure, on a reasonable and
cost-effective basis, the reliability of its financial information, and that its
assets are safeguarded from loss.
The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The Board
exercises its responsibilities through the Audit Committee of the Board which
meets with the external auditors to satisfy itself that the management's
responsibilities are properly discharged and to review the financial statements
before they are presented to the Board of Directors for approval.
The consolidated financial statements have been audited by KPMG Peat Marwick
LLP. Their report outlines the scope of their examination and their opinion on
the consolidated financial statements.
/s/ BRIAN J. KENNEDY /s/ EDWARD H. COLT
- ----------------------------------- -------------------------------
BRIAN J. KENNEDY EDWARD H. COLT
President & Chief Executive Officer Vice President, Finance & Chief
Financial Officer
February 18, 1997
<PAGE>
MERIDIAN GOLD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31
<TABLE>
<CAPTION>
(in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $76,230 $57,438 $63,369
Costs and expenses
Cost of sales 56,216 30,065 38,846
Depreciation, depletion, and amortization 21,068 21,253 15,275
Exploration costs 13,357 10,826 10,938
Selling, general and administrative expenses 6,397 5,070 6,466
- ------------------------------------------------------------------------------------------------------------
Total costs and expenses 97,038 67,214 71,525
Operating loss (20,808) (9,776) (8,156)
Interest Income 4,953 5,857 8,717
Gain on sale of assets - 1,680 -
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (15,855) (2,239) 561
(note 8) Provision (benefit) for income taxes - (4,512) (2,117)
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $(15,855) $ 2,273 $ 2,678
- ------------------------------------------------------------------------------------------------------------
(note 1) Earnings (loss) per common share $ (0.22) $ 0.03 $ 0.04
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MERIDIAN GOLD INC.
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
(note 1) Cash and cash equivalents $ 82,570 $ -
(notes 1
and 13) Loans and amounts due from FMC Corporation - 80,826
Trade receivables, net of allowances of $0 in 1996 and
$300 in 1995 1,768 4,859
(note 3) Inventories 16,763 14,792
Other current assets, net of allowances of $2,000 in 1996
and $0 in 1995 2,717 4,096
- ------------------------------------------------------------------------------------------------------------
Total current assets 103,818 104,573
(note 4) Property, plant and equipment, net 106,634 113,992
(notes 1
and 12) Other assets 4,115 6,612
- ------------------------------------------------------------------------------------------------------------
Total assets $214,567 $225,177
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
(note 1) Outstanding checks in excess of bank balances $ - $ 1,651
Accounts payable, trade and other 7,549 7,108
(note 6) Accrued and other liabilities 10,709 7,309
(note 13) Amounts due to FMC Corporation - 2,275
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 18,258 18,343
- ------------------------------------------------------------------------------------------------------------
(note 7) Other long-term liabilities 14,597 12,113
(note 12) Commitments and contingent liabilities
(note 1) SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value, authorized
100,000 shares, none issued or outstanding in 1995 - -
Series 1 preferred shares, no par value, authorized
unlimited shares, 10,000 issued and outstanding in 1996 100 -
Common stock, $0.01 par value, authorized 150,000,000
shares; issued and outstanding; 73,484,395 shares in 1995 - 735
Common shares, no par value, authorized unlimited shares
73,597,495 issued and outstanding in 1996 68,432 -
Capital in excess of par value 3,658 68,609
Retained earnings 109,522 125,377
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 181,712 194,721
- ------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $214,567 $225,177
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
Signed on behalf of the Board of Directors:
Dr. David S. Robertson Brian J. Kennedy
Director Director
<PAGE>
MERIDIAN GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $(15,855) $ 2,273 $ 2,678
- ------------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Provision for depreciation, depletion and amortization 21,068 21,253 15,275
Gain on sale of asset - (1,680) -
Provision for allowance on doubtful accounts 1,700 - 300
Issuance of preferred stock 100 - -
(INCREASE) DECREASE IN ASSETS:
Trade receivables 3,391 (3,363) 731
Inventories (1,971) (9,171) (1,845)
Other current assets (621) (2,538) (322)
Other assets 2,497 - (4,015)
(DECREASE) INCREASE IN LIABILITIES:
Accounts payable, trade and other 441 (4,002) 2,904
Accrued and other liabilities 3,400 (1,716) (2,910)
Amounts due to FMC Corporation (2,275) 1,681 (475)
Other long-term liabilities 2,484 (4,185) (940)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 14,359 (1,448) 11,381
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital spending (13,882) (36,943) (56,188)
Disposal of property, plant and equipment 172 4,645 251
Increase in other assets - 4,645 251
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (13,710) (34,089) (56,105)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (3,674) (3,674)
(note 1) Return of capital in connection with the reincorporation 1,472) - -
Proceeds from sale of common stock 560 - -
(note 1) Capital contribution related to the reincorporation 3,658 - -
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 2,746 (3,674) (3,674)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 3,395 (39,211) (48,398)
Cash and cash equivalents, beginning of year 79,175 118,386 166,784
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $82,570 $79,175 $118,386
- ------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid and (refunds received) for income taxes during
1996, 1995, and 1994 were $(1,454), $(2,857), and $895,
respectively.
</TABLE>
See notes to consolidated financial statements
<PAGE>
MERIDIAN GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Year ended December 31
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Number of Number of
Number of Meridian Meridian Number of Meridian Neridian
FMC Gold Gold Gold FMC Gold Gold Gold Capital in
Common Common Preferred Common Common Preferred excess of Retained
(in thousands) Shares Shares Shares Shares Shares Shares par value Earnings
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1993 73,484 $ 735 $ - $ - $ 68,609 $127,774
Net Income 2,678
Cash dividend ($0.05 per share) (3,674)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 73,484 735 68,609 126,778
Net Income 2,273
Cash dividend ($0.05 per share) (3,674)
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1995 73,484 735 68,609 125,377
Issuance of shares upon
Exercise of stock options 113 1 559
(note 1) Reincorporation (73,597) 73,597 (736) 69,904 (69,168)
Net Loss (15,855)
(note 1) Return of capital in connection
with the reincorporation (1,472)
(note 1) Capital contribution related to
the reincorporation 3,658
Preferred shares issued 10 100
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996 - 73,597 10 $ - $68,432 $ 100 $ 3,658 $109,522
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31
note 1 PRINCIPAL ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF OPERATIONS
Meridian Gold Inc. ("Meridian") is an exploration focused gold producer.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenues and
expenses during the reporting period.
Actual results could differ from those estimates.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Meridian and its predecessor, FMC Gold Company ("FMC Gold"), and all
majority-owned subsidiaries (collectively referred to as "the company").
The accounts of joint ventures in which the company holds an interest are
consolidated on a pro rata basis. All significant intercompany accounts
are eliminated in consolidation.
Meridian, a corporation organized under the laws of Canada, commenced
operations in July, 1996 upon completion of a series of transactions
whereby the company became the successor to the business of FMC Gold as
the result of a reincorporation from a Delaware company into a Canadian
company. As part of this reincorporation, FMC Gold shareholders received
one share of Meridian common stock and a $0.02 per share return of
capital, totaling approximately $1.5 million, in exchange for each common
share held in FMC Gold. Accordingly, the accompanying statement of
stockholders' equity has been adjusted to give effect to the
Reincorporation. Additionally, FMC Corporation ("FMC") sold its 80 percent
interest in Meridian through a public offering of Meridian's common stock
on the Toronto Stock Exchange. Concurrent with FMC selling their interest
in Meridian, FMC made a capital contribution to Meridian totaling
approximately $3.7 million. FMC Gold shares were subsequently canceled.
As a result of the Reincorporation as a Canadian company, the company
adopted GAAP recognized in Canada. Accordingly, the company's 1994
financial statements have been restated to conform with Canadian GAAP (the
adjustments from United States GAAP ("USGAAP") to Canadian GAAP were not
material in 1995 (see Note 14)). The accompanying consolidated financial
statements are presented in U.S. dollars.
REVENUE RECOGNITION
Revenue is generally recognized upon shipment of gold and silver dore to
third parties.
CASH AND CASH EQUIVALENTS
Meridian considers all highly liquid marketable securities with original
maturities of 90 days or less and loans and amounts due from FMC less
outstanding checks in excess of bank balances, to be cash equivalents.
Marketable securities consist of Euro-time deposits with major commercial
banks and total approximately $81.8 million at December 31, 1996. The book
value of the marketable securities approximates fair value.
Prior loans due from FMC consisted of three notes, with varying
maturities, due upon demand. Terms and conditions of these loans were
covered by the management services agreement between the company and FMC
(Note 13).
As a result of the company's prior participation in FMC's centralized cash
management system, the company reported a liability at December 31, 1995
for outstanding checks in excess of bank balances due to the timing of
cash transfers from FMC.
INVENTORIES
Inventories are stated at the lower of the average cost or market, and
include labor, materials, other production costs and depreciation. No
inventory value is assigned to stockpiled ore, except for certain
stockpiled in-process leach-pad ore where cost includes labor, materials
and other production costs.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including development costs and capitalized
interest associated with the construction of certain capital assets, is
recorded at cost. Depreciation and amortization for financial reporting
purposes is provided principally on the straight-line basis over the
shorter of the estimated lives of the assets or the estimated proven and
probable recoverable reserves. Certain assets are depreciated on a units
of production basis, with depreciation rates established according to
estimated producible units at the time the assets are placed in service.
Gains and losses are reflected in income upon sale or retirement of
assets.
<PAGE>
Maintenance and repairs are charged to expense in the year incurred.
Expenditures that extend the useful life of property, plant and equipment
or increase its productivity are capitalized.
MINERAL EXPLORATION AND DEVELOPMENT COSTS
Mineral exploration and preliminary development costs are expensed as
incurred. Development costs applicable to mineralized properties deemed
capable of commercial production are capitalized and then amortized over
units of production.
RECLAMATION
Reclamation and shutdown costs to be incurred when mining operations are
closed are estimated and accrued over the life of the mine.
INCOME TAXES
The company accounts for income taxes using the deferred method. Under
this method, deferred income taxes are recognized for income and expense
items that are reported in different years for income tax and financial
reporting purposes using the tax rates applicable for the year of the
calculation. Under the deferred method, deferred taxes are not adjusted
for subsequent changes in the tax rates.
See note 14 for a reconciliation from the company's accounting method of
Canadian GAAP to US GAAP.
FORWARD SALES AND HEDGING
In order to minimize exposure to decreasing prices for portions of its
gold production, the company has hedged portions of future gold production
by entering into put option contracts. Costs associated with the purchase
of open put options included in other assets were $2.5 million as of
December 31, 1996 and $3.4 million as of December 31, 1995. These costs
are deferred and recognized in the period the revenues related to the
hedged production were recorded.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share have been computed based on the weighted
average number of shares of common stock outstanding during the year
(73,563,087 shares in 1996, and 73,484,395 shares in 1995 and 1994).
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1996, the book value of the company's financial
instruments approximates fair value except as disclosed in Note 12.
RECLASSIFICATION
Certain amounts in 1995 and 1994 have been reclassified to conform with
the 1996 presentation.
note 2 ACQUISITIONS AND DIVESTITURES
- --------------------------------------------------------------------------------
On November 30, 1995, the company's 100 percent interest in Paradise Peak
Corporation was sold to Arimetco Inc. for $4 million in the form of cash
and a note receivable, resulting in a $1.7 million gain on the sale of the
assets and the reversal of $4.5 million of accrued reclamation liability
through cost of sales. In January 1997, Arimetco Inc. declared bankruptcy
under Chapter 11. The company has reserved $2.0 million for a promissory
note that was due in November 1996.
In June 1994, the company agreed to purchase the remaining 14 percent
interest in the Beartrack joint venture from Minex for $6.0 million,
bringing the company's ownership in the property to 100 percent. Two
installments of $1.5 million each were made to Minex in June 1994 and 1995
respectively. Another $1.0 million payment was made in June 1996, with the
balance owed to Minex to be paid in a $1.0 million installment in 1997,
and $0.5 million installments in 1998 and 1999.
note 3 INVENTORIES
- --------------------------------------------------------------------------------
Inventories (at cost) consist of the following:
- --------------------------------------------------------------------------------
(in thousands) 1996 1995
- --------------------------------------------------------------------------------
Gold and silver $ 1,863 $ 638
Leach-pad ore 12,750 11,368
Materials and supplies 2,150 2,786
- --------------------------------------------------------------------------------
Total $16,763 $14,792
- --------------------------------------------------------------------------------
<PAGE>
Gold and silver inventories are in the form of dore, which is suitable for
delivery to precious metal treatment facilities. These inventories are
generally sold to and further processed by these facilities into forms
suitable for end uses.
The value of heap leach pad ore increased to approximately $12.8 million
at December 31, 1996, from approximately $11.4 million at December 31,
1995. The increase represents the cost of loading ore on the heap leach
pads at the Beartrack mine, and includes labor, materials and other
production costs. At December 31, 1996, there were approximately 9.1
million tons of ore under leach containing approximately 77,000 ounces of
gold.
note 4 PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
Property, plant and equipment consists of the following:
--------------------------------------------------------------------------
(in thousands) 1996 1995
Land and land improvements $26,370 $ 2,689
less accumulated depreciation (3,374) (511)
--------------------------------------------------------------------------
22,996 2,178
--------------------------------------------------------------------------
Buildings 12,754 2,341
less accumulated depreciation (4,090) (1,491)
--------------------------------------------------------------------------
8,664 850
--------------------------------------------------------------------------
Machinery and equipment 119,900 84,416
less accumulated depreciation (75,016) (67,758)
--------------------------------------------------------------------------
44,884 16,658
--------------------------------------------------------------------------
Development costs 72,270 63,187
less accumulated depletion (48,490) (42,397)
--------------------------------------------------------------------------
23,780 20,790
--------------------------------------------------------------------------
Construction in progress 6,310 73,516
--------------------------------------------------------------------------
Net property, plant and equipment $106,634 $113,992
--------------------------------------------------------------------------
Allocated to the projects as follows:
--------------------------------------------------------------------------
(in thousands) 1996 1995
--------------------------------------------------------------------------
Beartrack mine $60,627 $66,495
Jerritt Canyon mine 38,889 40,384
Rossi project 5,500 5,500
Royal Mountain King mine 449 449
El Penon exploration 355 358
Administrative offices 814 806
--------------------------------------------------------------------------
Net property, plant and equipment $106,634 $113,992
--------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
note 5 JOINT VENTURES
- -------------------------------------------------------------------------------------------
The results of the company's 30% interest in Jerritt Canyon are
consolidated in the financial statements on a proportional basis and the
company's share of the joint venture is reflected as follows:
- -------------------------------------------------------------------------------------------
(in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 2,832 $ 5,126
Property, plant and equipment, net 38,889 40,384
Investments and other assets 649 2,467
- -------------------------------------------------------------------------------------------
Total assets $42,370 $ 47,977
- -------------------------------------------------------------------------------------------
Current liabilities $ 3,171 $ 4,356
Long-term liabilities 4,565 2,907
Other 315 -
Total liabilities $ 8,051 $ 7,263
Revenue $35,781 $ 37,622 $37,511
Expenses
Cost of sales 27,524 24,605 27,677
Depreciation, depletion and amortization 10,316 16,498 14,968
Other 3,225 896 (508)
Net (loss) $(5,284) $ (4,377) $ (4,626)
Cash provided by operating activities $ 9,932 $ 9,307 $ 10,786
Cash used in investing activities $(8,821) $(10,093) $(14,876)
note 6 ACCRUED AND OTHER LIABILITIES
- -------------------------------------------------------------------------------------------
Accrued and other liabilities comprise the following:
- -------------------------------------------------------------------------------------------
(in thousands) 1996 1995
- -------------------------------------------------------------------------------------------
Shutdown and reclamation accrual (notes 1 and 7) $ 4,615 $ 1,256
Notes payable (note 2) 2,500 1,000
Accrued bonus and payroll 1,228 979
Other 2,366 4,074
- -------------------------------------------------------------------------------------------
Total $10,709 $ 7,309
- -------------------------------------------------------------------------------------------
Included in notes payable were short-term borrowings incurred during the
Reincorporation (see Note 1), in the form of a note amounting to $1.5
million. This note bore interest at 8.75% and was paid in full in January
1997.
note 7 OTHER LONG-TERM LIABILITIES
- -------------------------------------------------------------------------------------------
Other long-term liabilities comprise the following:
- -------------------------------------------------------------------------------------------
(in thousands) 1996 1995
- -------------------------------------------------------------------------------------------
Shutdown and reclamation accrual (notes 1 and 6) $11,707 $ 7,843
Notes payable and other (note 2) 2,890 4,270
- -------------------------------------------------------------------------------------------
$14,597 $12,113
- -------------------------------------------------------------------------------------------
</TABLE>
Shutdown and reclamation accruals represent estimated costs of earthwork
such as detoxification and recontouring, revegetation, and stabilization.
Also included are heap-leach encapsulation and facility decommissioning
costs.
In determining the estimated costs, the company considers such factors as
changes in laws and regulations, the likelihood of additional permits
being required, requirements under existing operating permits, and
estimated operating costs. Such analyses are performed on an ongoing
basis.
Late in the fourth quarter of 1996, a new closure estimate to complete
reclamation of the Royal Mountain King mine was developed by an outside
engineering firm. Based on the new estimate, the reclamation liability
increased $5.6 million, reflecting increasingly stringent environmental
regulations, changing project conditions, and higher physical works costs.
The Royal Mountain King Mine was shutdown in July 1994.
<PAGE>
Although the ultimate amount of reclamation obligations to be incurred is
uncertain, Meridian has estimated these costs to be $32 million, and at
December 31, 1996, accrued reclamation costs including those identified in
Note 6-Accrued and Other Liabilities were $16.3 million for all
properties. The amounts of reclamation costs charged to earnings were $8.9
million in 1996, $1.9 million in 1995 and $0.9 million in 1994.
Reclamation spending at each of these facilities is expected to continue
in 1997 and beyond.
note 8 INCOME TAXES
- --------------------------------------------------------------------------------
Under terms of the reincorporation as described in Note 1, Meridian and
FMC jointly agreed to elect to treat the disposition of Meridian shares as
an asset sale under Section 338 (h) (10) of the United States Internal
Revenue Code of 1986. Tax bases in Meridian's assets were adjusted to fair
market value for tax purposes only and accordingly the Company's net
operating loss and alternative minimum tax credit carryforwards remained
with FMC.
On March 31, 1994, FMC increased its ownership interest in the company to
80 percent. Thereafter, the company was included in FMC's consolidated
federal income tax return until the company was divested by FMC on July
31, 1996. Under the tax-sharing agreement, the company paid to FMC amounts
generally equal to the tax the company would have been required to pay had
it filed a separate return, and FMC paid to the company amounts generally
equal to any tax benefits the company would have realized through
carryover on a separate return basis. For state tax purposes, the company
was included in FMC's combined returns. The tax-sharing agreement for
periods beginning after April 1, 1994 provided that the company was liable
for the incremental impact the company had on FMC's state tax liability in
states where FMC filed combined returns. In addition, in the states where
the company filed separate state tax returns, the company was responsible
for the tax due thereunder. On July 31, 1996 the company received a $1.7
million settlement under the tax sharing agreement, in conjunction with
FMC's disposition of Meridian, which amount was reflected as a recovery of
taxes in the financial statements for the year ended December 31,1995.
The provision (benefit) for income taxes is presented below. The tax
provision for 1996 is zero and the tax benefit for 1995 was $4.5 million,
which resulted from tax benefits realized under the tax sharing agreement
with FMC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Year ended December 31
- ------------------------------------------------------------------------------------------------------------
restated,
see Note 1
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT:
Federal - $ (4,512) $(2,117)
State - - -
- ------------------------------------------------------------------------------------------------------------
Total current - (4,512) (2,117)
Deferred - - -
- ------------------------------------------------------------------------------------------------------------
Total provision (benefit) - $ (4,512) $(2,117)
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
The effective income tax provision (benefit) differs from that computed by applying the United States
applicable federal statutory rate of approximately 34 percent to income before taxes for the following
reasons:
- ------------------------------------------------------------------------------------------------------------
Year ended December 31
- ------------------------------------------------------------------------------------------------------------
restated,
see Note 1
(in thousands) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total provision (benefit) - $ (4,512) $(2,117)
Income tax provision (benefit) calculated using
statutory tax rates $(5,391) $ (784) $ 197
Foreign sales corporation income - (844) (769)
Excess percentage depletion - (1,716) (1,217)
Loss from disposition of foreign entity available for
tax in excess of book - (1,324) -
Recognition of net operating loss carryover not
previously tax benefited - (1,707) (743)
Loss from U.S. operations not tax benefited 3,250 - -
Loss from foreign subsidiaries not tax benefited 2,121 1,844 398
Other 20 19 17
- ------------------------------------------------------------------------------------------------------------
Actual tax provision (benefit) $ - $(4,512) $(2,117)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
note 9 GEOGRAPHIC SALES AND SALES TO MAJOR CUSTOMERS
- --------------------------------------------------------------------------------
Sales to unaffiliated customers by destination of sale are as follows:
<TABLE>
<CAPTION>
Year ended December 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands) 1996 1995 1994
------------------------------------------------------------------------------------------------------
Canada $ - $ 1,109 $25,240
Western Europe 75,724 55,643 37,555
------------------------------------------------------------------------------------------------------
Total $75,724 $ 56,752 $62,795
------------------------------------------------------------------------------------------------------
</TABLE>
The company's products may be purchased and refined by several Canadian,
European and United States refiners. Sales to two refiners in 1996 and
1995, and three refiners in 1994, each represented 10 percent or more of
consolidated sales. Specifically, sales to these companies amounted $75.7
million in 1996, $56.8 million in 1995, and $62.8 million in 1994. The
company believes that because there are several alternative refiners, each
capable of refining the company's products, no adverse effect would result
should any of the current refiners discontinue buying the company's
products.
note 10 EMPLOYEE PLANS
- --------------------------------------------------------------------------------
Prior to July 31, 1996, all company employees were covered by FMC's
retirement plan, post retirement health care and life insurance benefit
program and were included in the costs paid under the management services
agreement as discussed in Note 13.
The company has a defined benefit pension plan covering substantially all
salaried employees. Pension benefits are generally based on years of
service and final average yearly earnings. The plan was spun off from the
FMC Corporation pension plan, with $1.5 million being transferred January
1, 1997. The company funding policy is to contribute the minimum amount
required by applicable regulations. The following table represents the
plan's funded status at December 31, 1996, including assets transferred
January 1, 1997:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
(in thousands) 1996
------------------------------------------------------------------------------------------------------
<S> <C>
Projected Benefit Obligation $ (1,130)
Market Value of Plan Assets 1,480
------------------------------------------------------------------------------------------------------
Excess of assets over projected benefit 350
obligation
Unrecognized transition obligation -
Unrecognized prior service cost (350)
Unrecognized net (gain)/loss -
------------------------------------------------------------------------------------------------------
Accrued pension cost -
------------------------------------------------------------------------------------------------------
Actuarial assumptions:
Weighted average discount rate 8.00%
Weighted average rate of compensation increase 5.00%
No contribution was required for 1996. The most recent actuarial valuation
was performed as part of FMC's January, 1996 actuarial valuation. The
above amounts were calculated as part of the reincorporation transferring
assets from the FMC plan to the company plan.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
note 11 SHARE CAPITAL
- --------------------------------------------------------------------------------
In 1989, the stockholders of FMC Gold Company approved the FMC Gold
Company 1988 Long-term Incentive Compensation Plan, which authorized the
Board of Directors of the company (the Board) to grant awards, payable in
the form of cash and non-qualified stock options, to key employees of the
company if certain specific performance objectives were met over a
four-year period ended December 31, 1991. The stock options granted in
1988 bear an exercise price ranging from $9.625 to $11.25, the fair market
value at the date of grant, and expire May 6, 1998. During 1992,
additional options for 223,000 shares of common stock were granted at an
exercise price of $4.25 which was fair market value at date of grant with
an expiration date of April 2007.
<PAGE>
On June 7, 1996, the Board adopted the Meridian Gold Inc. 1996 Stock
Option Plan (the "Plan"), which provides for the granting of options to
purchase the company's common shares (the "Option Shares") to certain
directors, officers and employees of the company (the "Participants"). The
aggregate number of Option Shares which may be reserved for issuance under
this Plan shall not exceed 3,750,000. On July 23, 1996, the shareholders
of FMC Gold Company approved the adoption of the Plan. The purpose of the
Plan is to develop the interest and incentive of eligible employees,
officers and directors of the company in its growth and development by
giving such Participants an opportunity to purchase the company's common
shares on a favorable basis, thereby advancing the interests of the
company, enhancing the value of the common shares for the benefit of all
shareholders and increasing the ability of the company to attract and
retain skilled and motivated individuals in the service of the company.
The Option Shares granted during 1996 were granted at exercise prices
ranging from $3.65 to $4.50 which was fair market value at date of grant,
and with expiration dates in 2006.
At December 31, 1996 options to purchase 1,663,950 common shares were
outstanding with terms up to ten years from the date of grant at an
exercise price equal to the market price prevailing at the time of the
grants, as detailed in the following table:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
COMMON SHARES $ PER SHARE
<S> <C> <C>
Outstanding, December 31, 1993 396,300 4.250-10.625
Granted in 1994 -
EXERCISED OR SURRENDERED, 1994 -
Outstanding, December 31, 1994 396,300 4.250-10.625
Granted in 1995 -
EXERCISED OR SURRENDERED, 1995 65,500 4.250-10.625
Outstanding, December 31, 1995 330,800 4.250-10.625
Granted in 1996 1,491,650 3.650-4.500
EXERCISED OR SURRENDERED, 1996 158,500 3.650-10.625
- ------------------------------------------------------------------------------------------------------------
Outstanding, December 31, 1996 1,663,950 3.650-10.625
- ------------------------------------------------------------------------------------------------------------
EXERCISABLE, DECEMBER 31, 1996 176,100 4.250-10.625
- ------------------------------------------------------------------------------------------------------------
</TABLE>
In July 1996, the company established a Shareholder Rights Plan. The Plan has a
term of three years and expires on July 31, 1999. In implementing the Plan, one
Right was distributed for each common share outstanding on July 31, 1996, as
well as each common share to be issued prior to the Separation Time. The
"Separation Time" is defined as the eighth trading day after the earlier of (i)
the first date of public announcement that a person or group other than certain
exempt persons (an "Acquiring Person"), together with affiliates or associates,
has acquired, or obtained the right to acquire, 20% or more of any class of
voting shares of the Company; or (ii) the date of commencement or announcement
of a Take-over Bid (as defined in the Shareholder Rights Plan Agreement).
A "Take-over Bid" means an offer to acquire voting shares of the company (or
securities convertible into such shares) which, if successful, would result in
the person making such an offer ("the Offeror") beneficially owning 20% or more
of any class of the voting shares of the Company (including any such shares held
by the Offeror prior to the offer). A "Permitted Bid" and a "Competing Permitted
Bid" are Take-over Bids that are made by means of an offering circular and (i)
are made to all shareholders; (ii) are open for a period of not less than 60
days; and (iii) contain certain withdrawal rights and extension terms.
The Shareholder Rights Plan Agreement provides that, until the Separation Time,
the Rights will be transferred with and only with the common shares. After the
Separation Time, separate Rights Certificates will be mailed to holders of
record of the common shares as of the Separation Time.
After the Separation Time and prior to the Expiration Time, the Rights are
exercisable by the holders. Each Right will entitle the holder to purchase one
common share for the Exercise Price (as defined in the Shareholder Rights Plan
Agreement).
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder.
<PAGE>
note 12 COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------
During the second quarter of 1994, the company entered into certain
forward contracts and purchased put options in connection with gold
production from the Beartrack property. The forward contracts were for
23,800 ounces of gold, deliverable between April 1995 and April 1996 and
have subsequently been closed out. The put options were originally
purchased for $4 million and provide the company the right to sell gold at
an agreed-upon price. At December 31, 1996, the carrying value of the
remaining options (at cost) was $2.5 million. The market values as
determined by the holders of the options, as of December 31, 1996 and
1995, were approximately $3.3 million and $2.8 million, respectively. The
cost of the options is recognized concurrently with the revenues related
to the hedged production.
The options are recorded at cost in other assets and are amortized in
accordance with utilization. The options carry a strike price of $400 per
ounce. The value of these options varies with changes in market prices of
the commodity and management continually evaluates the desirability of
exercise in relation to current market prices. The options expire
according to the following schedule:
Options Expiration
(ounces) Date
------------------------
33,000 12/27/97
33,000 12/27/98
32,000 12/27/99
32,000 12/27/00
27,000 12/27/01
----------------------
The company's mining operations and exploration activities are subject to
various federal, state and local laws, and regulations governing
protection of the environment. These laws are continually changing and, as
a general matter, are becoming more restrictive. The company believes that
its operations are in material compliance with all applicable laws and
regulations, and has no reason to believe that compliance problems exist
at operations in which it holds a joint-venture interest. To comply with
these federal, state, foreign and local laws, the company has made, and in
the future will be required to make, capital and operating expenditures on
environmental projects. However, the company currently has no
environmental projects that will require substantial and extraordinary
expenditures. In the opinion of management, expenditures for environmental
projects were not substantial in 1996, nor are they expected to be
substantial in 1997.
The company leases office and warehouse space in Reno, Vancouver, and
Santiago, as well as various types of equipment (primarily mobile mining
equipment at the Beartrack mine). Total rent expense under all leases
amounted to $2.1 million, $1.1 million and $0.5 million for 1996, 1995 and
1994 respectively. Minimum future rentals under noncancellable leases
aggregated approximately $9.5 million as of December 31, 1996, and are
estimated to be payable $2.0 million in 1997, $2.0 million in 1998, $1.8
million in 1999, $1.7 million in 2000, $1.7 million in 2001, and $0.3
million thereafter.
During the third quarter of 1994, the Pacific Rivers Council and the
Wilderness Society (collectively the "PRC"), in a lawsuit filed in Federal
District Court in Idaho (Pacific Rivers Council v. Thomas), sought an
injunction against all ongoing and future forest activities including
mining, which may affect endangered salmon, within various national
forests in Idaho including the Salmon National Forest in which the
Beartrack property is located. In that lawsuit, the PRC sought to require
the U.S. Forest Service to consult under the Endangered Species Act (the
"Act") with the National Marine Fisheries Service ("NMFS") regarding
existing land resource management plans for the subject forests and their
potential impacts on endangered Snake River salmon. The government
defendants and the plaintiffs have subsequently negotiated a stipulated
dismissal of most of the lawsuit. Under the terms of the stipulation, the
parties dismissed from this litigation all projects which have undergone
site-specific consultation. The company's Beartrack mine was identified by
the government defendants as a project for which consultation has been
completed. The Court issued an Order on Pending Claims on December 20,
1995 regarding the remaining specified projects (not including the
Beartrack mine) which have not yet completed consultation. Under the terms
of that Order, the Court has retained jurisdiction in this lawsuit for
further proceedings regarding those projects. The Beartrack mine is not
subject to or a part of the Court's order.
In October 1994, the Sierra Club Legal Defense Fund, Inc. ("Sierra"), on
behalf of certain other organizations, filed a lawsuit in Federal District
Court for the Western District of Washington at Seattle against NMFS and
other federal agencies for violation of the Act, alleging the NMFS'
biological opinion failed to satisfy the requirements of the Act. Sierra,
the federal agencies and the company, as intervener, each filed a motion
for summary judgment. In November 1995, the Court ordered the federal
agencies to reinitiate consultation under Section 7 of the Act on the
potential environmental impacts of the Beartrack mine project on
endangered salmon or the designated critical habitat for salmon. The
plaintiffs did not seek, and the Court did not impose, any injunction or
other restriction on the operation of the Beartrack mine pending
completion of such consultation. On November 17, 1995, the court closed
the case but retained jurisdiction to resolve any disputes that may arise
concerning the reinitiated consultation schedule or to resolve issues once
the renewed consultation is completed. The Forest Service has yet to
formally reinitiate consultation by submitting a revised biological
assessment to NMFS, although the Forest Service is revising that
assessment. Under Section 7(d) of the Act, the Forest Service may require
Meridian to
<PAGE>
cease an activity associated with mine operations if that activity could
preclude the development of reasonable and prudent alternatives to the
project pending the completion of the reinitiated consultation. On July 3,
1996, the Forest Service completed its Section 7(d) determination for the
Beartrack mine operations and determined that, for the following 12 months
from that date, all ongoing and planned significant activities at the mine
could continue pending the reinitiated consultation, with exception of:
(1) proposed reconstruction of the leach pad Run of the Mine Road, and (2)
proposed use of the soil stockpile area associated with development of
Phase III of the heap leach pad. The Forest Service recognized that these
latter two activities may be authorized upon further review by the Forest
Service prior to completion of the reinitiated consultation. Under the
Act's regulations, consultation must be completed within 135 days of the
date consultation is initiated. An extension of 60 days can be imposed by
the agencies. Under the relevant statutory and regulatory authorities, the
results of a consultation can range from no impact on the activities under
review on the one hand to modest to significant impacts on the other. In
an extreme situation, a consultation could result in the cessation of
activities altogether, a potential result the company believes to be
remote in the case of Beartrack mine, which has been in operation and
production since mid-1995. The company believes that the ongoing operation
of the Beartrack mine will not jeopardize endangered salmon or adversely
modify or destroy designated critical habitat, and that upon completion of
consultation, the mine will be permitted to continue operation.
On February 16, 1996, the company settled a dispute with a subcontractor
on the Beartrack project. The subcontractor made claims against the prime
contractor alleging overruns for work performed which exceeded the
original estimated costs for the project by approximately $8 million.
These claims were disputed by the prime contractor. Arbitration of the
subcontractor's claims against the prime contractor was concluded, and the
company agreed to pay a settlement of $3.1 million as part of the overall
arbitrated settlement. The settlement was charged to property, plant and
equipment and depreciated over the remaining life of the Beartrack
property. The company sought and obtained from the U.S. Army Corps of
Engineers (the "Corps") a permit authorizing dredging and filling of
wetlands in connection with construction of the Beartrack mine under
Section 404 of the Clean Water Act. That permit was set to expire on
October 11, 1994. On June 16, 1994, the company sought an extension of the
permit under applicable regulations. Under those regulations, the filing
of a request for extension operates to extend the permit until the agency
acts upon the request for extension. As of the date of this report, the
Corps has not taken action upon the company's request. The company has
certain other contingent liabilities resulting from litigation, claims and
commitments incident to the ordinary course of business. Management
believes that the probable resolution of such contingencies will not
materially affect the financial position or results of operations of the
company.
note 13 RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
Prior to July 31, 1996, 80 percent of the outstanding common stock of FMC
Gold Company was held by FMC.
Certain agreements existed in the past between FMC Gold Company and FMC
concerning income taxes (Note 8) and management services.
Under the management services agreement, the company was charged at FMC's
direct and indirect cost, including allocated overhead, for certain
general, administrative and other services provided by FMC. Overhead
allocations of $0.8 million, $1.0 million and $1.6 million in 1996, 1995
and 1994, respectively, were based generally on the level of company sales
to aggregate FMC sales. The company's management believes that all
determinations with respect to direct and indirect costs, including
allocated overhead, were made in a reasonable and consistent manner.
In addition, the agreement stated that either the company or FMC could
borrow up to $50 million from the other on a short-term basis. Borrowings
exceeding $50 million were made upon the review and approval of the
lending company. All such borrowings were payable on a demand basis and
carried interest at a floating rate equal to FMC's current weighted
average rate on its borrowings under its credit facilities, or its
investing rate, for the relevant period. The company's management believed
that any demand by Meridian Gold for repayment of FMC's borrowings under
the management services agreement was legally enforceable. On July 31,
1996, FMC repaid its total borrowings, plus accrued interest, to the
company, totaling $79.1 million. Total interest received on loans to FMC
through July 31, 1996 was $3.1 million.
<PAGE>
At July 31, 1996, FMC paid an amount of $3.658 million to Meridian Gold in
conjunction with the reincorporation. This amount was treated as a capital
contribution and was agreed to by FMC and the company.
The following schedule summarizes the activity of indebtedness to and from
FMC in 1996, 1995 and 1994.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(in thousands) Loan due from FMC Amounts due from (to) FMC
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE DECEMBER 31, 1993 $167,326 $ (1,069)
Increase in amounts loaned 50,000
Interest charges 8,677
Payments made by FMC for Meridian Gold (11,888)
Charges from FMC for services and materials (4,468)
Payments made by Meridian Gold 16,793
Payments received by Meridian Gold (97,000) (8,639)
BALANCE DECEMBER 31, 1994 120,326 (594)
Increase in amounts loaned 51,500
Interest charges 5,737
Payments made by FMC for Meridian Gold (18,480)
Charges from FMC for services and materials (1,808)
Payments made by Meridian Gold 19,040
Payments received by Meridian Gold (91,000) (6,170)
BALANCE DECEMBER 31, 1995 80,826 (2,275)
Increase in amounts loaned 39,500
Interest charges 3,107
Payments made by FMC for Meridian Gold (5,801)
Charges from FMC for services and materials (1,176)
Payments made by Meridian Gold 9,868
Payments received by Meridian Gold (120,326) (3,723)
- ------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1996 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
</TABLE>
FMC continues to be obligated under a $75 million issue of exchangeable
senior subordinated debentures of FMC in Europe. The debentures bear
interest at 6 3/4 percent and are exchangeable at $15 1/8 per share,
subject to change as defined in the 1996 offering circular, into Meridian
Gold Inc. common stock. In conjunction with the reincorporation, FMC was
granted a right, exercisable during the period beginning January 31, 1998
and ending April 30,1998, to purchase at the then fair market value an
option from the company to buy up to an aggregate of $75,000,000 of the
company's common shares until January 16, 2000 at an exercise price of
$15.125 per share. Such option may only be exercised by FMC to satisfy
certain obligations of FMC to provide common shares to the holders of
FMC's 6 3/4% Exchangeable Debentures due 2005 in exchange for such
debentures.
The company continues to purchase liquid sodium cyanide from the Alkali
Chemicals Division of FMC. Such purchases amounted to $0.8 million, $1.0
million and $1.9 million in 1996, 1995 and 1994, respectively. The
purchases from FMC were transacted on terms no less favorable to the
company than those which the company believes could have been obtained
from an unaffiliated third party.
Michael Callahan, Chief Financial Officer of FMC Corporation, is a
Director of the company.
In connection with the services rendered by Brian J. Kennedy during the
Reincorporation, the company issued to Mr. Kennedy 10,000 preferred
shares.
<PAGE>
note 14 RECONCILIATION OF UNITED STATES AND CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
- --------------------------------------------------------------------------------
The consolidated financial statements have been prepared in accordance
with GAAP in Canada which differ in certain material respects from those
principles and practices that the company would have followed had its
consolidated financial statements been prepared in accordance with
accounting principles and practices generally accepted in the US. Under US
GAAP, income taxes are accounted for under the asset and liability method.
Under the asset and liability method, deferred taxes are recognized for
the future tax consequences attributable to tax assets and liabilities
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is included in earnings in the period that includes
the enactment date.
Under US GAAP significant components of the company's deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Inventory $1,068 $ -
Alternative minimum tax ("AMT") carryforwards - 9,522
Reclamation reserves 2,186 1,734
Capitalized exploration costs - 3,034
Property, plant and equipment 17,006 394
Other reserves - 2,150
Loss carryforwards 923 11,854
Accrued pension and other post retirement benefits - 823
Other - 382
- ------------------------------------------------------------------------------------------------------------
Deferred tax assets 21,183 29.893
Valuation allowances (19,339) (29,103)
- ------------------------------------------------------------------------------------------------------------
Deferred tax assets, net of allowances 1,844 790
Capitalized development costs - (546)
Property, plant and equipment (1,844) -
Other - (244)
- ------------------------------------------------------------------------------------------------------------
Deferred tax liabilities (1,844) (790)
- ------------------------------------------------------------------------------------------------------------
Net deferred tax assets $ - $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in deferred tax assets of $8.7 million includes the
forfeiture of $13.0 million in deferred tax assets due to the company's
election to step up tax basis in assets. A valuation allowance of $10.7
million had been established for the forfeited deferred tax assets in
prior years. The valuation allowance for deferred tax assets as of
December 31, 1996 and 1995 is $19.4 million and $29.1 million,
respectively. The valuation reserve decreased $9.7 million due to the
$10.7 million reversal associated with the tax asset forfeiture and a $1.0
million provision for the current year net operating loss carryforward.
At December 31, 1996, the company had a net operating loss carryforward of
approximately $2.7 million which will expire in 2011.
The application of US GAAP would have the following effect on net earnings
as reported:
Year ended December 31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Net income (loss) as reported in accordance with Canadian GAAP $(15,855) $ 2,273 $ 2,678
Application of asset and liability of accounting for income taxes - - (2,527)
- ------------------------------------------------------------------------------------------------------------
Net income (loss) in accordance with U.S. GAAP $(15,855) $ 2,273 $151
- ------------------------------------------------------------------------------------------------------------
Net income (loss) per share in accordance with U.S. GAAP $ (0.22) $ 0.03 $ -
</TABLE>
Under US GAAP, the $2,527,000 which related to general reserves and
miscellaneous accrued liabilities is fully reserved for with a valuation
allowance in 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused the Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MERIDIAN GOLD INC.
By:/s/Brian J. Kennedy/
-------------------------------------
Brian J. Kennedy
President and Chief Executive Officer
Date: May 16, 1997
<PAGE>
INDEX TO EXHIBITS
The following documents are being filed with the Commission as exhibits
to, and are incorporated by reference into, and form a part of, this Annual
Report on Form 20-F.
NUMBER EXHIBIT SEQUENTIAL
- ------ ------- ----------
PAGE NUMBER
-----------
2.1* Form of certificate representing Common Shares of
the Company (filed with the Company's Registration
Statement on Form 8-B (No. 001-12003))
2.2* Form of certificate representing Instalment
Receipts of the Company (filed with the
Company's Registration Statement on Form 8-B
(No. 001-12003))
2.3* Articles of Amalgamation, as amended (filed
with the Company's Registration Statement on
Form S-4 (No. 333-9171))
2.4 By-laws, as amended
2.5 Executive Employment Agreement dated July 1,
1996 between the Company and Christopher D.S.
Bates
2.6 Executive Employment Agreement dated July 31,
1996 between the Company and Donald L. Beckwith
2.7 Executive Employment Agreement dated December
1, 1996 between the Company and Edward H. Colt
2.8 Executive Employment Agreement dated July 31,
1996 between the Company and Brian J. Kennedy
2.9 Executive Employment Agreement dated July 31,
1996 between the Company and Richard C. Lorson
2.10* Meridian Gold Inc. 1996 Stock Option Plan
(filed with the Company's Registration
Statement on Form S-4 (No. 333-9171))
2.11* Shareholder Rights Plan (filed with the
Company's Registration Statement on Form 8-B
(No. 001-12003)
2.12* Instalment Receipt Agreement (filed with the
Company's Registration Statement on Form 8-B
(No. 001-12003)
<PAGE>
2.13* Joint Venture Agreement between Freeport
Exploration Company FMC Corporation (filed with
FMC Gold Company's Registration Statement on
Form S-1 (No. 33-14429))
- ------------
* Incorporated by reference pursuant to Rule 12b-32 under the Securities and
Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 2.4
BY-LAW NO. 1
(as amended, April 1997)
a by-law relating generally
to the transaction of the
business and affairs of
MERIDIAN GOLD INC.
(the "Corporation")
INTERPRETATION
--------------
Definitions - In this by-law and all other by-laws of the Corporation,
-----------
unless the context requires otherwise:
"Act" means the Canada Business Corporations Act or any statute which may
be substituted therefor, as amended from time to time;
"articles" means the original or restated articles of incorporation,
articles of amendment, articles of amalgamation, articles of continuance,
articles of reorganization, articles of arrangement, articles of
dissolution or articles of revival of the Corporation and includes any
amendments thereto;
"board" means the board of directors of the Corporation;
"meeting of shareholders" means an annual meeting of shareholders or a
special meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Canada);
"person" includes an individual, partnership, association, body corporate,
trustee, executor, administrator or legal representative;
"resident Canadian" means a Canadian citizen ordinarily resident in Canada
or as otherwise defined in the Act;
words importing the singular number also include the plural and vice-versa;
words importing the masculine gender include the feminine and neuter
genders; words importing persons include individuals, sole proprietorships,
personal representatives, bodies corporate, partnerships, unincorporated
syndicates, trusts, unincorporated organizations and governmental bodies;
<PAGE>
all words used in this by-law and defined in the Act shall have the
meanings given to such words in the Act or in the related Parts thereof.
GENERAL BUSINESS
----------------
Registered Office - Until changed in accordance with the Act, the
-----------------
registered office of the Corporation shall be in the place within Canada
specified in the articles and at such location therein as the board may from
time to time determine.
Seal - The Corporation may have a seal which shall be adopted and may be
----
changed by the board.
Financial Year - Until changed by the board, the financial year of the
--------------
Corporation shall end on the 3lst day of December in each year.
Execution of Instruments - The secretary or any other officer or any
------------------------
director may sign certificates and similar instruments (other than share
certificates) on the Corporation's behalf with respect to any factual matters
relating to the Corporation's business and affairs, including certificates
verifying copies of the articles, by-laws, resolutions and minutes of meetings
of the Corporation. Subject to the foregoing, deeds, transfers, assignments,
contracts, obligations, certificates and other instruments shall be signed on
behalf of the Corporation by two persons, one of whom holds the office of
chairman of the board, president, vice-president or director and the other of
whom holds one of the said offices or the office of secretary, treasurer,
assistant secretary or assistant treasurer or any other office created by by-law
or by resolution of the board. In addition, the board may from time to time
direct the manner in which and the person or persons by whom any particular
instrument or class of instruments may or shall be signed.
Banking Arrangements - The banking business of the Corporation, or any part
--------------------
thereof, including, without limitation, the borrowing of money and the giving of
security therefor, shall be transacted with such banks, trust companies or other
bodies corporate or organizations as may from time to time be designated by or
under the authority of the board. Such banking business or any part thereof
shall be transacted on the Corporation's behalf by such one or more officers or
other persons as the board may designate, direct or authorize from time to time
and to the extent thereby provided.
BORROWING
---------
Borrowing - Without limit to the powers of the board of directors as
---------
provided in the Act, the board of directors may from time to time on behalf of
the Corporation:
borrow money upon the credit of the Corporation;
<PAGE>
issue, reissue, sell or pledge debt obligations of the Corporation;
to the extent permitted by the Act, give, directly or indirectly, financial
assistance to any person by means of a loan, a guarantee to secure the
performance of an obligation or otherwise; and
mortgage, hypothecate, pledge or otherwise create a security interest in
all or any property of the Corporation, owned or subsequently acquired, to
secure any obligation of the Corporation.
Delegation - Subject to the Act, the articles and any by-laws, the board
----------
may from time to time delegate to a director, a committee of directors or an
officer of the Corporation or such other person or persons so designated by the
board all or any of the powers conferred on the board by section 7 or by the Act
to such extent and in such manner as the board shall determine at the time of
each such delegation.
DIRECTORS
---------
Duties of Directors - The board shall manage the business and affairs of
-------------------
the Corporation.
Qualifications of Directors - Unless otherwise provided by the Act, a
---------------------------
majority of directors on the board shall be resident Canadians. So long as
required by the Act, at least two-thirds of the directors shall not be officers
or employees of the Corporation or its affiliates. No person shall be elected
or appointed a director if such person is less than 18 years of age, of unsound
mind and has been so found by a court in Canada or elsewhere, is not an
individual, or has the status of bankrupt. A director need not hold shares
issued by the Corporation.
Number of Directors and Quorum - Until changed in accordance with the Act,
------------------------------
the board shall consist of such number of directors not greater than eleven (11)
nor less than three (3) as the board may from time to time determine, and a
majority of the minimum number shall constitute a quorum for the transaction of
business. Notwithstanding vacancies, a quorum of directors may exercise all the
powers of the board.
Election and Term - Directors shall be elected by the shareholders at the
-----------------
first meeting of shareholders after the effective date of this by-law and at
each succeeding annual meeting at which an election of directors is required and
shall hold office for a term expiring not later than the close of the third
annual meeting of shareholders following the election. The number of directors
to be elected at any such meeting shall be that number most recently determined
by the board. The election need not be by
<PAGE>
ballot unless a ballot is demanded by any shareholder or required by the
chairman in accordance with section 52. If an election of directors is not held
at an annual meeting of shareholders at which such election is required, the
directors then in office shall continue in office until their successors are
elected.
Removal of Directors - Subject to the provisions of the Act, the
--------------------
shareholders may, by ordinary resolution passed by a majority of the votes cast
at a special meeting of shareholders duly called for that purpose, remove any
director and may at that meeting elect a qualified person for the remainder of
such term.
Ceasing to Hold Office - A director may resign from office by notice in
----------------------
writing delivered or sent to the Corporation and such resignation shall become
effective at the time the notice is delivered or sent or on such later date as
may be specified in such notice. A director shall forthwith cease to hold
office as a director should such director be found by a court in Canada or
elsewhere to be of unsound mind, acquire the status of bankrupt, or be removed
from office by the shareholders of the Corporation. Any attempt to amend or
terminate any unanimous shareholder agreement without written consent of all
persons who are then directors of the Corporation shall constitute the
immediately effective resignation of all such directors who have not so
consented.
Vacancies - Subject to the Act, whenever the board has fewer than the
---------
number of members elected, the directors then in office, if constituting a
quorum (and notwithstanding that the majority of such directors are not resident
Canadians), may appoint a qualified person to the board to hold office for a
term expiring at the close of the next annual meeting of shareholders. Whenever
a vacancy shall occur on the board which results in the board not having a
quorum, the remaining directors shall forthwith call a special meeting of
shareholders to fill the vacancy. If the board fails to call such meeting or if
there are no such directors then in office, any shareholder may call the
meeting. Where the number or the minimum number of directors is increased, any
vacancy resulting from such increase shall be filled by the board, subject to
any constraints imposed by the Act, failing which any such vacancy shall be
filled by election at a special meeting of shareholders.
Action by the Board - The board shall exercise its powers by or pursuant to
-------------------
a by-law or resolution either passed at a meeting of directors at which a quorum
is present and at which a majority of the directors present are resident
Canadians or consented to by the signatures of all the directors then in office
if constituting a quorum. The board may transact business at a meeting of
directors where a majority of resident Canadian directors is not present if a
resident Canadian director who is unable to be present approves in writing or by
telephone or other communications facilities the business transacted at the
meeting, and a majority of resident Canadian directors would have been present
had that director been present at the meeting. Where the Corporation has only
one director, that director may constitute a meeting.
<PAGE>
Action in Writing - A resolution in writing, signed by all the directors
-----------------
entitled to vote on that resolution at a meeting of directors, is as valid as if
it had been passed at a meeting of directors.
Meetings by Telephone - Any director may participate in a meeting of the
---------------------
board by means of telephone or other communications equipment by means of which
all persons participating in the meeting can hear each other, if all the
directors consent to the holding of meetings in such manner. Any such consent
shall be effective whether given before or after the meeting to which it relates
and may be given with respect to all meetings of the board held while a director
holds office.
Place of Meetings - Meetings of the board may be held at the registered
-----------------
office of the Corporation or at any other place within or outside Canada.
Calling of Meetings - Meetings of the board shall be held from time to time
-------------------
at such place, on such day and at such time as the board, the chairman of the
board, the managing director, the president or any two directors may determine.
Notice of Meetings - Notice of the time and place of each meeting of the
------------------
board shall be given to each director not less than 48 hours before the time
when the meeting is to be held. A notice of a meeting of directors need not
specify the purpose of or the business to be transacted at the meeting except
where the Act requires such purpose or business to be specified, including any
proposal to:
submit to the shareholders any question or matter requiring the approval of
the shareholders;
fill a vacancy among the directors or in the office of auditor;
issue securities;
declare dividends;
purchase, redeem or otherwise acquire shares of the Corporation;
pay a commission for the sale of shares;
approve a management proxy circular;
approve a take-over bid or directors' circular;
approve any annual financial statements; or
<PAGE>
adopt, amend or repeal by-laws.
First Meeting of New Board - Provided a quorum of directors is present,
--------------------------
each newly elected board may without notice hold its first meeting following the
meeting of shareholders at which such board is elected.
Adjourned Meeting - Notice of an adjourned meeting of the board is not
-----------------
required if the time and place of the adjourned meeting is announced at the
original meeting.
Votes to Govern - At all meetings of the board any question shall be
---------------
decided by a majority of the votes cast on the question and in the case of an
equality of votes the chairman of the meeting shall be entitled to a second or
casting vote. Any question at a meeting of the board shall be decided by a show
of hands unless a ballot is required or demanded.
Chairman and Secretary - The chairman of the board or, in the chairman's
----------------------
absence, the president or, in the president's absence, a vice-president shall be
chairman of any meeting of the board. If none of the said officers is present,
the directors present shall choose one of their number to be chairman. The
secretary of the Corporation shall act as secretary at any meeting of the board
and, if the secretary of the Corporation be absent, the chairman of the meeting
shall appoint a person who need not be a director to act as secretary of the
meeting.
Remuneration and Expenses - The directors shall be paid such remuneration
-------------------------
for their services as directors as the board may from time to time authorize.
Conflict of Interest - Subject to and in accordance with the provisions of
--------------------
the Act, a director or officer of the Corporation who is a party to a material
contract or proposed material contract with the Corporation, or is a director or
an officer of or has a material interest in any person who is a party to a
material contract or proposed material contract with the Corporation, shall
disclose in writing to the Corporation or request to have entered in the minutes
of meetings of directors the nature and extent of such director or officer's
interest, and any such director shall refrain from voting in respect thereof
unless otherwise permitted by the Act.
COMMITTEES
----------
Committees of Directors - The board may appoint a committee or committees
-----------------------
of directors, however designated, and delegate to such committee or committees
any of the powers of the board except powers to:
submit to the shareholders any question or matter requiring the approval of
the
<PAGE>
shareholders;
fill a vacancy among the directors or in the office of auditor;
issue securities except in the manner and on the terms authorized by the
directors;
declare dividends;
purchase, redeem or otherwise acquire shares issued by the Corporation;
pay a commission for the sale of shares of the Corporation;
approve a management proxy circular;
approve a take-over bid or directors' circular;
approve any annual financial statements; or
adopt, amend or repeal by-laws.
A majority of the members of any such committee shall be resident Canadians.
Audit Committee - If any of the issued securities of the Corporation are
---------------
part of a distribution to the public, the board of directors shall elect
annually from among their number an audit committee to be composed of not fewer
than three directors, a majority of whom are not officers or employees of the
Corporation or any of its affiliates. Each member of the audit committee shall
serve during the pleasure of the board of directors and, in any event, only so
long as he shall be a director. The directors may fill vacancies in the audit
committee by election from among their number. The audit committee shall have
power to fix its quorum at not less than a majority of its members and to
determine its own rules of procedure subject to any regulations imposed by the
board of directors from time to time and to the following provision. The
auditor of the Corporation is entitled to receive notice of every meeting of the
audit committee and, at the expense of the Corporation, to attend and be heard
thereat; and, if so requested by a member of the audit committee, shall attend
every meeting of the committee held during the term of office of the auditor.
The auditor of the Corporation or any member of the audit committee may call a
meeting of the committee. The audit committee shall review the financial
statements of the Corporation prior to approval thereof by the board of
directors and shall have such other powers and duties as may from time to time
by resolution be assigned to it by the board.
Transaction of Business - The powers of a committee of directors may be
-----------------------
<PAGE>
exercised by a meeting at which a quorum is present or by resolution in writing
signed by all the members of such committee who would have been entitled to vote
on that resolution at a meeting of the committee. Meetings of such committee
may be held at any place in or outside Canada and, subject to the provisions of
section 18 which shall be applicable mutatis mutandis, may be held by means of
telephone or other communications equipment.
Procedure - Unless otherwise determined by the board, each committee shall
---------
have the power to fix its quorum at not less than a majority of its members, to
elect its chairman and to regulate its procedure.
OFFICERS
--------
Appointment of Officers - The board may from time to time appoint a
-----------------------
chairman of the board, a president, one or more vice-presidents, a secretary, a
treasurer and such other officers as the board may determine, including one or
more assistants to any of the officers so appointed. The board may specify the
duties of and, in accordance with this by-law and subject to the provisions of
the Act, delegate to such officers powers to manage the business and affairs of
the Corporation other than any of the powers listed in section 28. Except a
chairman of the board, an officer may but need not be a director and one person
may hold more than one office. The president or such other officer as the board
may designate shall be the chief executive officer of the Corporation.
Conflict of Interest - Officers shall disclose their interest in any
--------------------
material contract or proposed material contract with the Corporation in
accordance with section 27.
PROTECTION OF DIRECTORS AND OFFICERS
------------------------------------
Indemnity of Directors and Officers - Except in respect of an action by or
-----------------------------------
on behalf of the Corporation or body corporate to procure a judgment in its
favour, the Corporation shall indemnify a director or officer of the
Corporation, a former director or officer of the Corporation or a person who
acts or acted at the Corporation's request as a director or officer of a body
corporate of which the Corporation is or was a shareholder or creditor (or a
person who undertakes or has undertaken any liability on behalf of the
Corporation or at the Corporation's request on behalf of any such body
corporate), and such director or officer's heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by such director or officer in
respect of any civil, criminal or administrative action or proceeding to which
such director or officer is made a party by reason of being or having been a
director or officer of such Corporation or body corporate (or by reason of
having undertaken such liability); and the Corporation shall with the approval
of a court indemnify a person in respect of an action by or on behalf of the
Corporation or body corporate to procure a judgment in its
<PAGE>
favour, to which such person is made a party by reason of being or having been a
director or an officer of the Corporation or body corporate, against all costs,
charges and expenses reasonably incurred by such director or officer in
connection with such action if in each case such director or officer:
acted honestly and in good faith with a view to the best interests of the
Corporation; and
in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, had reasonable grounds for believing that
his or her conduct was lawful.
Notwithstanding the foregoing, the Corporation shall, without requiring the
approval of a court, indemnify any person referred to above, in respect of an
action by or on behalf of the Corporation or body corporate to procure a
judgment in its favour who has been substantially successful on the merits in
the defence of any civil, criminal or administrative action or proceeding to
which such person is made a party by reason of being or having been a director
or officer of the Corporation or body corporate, against all costs, charges and
expenses reasonably incurred by such person in respect of such action or
proceeding, provided that such person has satisfied the appropriate conditions
referred to in (a) and (b) above.
Insurance - Subject to the limitations contained in the Act, the
---------
Corporation may purchase and maintain insurance for the benefit of any person
referred to in section 34 as the board may from time to time determine.
MEETINGS OF SHAREHOLDERS
------------------------
Annual Meetings - The annual meeting of shareholders shall be held on such
---------------
day and at such time in each year as the board, or the chairman of the board, or
the president in the absence of the chairman of the board, may from time to time
determine, for the purpose of considering the financial statements and reports
required by the Act to be placed before the annual meeting, electing directors,
appointing auditors and for the transaction of such other business as may
properly be brought before the meeting provided, in the case of any annual
meeting called other than by the board, the board shall approve the submission
to the meeting of any question or matter requiring the approval of the
shareholders.
Special Meetings - The board or the chairman of the board or the president
----------------
or a vice-president shall have power to call a special meeting of shareholders
at any time. A special meeting may be held on such day and at such time as may
be determined by the board or the person calling the meeting.
<PAGE>
Resolution in lieu of Meeting - Except where a written statement is
-----------------------------
submitted by a director or by an auditor in accordance with the provisions of
the Act, a resolution in writing signed by all the shareholders entitled to vote
on that resolution at a meeting of shareholders is as valid as if it had been
passed at a meeting of the shareholders; and a resolution in writing dealing
with all matters required to be dealt with at a meeting of shareholders, and
signed by all the shareholders entitled to vote at such meeting, satisfies all
the requirements of the Act relating to meetings of shareholders.
Place of Meetings - Meetings of shareholders shall be held at the
-----------------
registered office of the Corporation or elsewhere in the municipality in which
the registered office is situate or, if the board shall so determine, at some
other place in Canada or, if all the shareholders entitled to vote at the
meeting so agree, at some place outside Canada, and a shareholder who attends a
meeting outside Canada is deemed to have so agreed except when such shareholder
attends such meeting for the express purpose of objecting to the transaction of
any business on the grounds that the meeting is not lawfully held.
Notices of Meetings - Notice of the time and place of every meeting of
-------------------
shareholders shall be sent not less than 21 days nor more than 50 days before
the meeting to each shareholder entitled to vote at the meeting, to each
director and to the auditor of the Corporation. Notice of a meeting of
shareholders at which special business is to be transacted shall state
the nature of that business in sufficient detail to permit the shareholder
to form a reasoned judgment thereon; and
the text of any special resolution or by-law to be submitted to the
meeting.
All business transacted at a special meeting of the shareholders and all
business transacted at an annual meeting of shareholders, except consideration
of the financial statements and auditor's report, election of directors and
reappointment of the incumbent auditor, is deemed to be special business.
List of Shareholders Entitled to Notice - For every meeting of
---------------------------------------
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares entitled to be voted at the meeting held by each shareholder.
If a record date for the meeting is fixed, the shareholders listed shall be
those registered at the close of business on such record date and such list
shall be prepared not later than 10 days after such record date. If no record
date is fixed, the shareholders listed shall be those registered at the close of
business on the day immediately preceding the day on which the notice of the
meeting is given and such list shall be prepared not later than 10 days after
the day on which such notice is given. The list shall be available for
examination by any shareholder
<PAGE>
during usual business hours at the registered office of the Corporation or at
the place where the securities register is kept and at the meeting for which the
list is prepared. Notwithstanding the foregoing, where no notice of meeting is
given, the shareholders listed shall be those registered on the day on which the
meeting is held and such list shall be prepared so that it is available at such
meeting.
Record Date for Notice - The board may fix in advance a record date,
----------------------
preceding the date of any meeting of shareholders by not more than 50 days and
not less than 21 days, for the determination of the shareholders entitled to
notice of the meeting, provided that notice of any such record date is given,
not less than 7 days before such record date, by newspaper advertisement
published or distributed in the place where the registered office of the
Corporation is situate and in each place in Canada where a transfer of the
Corporation's shares may be recorded, unless notice of such record date is
waived in writing by every holder of a share of the class or series affected
whose name is set out in the securities register of the Corporation at the close
of business on the day the directors fix the record date. If no record date is
so fixed, the record date for the determination of the shareholders entitled to
notice of the meeting shall be the close of business on the day immediately
preceding the day on which the notice is given.
Chairman, Secretary and Scrutineers - The chairman of the board or, in the
-----------------------------------
chairman's absence, the president or, in the president's absence, a vice-
president shall be chairman of any meeting of shareholders and, if none of the
said officers be present within 15 minutes after the time appointed for holding
the meeting, the persons present and entitled to vote shall choose a chairman
from amongst themselves. The secretary of the Corporation shall act as
secretary at any meeting of shareholders or, if the secretary of the Corporation
be absent, the chairman of the meeting shall appoint some person, who need not
be a shareholder, to act as secretary of the meeting. If desired, one or more
scrutineers, who need not be shareholders, may be appointed by resolution or by
the chairman with the consent of the meeting.
Persons Entitled to be Present - The only persons entitled to be present at
------------------------------
a meeting of shareholders shall be those entitled to vote thereat, the directors
and auditors of the Corporation and others who, although not entitled to vote,
are entitled or required under any provision of the Act or the articles or by-
laws to be present at the meeting. Any other person may be admitted only on the
invitation of the chairman of the meeting or with the consent of the meeting.
Quorum - A quorum of shareholders is present at a meeting of shareholders
------
irrespective of the number of persons actually present at the meeting, if the
holders of 10% of the shares entitled to vote at the meeting are present in
person or represented by proxy. A quorum need not be present throughout the
meeting provided a quorum is present at the opening of the meeting.
<PAGE>
Right to Vote - At any meeting of shareholders every person who is named in
-------------
the list prepared in accordance with section 41 shall be entitled to vote the
shares shown thereon opposite such person's name except to the extent that such
person has transferred any of such shares and the transferee, upon producing
properly endorsed certificates evidencing such shares or otherwise establishing
that the transferee owns such shares, demands not later than 10 days before the
meeting that the transferred name be included on the list to vote the
transferred shares at the meeting. In the absence of a list prepared as
aforesaid in respect of a meeting of shareholders, every person shall be
entitled to vote at the meeting who at the time is entered in the securities
register as the holder of one or more shares carrying the right to vote at such
meeting.
Proxies and Representatives - Every shareholder entitled to vote at a
---------------------------
meeting of shareholders may, by means of a proxy, appoint a proxyholder, or one
or more alternate proxy-holders, who need not be shareholders, to attend and act
at the meeting in the manner and to the extent authorized and with the authority
conferred by the proxy. A proxy shall be in writing executed by the shareholder
or the shareholder's attorney. A body corporate or association which is a
shareholder of the Corporation may be represented at a meeting of shareholders
by any individual authorized by a resolution of its directors or governing body
and such individual may exercise on behalf of the body corporate or association
which such individual represents all the powers it could exercise if it were an
individual shareholder.
Time for Deposit of Proxies - The board may specify in a notice calling a
---------------------------
meeting of shareholders a time, preceding the time of such meeting by not more
than 48 hours exclusive of non-business days, before which time proxies to be
used at such meeting must be deposited. A proxy shall be acted upon only if,
prior to the time so specified, it shall have been deposited with the
Corporation or an agent thereof specified in such notice or, if no such time is
specified in such notice, it shall have been received by the secretary of the
Corporation or by the chairman of the meeting or any adjournment thereof prior
to the time of voting.
Joint Shareholders - Where two or more persons hold the same shares
------------------
jointly, any of such persons present or represented by proxy at a meeting of
shareholders has the right in the absence of the other or others to vote in
respect of such shares, but if more than one of such persons are present or
represented by proxy, that one of such persons whose name stands first on the
securities register of the Corporation or such person's proxy shall alone be
entitled to vote such shares.
Votes to Govern - Except as otherwise required by the Act, all questions
---------------
proposed for the consideration of shareholders at a meeting of shareholders
shall be determined by the majority of the votes cast.
<PAGE>
Casting Vote - In case of an equality of votes at any meeting of
------------
shareholders either upon a show of hands or upon a ballot, the chairman of the
meeting shall be entitled to a second or casting vote.
Show of Hands - Any question at a meeting of shareholders shall be decided
-------------
by a show of hands unless a ballot thereon is required or demanded as
hereinafter provided. Upon a show of hands every person who is present and
entitled to vote shall have one vote. Whenever a vote by show of hands shall
have been taken upon a question, unless a ballot thereon is so required or
demanded, a declaration by the chairman of the meeting that the vote upon the
question has been carried or carried by a particular majority or not carried and
an entry to that effect in the minutes of the meeting shall be prima facie
evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against any resolution or other proceeding in respect
of the said question, and the result of the vote so taken shall be the decision
of the shareholders upon the said question.
Ballots - On any question proposed for consideration at a meeting of
-------
shareholders, and whether or not a show of hands has been taken thereon, the
chairman may require, or any shareholder or proxyholder entitled to vote at the
meeting may demand, a ballot. A ballot so required or demanded shall be taken
in such manner as the chairman shall direct. A requirement or demand for a
ballot may be withdrawn at any time prior to the taking of the ballot. If a
ballot is taken each person present shall be entitled, in respect of the shares
which each person is entitled to vote at the meeting upon the question, to that
number of votes provided by the Act or the articles, and the result of the
ballot so taken shall be the decision of the shareholders upon the said
question.
Adjournment - If a meeting of shareholders is adjourned for less than 30
-----------
days, it shall not be necessary to give notice of the adjourned meeting, other
than by announcement at the earliest meeting that is adjourned. If a meeting of
shareholders is adjourned by one or more adjournments for an aggregate of 30
days or more, notice of the adjourned meeting shall be given as for an original
meeting.
Submission of Contracts or Transactions to Shareholders for Approval - The
--------------------------------------------------------------------
board in its discretion may submit any contract, act or transaction for approval
or ratification at any special meeting of the shareholders called for the
purpose of considering the same and, subject to any additional requirements of
the Act, the articles or the by-laws, any contract, act or transaction that
shall be approved or ratified by a resolution passed by a majority of the votes
cast at any such meeting shall be as valid and as binding upon the Corporation
and upon all the shareholders as though it had been approved or ratified by
every shareholder.
One Shareholder - Where the Corporation has only one shareholder or only
---------------
one
<PAGE>
holder of any class or series of shares, the shareholder present in person or by
proxy constitutes a meeting.
SECURITIES
----------
Issuance - Subject to the provisions of the Act and the articles, the board
--------
may from time to time issue or grant options to purchase unissued shares of the
Corporation at such times, in such manner and to such persons or class of
persons and for such consideration as the board shall determine, provided that
no share shall be issued until it is fully paid as provided by the Act.
Commissions - The board may from time to time authorize the Corporation to
-----------
pay a reasonable commission to any person in consideration of his purchasing or
agreeing to purchase shares of the Corporation, whether from the Corporation or
from any other person, or procuring or agreeing to procure purchasers for any
such shares.
Securities Records - The Corporation shall maintain, at its registered
------------------
office or at any other place in Canada designated by the board, a register of
shares and other securities in which it records the shares and other securities
issued by it in registered form, showing with respect to each class or series of
shares and other securities:
the names, alphabetically arranged, and the latest known address of each
person who is or has been a holder;
the number of shares or other securities held by each holder; and
the date and particulars of the issue and transfer of each share or other
security.
Registration of Transfer - Subject to the provisions of the Act and the
------------------------
articles, no transfer of shares shall be registered unless:
the share or other security is endorsed by an appropriate person;
reasonable assurance is given that the endorsement is genuine and
effective;
the issuer has no duty to inquire into adverse claims or has discharged any
such duty;
any applicable law relating to the collection of taxes has been complied
with;
the transfer is rightful or is to a bona fide purchaser; and
any fee for a share or other security certificate prescribed by the board
or in
<PAGE>
accordance with the Act has been paid.
Transfer Agents and Registrars - The board may from time to time appoint
------------------------------
and/or remove one or more transfer agents or registrars (which may or may not be
the same individual or company) for securities of the Corporation, to maintain
in respect of each class of securities of the Corporation issued by it in
registered form, a central securities register and one or more branch securities
registers. Such transfer agents or registrars shall keep all necessary books
and registers of the Corporation for the registering and transferring of
securities of the Corporation, and all share certificates issued by the
Corporation shall in the event of any such appointment be countersigned manually
by or on behalf of one of the said transfer agents or registrars.
Lien for Indebtedness - If the articles provide that the Corporation shall
---------------------
have a lien on shares registered in the name of a shareholder indebted to the
Corporation, such lien may be enforced, subject to any other provision of the
articles, by the sale of the shares thereby affected or by any other action,
suit, remedy or proceeding authorized or permitted by law or by equity and,
pending such enforcement, the Corporation may refuse to register a transfer of
the whole or any part of such shares.
Non-recognition of Trusts - Subject to the provisions of the Act, the
-------------------------
Corporation may treat the registered owner of a share as the person exclusively
entitled to vote, to receive notices, to receive any dividend or other payments
in respect thereof and otherwise to exercise all the rights and powers of an
owner of a share. Accordingly, the Corporation shall not, except as ordered by
a court of competent jurisdiction or as required by the Act, be bound to see to
the execution of any trust, whether expired, implied, or constructive, in
respect of any share or to recognize any other claim to or interest in such
share on the part of any person other than the registered holder thereof.
Share Certificates - Every holder of one or more shares of the Corporation
------------------
shall be entitled, at the holder's option, to a share certificate, or to a non-
transferable written acknowledgement of the holder's right to obtain a share
certificate, stating the number and class or series of shares held by such
shareholder as shown on the securities register. Share certificates and
acknowledgements of a shareholder's right to a share certificate, respectively,
shall be in such form as the board may from time to time approve. Unless
otherwise ordered by the board, any share certificates shall be signed by the
chairman of the board, the president, the managing director, or a vice-president
and by the secretary, treasurer, any assistant secretary or any assistant
treasurer or any director and need not be under corporate seal. Signatures of
signing officers may be printed or mechanically reproduced in facsimile upon
share certificates and every such facsimile shall for all purposes be deemed to
be the signature of the officer whose signature it reproduces and shall be
binding upon the Corporation; provided that at least one duly authorized
director or officer of the Corporation shall manually sign each certificate
(other than a scrip certificate or a certificate representing a fractional share
or
<PAGE>
a warrant or a promissory note that is not issued under a trust indenture) in
the absence of a manual signature thereon of a duly appointed transfer agent or
registrar. A share certificate executed as aforesaid shall be valid
notwithstanding that an officer whose facsimile signature appears thereon no
longer holds office at the date of issue of the certificate.
Replacement of Share Certificates - Subject to the provisions of the Act,
---------------------------------
the board or any officer or agent designated by the board may in its or such
officer or agent's discretion direct the issue of a new share certificate in
lieu of and upon cancellation of a share certificate claimed to have been lost,
destroyed or wrongfully taken on payment of such fee prescribed by or in
accordance with the Act, and on such terms as to indemnity, reimbursement of
expenses and evidence of loss and of title as the board may from time to time
prescribe, whether generally or in any particular case.
Joint Shareholders - If two or more persons are registered as joint holders
------------------
of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons
may give effectual receipts for the certificate issued in respect thereof or for
any dividend, bonus, return of capital or other money payable or warrant
issuable in respect of such share.
Deceased Shareholders - In the event of the death of a holder, or of one of
---------------------
the joint holders, of any share, the Corporation shall not be required to make
any entry in the securities register in respect thereof or to make payment of
any dividends thereon except upon production of all such documents as may be
required by the Act and upon compliance with the reasonable requirements of the
Corporation.
DIVIDENDS AND RIGHTS
--------------------
Dividends - Subject to the provisions of the Act, the board may from time
---------
to time declare dividends payable to the shareholders according to their
respective rights and interests in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation or options
or rights to acquire fully paid shares of the Corporation.
Dividend Cheques - A dividend payable in cash shall be paid by cheque drawn
----------------
on the Corporation's bankers or one of them to the order of each registered
holder of shares of the class or series in respect of which it has been declared
and mailed by prepaid ordinary mail to such registered holder at such holder's
address recorded in the Corporation's securities register, unless in each case
such holder otherwise directs. In the case of joint holders the cheque shall,
unless such joint holders otherwise direct, be made payable to the order of all
of such joint holders and mailed to them at their address recorded in the
securities register of the Corporation. The mailing of such
<PAGE>
cheque as aforesaid, unless the same is not paid on due presentation, shall
satisfy and discharge the liability for the dividend to the extent of the sum
represented thereby plus the amount of any tax which the Corporation is required
to and does withhold.
Non-receipt or Loss of Cheques - In the event of non-receipt or loss of any
------------------------------
dividend cheque by the person to whom it is sent as aforesaid, the Corporation
shall issue to such person a replacement cheque for a like amount on such terms
as to indemnity, reimbursement of expenses and evidence of non-receipt and of
title as the board may from time to time prescribe, whether generally or in any
particular case.
Record Date for Dividends - The board may fix in advance a date, preceding
-------------------------
by not more than 50 days the date for the payment of any dividend, as a record
date for the determination of the persons entitled to receive payment of such
dividend, provided that notice of any such record date is given, not less than 7
days before such record date, by advertisement in a newspaper published or
distributed in the place where the Corporation has its registered office and in
each place in Canada where a transfer of the Corporation's shares may be
recorded, unless notice of such record date is waived in writing by every holder
of a share of the class or series affected whose name is set out in the
securities register of the Corporation at the close of business on the day the
directors fix the record date. If no record date is fixed in advance the record
date for the determination of the persons entitled to receive payment of any
dividend shall be at the close of business on the day on which the resolution
relating to such dividend is passed by the board.
Unclaimed Dividends - Any dividend unclaimed after a period of six years
-------------------
from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
NOTICES
-------
Method of Giving Notices - Any notice, communication or document ("notice")
------------------------
to be given, sent, delivered or served pursuant to the Act, the articles, the
by-laws or otherwise to or on a shareholder, director, officer, auditor or
member of a committee of the board shall be sufficiently given, sent, delivered
or served if delivered personally to the person to whom it is to be given or if
delivered to such person's latest address as shown in the securities register or
in the records of the Corporation, as the case may be, or if mailed to such
person at such address by prepaid ordinary or air mail or if sent to such person
at such address by any means of prepaid transmitted or recorded communication.
A notice so delivered shall be deemed to have been sent when it is delivered
personally or to such address as aforesaid; and a notice so sent by any means of
transmitted or recorded communication shall be deemed to have been sent when
dispatched or when delivered to the appropriate communication company or agency
or its representative for dispatch. The secretary may change or cause to be
changed the
<PAGE>
recorded address of any shareholder, director, officer, auditor or member of a
committee of the board in accordance with any information believed by the
secretary to be reliable.
Notice to Joint Shareholders - If two or more persons are registered as
----------------------------
joint holders of any share, any notice shall be addressed to all of such joint
holders but notice to one of such persons shall be sufficient notice to all of
them.
Signature to Notices - The signature to a notice or demand may be written,
--------------------
stamped, typewritten or printed or partly written, stamped, typewritten or
printed.
Computation of Time - In computing the date when notice must be given under
-------------------
any provision requiring a specified number of days' notice of any meeting or
other event, both the date of giving the notice and the date of the meeting or
other event shall be excluded.
Deceased Shareholders - Any notice delivered or sent by post to or left at
---------------------
the latest recorded address of any shareholder shall, notwithstanding that such
shareholder be then deceased and whether or not the Corporation has notice of
his decease, be deemed to have been duly served in respect of the shares held by
such shareholder (whether held solely or with other persons) until some other
person be entered in his stead on the books of the Corporation as the holder or
one of the holders thereof, and such service shall for all purposes be deemed a
sufficient service of such notice on his heirs, executors or administrators and
all persons, if any, interested with him in such shares.
Proof of Service - A certificate of the chairman, the president, the vice-
----------------
chairman, an executive vice-president, a senior vice-president, a vice-
president, the secretary or the treasurer or of any other officer of the
Corporation in office at the time of the making of the certificate or of any
transfer officer of any transfer agent of shares of any class of the Corporation
as to facts in relation to the mailing or delivery of any notice to any
shareholder, director, officer, auditor or member of a committee of the board or
in relation to the publication of any notice shall be conclusive evidence
thereof and shall be binding on every shareholder, director, officer, auditor or
member of a committee of the board as the case may be.
Undelivered Notices - If any notice given to a shareholder pursuant to
-------------------
section 73 is returned on three consecutive occasions because the shareholder
cannot be found, the Corporation shall not be required to give any further
notice to such shareholder until such shareholder informs the Corporation in
writing of the shareholder's new address.
Omissions and Errors - The accidental omission to give any notice to any
--------------------
shareholder, director, officer, auditor or member of a committee of the board or
the
<PAGE>
non-receipt of any notice by any such person or any error in any notice not
affecting the substance thereof shall not invalidate any action taken at any
meeting held pursuant to such notice or otherwise based thereon.
Persons Entitled by Death or Operation of Law - Every person who, by
---------------------------------------------
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom such person derives title to such share prior to such person's name
and address being entered on the securities register (whether such notice was
given before or after the happening of the event upon which such person became
so entitled) and prior to such person furnishing to the Corporation the proof of
authority or evidence of such person's entitlement prescribed by the Act.
Waiver of Notice - Any shareholder (or such shareholder's duly appointed
----------------
proxyholder), director, officer, auditor or member of a committee of the board
may at any time waive the sending of any notice, or waive or abridge the time
for any notice, required to be given to such person under any provision of the
Act, the articles, the by-laws or otherwise and such waiver or abridgement shall
cure any default in the giving or in the time of such notice, as the case may
be. Any such waiver or abridgement shall be in writing except a waiver of
notice of a meeting of shareholders or of the board which may be given in any
manner. Attendance of a director at a meeting of directors or of a shareholder
or any other person entitled to attend a meeting of shareholders is a waiver of
notice of the meeting except where such director, shareholder or other person,
as the case may be, attends a meeting for the express purpose of objecting to
the transaction of any business on the grounds that the meeting is not lawfully
called.
The foregoing By-law No. 1 is hereby consented to and passed as
evidenced by the signatures of all the directors of the Corporation pursuant to
the provisions of the Canada Business Corporations Act.
DATED this 22nd day of April, 1997.
Michael J. Callahan John A. Eckersley
Brian J. Kennedy David S. Robertson
<PAGE>
John C. White
<PAGE>
-1-
EXHIBIT 2.5
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of July, 1996 BETWEEN: MERIDIAN
GOLD INC. (hereinafter referred to as the "Company") OF THE FIRST PART and
CHRISTOPHER D.S. BATES (hereinafter referred to as the "Executive") OF THE
SECOND PART (hereinafter collectively referred to as the "Parties").
WHEREAS the Company wishes to retain the services of the Executive and
the Executive wishes to be retained by the Company on the terms and conditions
specified herein;
AND WHEREAS the Executive has worked for the business of the Company and
its predecessor since 1994;
AND WHEREAS the Company and the Executive desire to enter into a written
agreement which contains the agreed-upon terms and conditions of employment;
NOW THEREFORE for the good and valuable consideration of the mutual
covenants and agreements hereinafter contained, the Parties mutually covenant
and agree as follows:
Employment
----------
The Company hereby agrees to employ the Executive in the position of
Vice- President, Business Development and the Executive hereby accepts such
employment.
The Executive shall serve the Company in the capacity of Vice-President,
Business Development to perform such duties and exercise such powers as may be
reasonably required of him or be vested in him by the Board of Directors of the
Company. The Executive acknowledges that he is employed in a fiduciary capacity
and that, during his employment hereunder, the Executive shall devote his full
time and attention and exert his best efforts, knowledge, skill and energy to
his employment hereunder and will not, without the prior written consent of the
Board of Directors, assume other employment or engage in any other business. The
Executive shall report to the President.
Term -
----
The term of the Executive's employment shall commence on July 1, 1996
and shall, upon written notice from one party to the other given no
later than January 1, 2001, terminate on July 1, 2001, unless terminated
sooner pursuant to Paragraph 7.
If neither party gives to the other notice of termination pursuant to
subparagraph 1.3(a) above, the term of the Executive's employment shall
be automatically renewed for a second term, which shall automatically
terminate on July 1, 2006, unless terminated sooner pursuant to
Paragraph 7.
Compensation
------------
Base Salary - During the first year of his employment, the Executive
-----------
shall receive an annual base salary of Cdn. $150,000 (less required statutory
and other deductions authorized by the Executive), which base salary shall be
paid in accordance with the Company's normal payroll practices. The Executive's
base salary shall be reviewed by the Compensation Committee of the Board of
Directors on an annual basis thereafter. Any adjustment to the Executive's base
salary shall be determined in the sole discretion of the Board of Directors of
the Company ("Board of Directors") based on the recommendations of the
Compensation Committee.
Bonus - If the Board of Directors of the Company determines to establish
-----
a bonus plan for any of its employees, the Executive shall be entitled to
participate in such bonus plan in accordance with its terms.
<PAGE>
-2-
Stock Options - If the Board of Directors of the Company determines to
-------------
establish a stock option plan for any of its employees, the Executive shall be
entitled to participate in such stock option plan in accordance with its terms.
Benefits and Vacation
---------------------
While employed by the Company, the Company shall make available to the
Executive the benefits under the Company's employee benefits program which, in
its sole discretion, it makes available to other employees of the Company from
time to time. These benefits include, without limitation, participation in the
Company Salaried Employees' Retirement Plan (the "Pension Plan") and Salaried
Employees' Equivalent Retirement Plan (collectively the "Retirement Plans").
While employed by the Company:
the Executive shall be entitled to four weeks' vacation per year, to be
scheduled at the mutual convenience of the Parties; and
the Executive shall be entitled to the regular holidays schedule
recognized by the Company location at which he works.
Other Executive Benefits
------------------------
The Executive shall participate in the supplementary benefits made
available by the Company generally to its employees from time to time.
Reimbursement of Expenses
-------------------------
The Executive shall be reimbursed for all expenses incurred by him in
compliance with Company policies, as may be modified from time to time.
Officer of the Company
----------------------
So long as the Board of Directors, in its sole discretion, shall desire,
the Executive shall serve as a officer of the Company or any subsidiary or
affiliate, without any additional remuneration to the Executive.
Termination
-----------
In the event the Executive's employment with the Company is terminated
by reason of the Executive's death,
by reason of the Executive becoming Permanently Disabled as described
in subparagraph 7.3, or
for Cause,
then, except as otherwise provided in subparagraphs 3.1, 3.2, and 7.3, all
obligations of the Company hereunder shall terminate. If the Executive's
employment with the Company shall terminate for Cause, or due to death,
disability or Voluntary Termination, any portion of his fixed salary pursuant to
subparagraph 2.1 which is earned but unpaid as of the date of termination shall
be paid to the Executive, or his designated beneficiary in the event of his
death, or if known to his then living spouse, or if none, to the duly appointed
personal representative of his estate.
If the Executive's employment with the Company shall terminate by reason
of an Involuntary Termination, the Executive shall be entitled to payment
(within 14 days of the Termination Date) of any portion of his fixed
<PAGE>
-3-
salary pursuant to subparagraph 2.1 which is earned but unpaid as of the
Termination Date and to severance pay and benefits as follows:
Severance Pay. The Company shall, not later than 14 days after the
-------------
Termination Date, pay to the Executive a lump sum amount equal to the
Executive's Regular Monthly Compensation multiplied by 18.
Medical and Dental Benefits. The Company must, at the election of the
---------------------------
Executive made within ten days after the Termination Date, either:
not later than 14 days after the Termination Date, pay to the
Executive a lump sum amount equal to the aggregate cost to the
Company (without discount or present valuation) of the Regular
Employee Benefits for the Termination Period; or
continue to make the contributions necessary to maintain the
Executive's coverage pursuant to the Regular Employee Benefits
until the earlier of (i) the end of the Termination Period, or
(ii) the month after the Executive obtains comparable replacement
benefits at any alternative employment.
Incentive. The Company will pay to the Executive the Current Year's
---------
Incentive Plan(s) Amount prorated in proportion to the number of months
in the year before the Termination Date and on a percentage basis
comparable to the average for executives paid in the preceding two
years. If the Executive has been employed for less than two years, the
Executive will receive his base percentage bonus.
Outplacement Assistance. Professional executive outplacement services
-----------------------
will be provided to the Executive at the Company's expense. The cost of
such services will not exceed 15% of the Executive's annual base salary.
If, during the Executive's employment with the Company the Executive
becomes Permanently Disabled, the Company shall have the right, on not less than
60 days' written notice to the Executive, to terminate the Executive's
employment. In the event that the Executive's employment is terminated on
account of Disability, the Executive shall continue to be eligible for long-term
disability benefits in accordance with the provision of the long-term disability
policy then in effect and the Retirement Plans benefits will be payable as
described therein. Except for such long-term disability benefits and the
Retirement Plans benefits, the Executive shall not be entitled to receive any
further compensation or benefits pursuant to this Agreement other than those
accrued to the date of the Executive's termination hereunder.
Any unused and accrued vacation will be paid with the final cheque
following any termination of employment with the Company.
Restrictive Covenant
--------------------
During the Executive's employment with the Company and for a period of
eighteen months following the termination of the Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, the Executive shall not interfere with the relationship between
the Company and any of its employees, agents or representatives.
Non-disclosure of Confidential Information
------------------------------------------
The Executive acknowledges that the Company may disclose certain
confidential information to the Executive during the term of this Agreement to
enable him to perform his duties hereunder. The Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information shall include, but not be limited to, any scientific
or technical information, design, process, procedure, formula, improvement,
confidential business or financial information, records notes memoranda, data,
ideas, processes,
<PAGE>
-4-
methods, techniques, systems, patents, models, devices, programs, customer
software, writings, research, or personnel or customer information.
The foregoing paragraph shall not be applicable if and to the extent
Executive is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative tribunal issued after Executive and his
legal counsel urge that the aforementioned confidentiality be preserved.
The Executive agrees promptly to reduce to writing to disclose and
assign, and hereby does assign, to the Company, its parent, subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, capable of use in connection with the business of the
Company, which employee may make or conceive, either solely or jointly with
others, during the period of his employment by the Company, its parent,
subsidiaries or successors.
The Executive agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge and deliver to the Company all such papers,
including applications for patents, application soft copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
The Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatsoever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries or successors. All
such discoveries, inventions and improvements which are applicable in any way to
the Company's business shall be the sole and exclusive property of the Company.
The covenants set forth in this paragraph which are made by the
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, the Executive during his employment by the
Company. The foregoing covenants will not prohibit Executive from disclosing
confidential or other information to other employees of the company or third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.
The covenants set forth in paragraphs 8.1, 9.1, 9.2, 9.3 and 10 shall
survive the expiration or termination of this Agreement and shall continue in
full force and effect in accordance with the terms of such obligations.
Additional Remedies
-------------------
The Executive recognizes that irreparable injury will result to the
Company and to its business and properties in the event of any breach Executive
of any of the provisions of Paragraphs 8 and 9 of this Agreement or either of
them, and that the Executive's continued employment is predicated on the
commitments undertaken by him pursuant to said paragraphs. In the event of any
breach of any of the Executive's commitments pursuant to Paragraphs 8 and 9 or
either of them, the Company shall be entitled, in addition to any other remedies
and damages available, to injunctive relief to restrain the violation of such
commitments by the Executive or by any person or persons acting for or with the
Executive in any capacity whatsoever.
Non-Assignment
--------------
This Agreement is personal to Executive and shall not be assigned by
him. Executive shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may assign
this Agreement without Executive's consent to any other entity who, in
connection with such assignment, acquires all or substantially all of the
Company's assets or into or with which the Company is merged or consolidated.
<PAGE>
-5-
Waiver
------
The waiver by the Company of a breach by Executive of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach by
Executive.
Arbitration, Interpretation, etc.
---------------------------------
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, except a claimed violation of Sections 8 and 9, shall be
settled by arbitration in accordance with the Commercial Arbitration Act
(British Columbia) applying the procedures and rules in the Employment Dispute
Resolution Rules of the American Arbitration Association, at Vancouver, British
Columbia, and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. All statutes of limitations which
would otherwise be applicable shall apply to any arbitration proceeding pursuant
to this paragraph. All reasonable legal costs relating to the arbitration
proceedings shall be paid by the Company.
If any clause, phrase, provision or portion of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement, which shall be
construed as if such invalid or unenforceable provision were omitted.
The division of this Agreement into Paragraphs, Articles and Sections
and the insertion of headings are for the convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Paragraphs, Articles, Sections and clauses are to Paragraphs,
Articles, Sections and clauses of this Agreement.
In this Agreement, words importing the singular number only shall
include the plural and vice versa, and words importing the masculine gender
shall include the feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
The Company shall withhold from any amounts payable under this Agreement
such taxes and other amounts as may be required to be withheld pursuant to any
applicable law or regulation.
In consideration of the payments provided for in subparagraph 7.2, the
Executive agrees to execute before a witness and deliver to the Company a
release in the form of the attached Schedule "A" and agrees to be bound by its
terms.
The Executive hereby acknowledges receipt of a copy of this Agreement
duly signed by the Company.
The Executive agrees that after any termination of his employment, he
will tender his resignation from any position he may hold as an officer or
director of the Company or any of its affiliated or associated companies.
Benefit
-------
The provisions of this Agreement shall inure to the benefit of the
Company, its successors and assigns, and shall be binding upon the Company and
Executive, its and his heirs, personal representatives and successors, including
without limitation Executive's estate and the executors, administrators, or
trustees of such estate.
Relevant Law
------------
This Agreement shall be construed and enforced in accordance with the
laws of the Province of British Columbia.
<PAGE>
-6-
Notices
-------
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 72 hours after facsimile transmission and/or
mailing at any general or branch United States or Canadian Post Office, by
registered or certified mail, postage prepaid, addressed as follows, or to such
other address as shall have been designated in writing by the addressee:
(a) If to the Company:
c/o 5011 Meadowood Way
Reno, NV 89502
Facsimile: 702-827-7133
(b) If to the Executive:
c/o Meridian Gold Inc.
1090 West Georgia Street
Vancouver, BC
Facsimile: 604-608-0712
Entire Agreement
----------------
The Parties hereto agree that this Agreement contains the whole
agreement and understanding of the Parties and supersedes and replaces all oral
or written contracts or representations, and that this Agreement cannot be
amended, modified or supplemented in any respect except by subsequent written
agreement signed by both Parties hereto.
Further Assurances
------------------
The Parties hereto shall do such things and sign such documents as may
be necessary and desirable to give full effect and force to this Agreement.
Definitions
-----------
For the purposes of this Agreement,
"Cause" shall be deemed to exist if, and only if:
the Executive willfully refuses to perform services hereunder;
the Executive materially breaches Paragraph 8 or Paragraph 9 of this
Agreement;
the Executive engages in acts of dishonesty or fraud in connection
with his services hereunder; or
the Executive engages in other serious misconduct of such a nature that
the continued employment of the Executive may reasonably be expected to
adversely affect the business or properties of the Company,
provided that, if the Company determines that a reason constituting cause for
termination under clauses (a), (b) or (d) has occurred, it shall give the
Executive written notice thereof at least 14 days prior to the proposed date of
termination of employment. If the Executive shall take the necessary steps to
remedy the condition constituting Cause within 10 days after the receipt of such
notice, then a reason for termination for Cause shall be deemed not to have
occurred. If the Executive shall not remedy the condition constituting Cause
within such time period to the reasonable satisfaction of the Company, then
termination for Cause shall occur on the date set forth in the notice from the
Company.
<PAGE>
-7-
"Change of Control" shall mean any of:
a sale, transfer or other disposition of all or substantially all of the
property or assets of the Company other than to an affiliate, within the
meaning of Rule 405 of Regulation C adopted under the Securities Act of
1933.
a merger or consolidation of the Company;
any change in the holding, direct or indirect of shares in the capital
of the Company as a result of which a person, or a group of persons or
persons acting jointly or in concert, or persons associated or
affiliated with any such person or group within the meaning of section
13(d)(3) of the Securities Exchange Act of 1934 are in a position to
exercise effective control of the Company, provided that for the
purposes of this Agreement a person or group of persons holding shares
and/or other securities in excess of the number which, directly or
following conversion thereof, would entitle the holders thereof to cast
more than 30% of the votes attaching to all shares in the capital of the
Company which may be cast to elect directors of the Company shall be
deemed to be in a position to exercise effective control of the Company,
and further provided that at the time of such acquisition, no other
person or group of persons shall hold securities entitled to more than
30% of such votes;
Incumbent Directors no longer constituting at least a majority of the
Board at or prior to the conclusion of the first twelve (12) months from
the Effective Date.
"Effective Date" means the date upon which this Agreement takes effect;
"Good Reason" means:
a reduction by the Company to the Executive's base salary;
the failure by the Company to continue in effect any Plan in which the
Employee participates, unless such Plan (a) is replaced by a successor
Plan providing to Executive substantially similar compensation and
benefits (which replacement Plan shall continue to be subject to this
provision) or (b) terminates as a result of the normal expiration of
such Plan in accordance with its terms; or the taking of any other
action, or the failure to act, by the Company which would materially
adversely affect the Executive's continued participation in any of such
Plans without the consent of the Executive, including by materially
reducing the Executive's benefits in the future under any of such plans;
effecting a diminution in the position or duties and responsibilities of
the Executive; or
Company requiring the Executive to be based anywhere more than 45 miles
from the location of the Executive's office immediately prior to the
date hereof;
provided, however, that the events set out above in this subparagraph 19.2 shall
be considered to be Good Reason only if the Executive either before or within 30
days following notification from the Company of the occurrence of any such
event, notifies the Company that the event is not acceptable to the Executive
and the Company does not, within 14 days after such notice, rescind or rectify
to the reasonable satisfaction of the Executive the event that was not
acceptable to the Executive. Failure to object to an event set out above shall
not, however, preclude the Executive from reliance on such event if the
Executive objects to a subsequent event or events in accordance with this
subparagraph 19.2.
"Permanently Disabled" means that the Executive, by reason of illness,
disease, mental or physical disability or similar cause as determined by a
qualified medical practitioner mutually agreed to by the Executive and the
Company ("Disability"), is permanently disabled so as to be unable to fulfil the
Executive's duties, responsibilities and obligations hereunder and such
Disability shall continue for any consecutive 365-day period or for any period
of 365 days (whether or not consecutive) in any consecutive 24-month period.
<PAGE>
-8-
"Incumbent Directors" shall mean those persons who are directors of the
Company on the Effective Date and shall include any person who becomes a
director of the Company thereafter and whose election, or nomination for
election, by the Company's shareholders was approved by a majority of the
Incumbent Directors then on the Board of Directors.
"Involuntary Termination" means:
the termination of the Executive's employment by the Company, except for
Cause or pursuant to subparagraph 7.3;
the termination of the Executive's employment by the Executive for Good
Reason; or
termination of the Executive's employment on September 1, 2001 pursuant
to the notice given by the Company under subparagraph 1.3(a),
resignation from employment by the Executive following a Change of
Control, provided that both the resignation and Change of Control occur
within twelve (12) months from the Effective Date;
provided, however, a reassignment of the Executive to a position reasonably
comparable in responsibilities and duties to the position created under this
Agreement with a subsidiary, affiliate or related entity to the Company (the
"successor employer") will not constitute an Involuntary Termination under (a),
(b) and (c) above if the successor employer agrees to enter into an agreement
with the Executive that is substantially similar to this Agreement.
"Regular Monthly Compensation" shall mean one-twelfth (1/12) of the sum
of:
annual salary as at Termination Date, plus
either (i) the average of the awards of cash compensation (or if such
awards were not made in cash, the cash equivalent thereof) paid or
payable to the executive under any Incentive Plan(s) in respect of the
three calendar years completed immediately prior to his termination from
employment, or (ii) if the Executive has not been employed for at least
three calendar years before the Termination Date, the Current Year's
Incentive Plan(s) Amount.
"Incentive Plan(s)" shall mean executive compensation or bonus or
incentive plans established by the Company, and shall include any bonus or other
plans established both prior and subsequent to the date of this Agreement.
"Termination Period" shall mean the shorter of (i) the period starting
with the month in which the Executive's termination occurs and ending on the
last day of the 18th month thereafter, or (ii) the period starting with the
month in which the Executive's termination occurs and ending on his normal
retirement date (as defined in the Pension Plan).
"Voluntary Termination" means the resignation from employment by the
Executive except for "Good Reason".
"Termination Date" shall mean:
in the case of an Involuntary Termination as defined in subparagraph
19.7(a), the effective date of termination of the Executive's
employment;
in the case of an Involuntary Termination as defined in subparagraph
19.7(b), the date notice is given by the Executive to the Company of the
termination of the Executive's employment by the Executive for Good
Reason; and
<PAGE>
-9-
(c) in the case of an Involuntary Termination as defined in subparagraph
19.7(d), the date notice of resignation is given by the Executive to the
Company.
"Current Year's Incentive Plan(s) Amount" means the amount that would
otherwise be payable to the Executive under the Incentive Plan(s) in the year in
which the Termination Date occurs had the Executive remained employed to the end
of the Termination Period calculated on the basis that all targets and the
performance objectives under the Incentive Plan(s) were achieved.
"Regular Employee Benefits" means those medical or insurance benefits
which the Company provides to the Executive.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on
the day and year first above written.
SIGNED, SEALED AND DELIVERED )
In the presence of: )
) -------------------------- l/s
) CHRISTOPHER D.S. BATES
- ------------------------------------
Witness )
MERIDIAN GOLD COMPANY
By: c/s
-------------------
<PAGE>
EXHIBIT 2.6
- 1 -
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made the 31st day of July, 1996 BETWEEN: MERIDIAN GOLD
COMPANY (hereinafter referred to as the "Company") OF THE FIRST PART and DONALD
L. BECKWITH (hereinafter referred to as the "Executive") OF THE SECOND PART
(hereinafter collectively referred to as the "Parties").
WHEREAS the Company wishes to retain the services of the Executive and
the Executive wishes to be retained by the Company on the terms and conditions
specified herein;
AND WHEREAS the Executive has worked for the business of the Company and
its predecessor since 1987;
AND WHEREAS the Company and the Executive desire to enter into a written
agreement which contains the agreed-upon terms and conditions of employment;
NOW THEREFORE for the good and valuable consideration of the mutual
covenants and agreements hereinafter contained, the Parties mutually covenant
and agree as follows:
Employment
----------
The Company hereby agrees to employ the Executive in the position of
Vice-President, Operations and Secretary, and the Executive hereby accepts such
employment.
The Executive shall serve the Company in the capacity of Vice-President,
Operations and Secretary to perform such duties and exercise such powers as may
be reasonably required of him or be vested in him by the Board of Directors of
the Company. During his employment hereunder, the Executive shall devote his
full time and attention and exert his best efforts, knowledge, skill and energy
to his employment hereunder and will not, without the prior written consent of
the Board of Directors, assume other employment or engage in any other business.
The Executive shall report directly to the President of the Company.
Term -
----
The term of the Executive's employment shall commence on August
1, 1996 and shall, upon written notice from one party to the
other given no later than March 1, 2001, terminate on September
1, 2001, unless terminated sooner pursuant to Paragraph 7.
If neither party gives to the other notice of termination
pursuant to subparagraph 1.3(a) above, the term of the
Executive's employment shall be automatically renewed for a
second term, which shall automatically terminate on September 1,
2006, unless terminated sooner pursuant to Paragraph 7.
Compensation
------------
Base Salary - During the first year of his employment, the Executive
-----------
shall receive an annual base salary of U.S. $135,000 (less required statutory
and other deductions authorized by the Executive), which base salary shall be
paid in accordance with the Company's normal payroll practices. The Executive's
base salary shall be reviewed by the Compensation Committee of the Board of
Directors on an annual basis during thereafter. Any adjustment to the
Executive's base salary shall be determined in the sole discretion of the Board
of Directors of the Company ("Board of Directors") based on the recommendations
of the Compensation Committee.
Bonus - If the Board of Directors of the Company determines to establish
-----
a bonus plan for any of its employees, the Executive shall be entitled to
participate in such bonus plan in accordance with its terms.
<PAGE>
- 2 -
Stock Options - If the Board of Directors of the Company determines to
-------------
establish a stock option plan for any of its employees, the Executive shall be
entitled to participate in such stock option plan in accordance with its terms.
Benefits and Vacation
---------------------
While employed by the Company, the Company shall make available to the
Executive the benefits under the Company's employee benefits program which, in
its sole discretion, it makes available to other employees of the Company from
time to time. These benefits include, without limitation, participation in the
Company Salaried Employees' Retirement Plan (the "Pension Plan") and Salaried
Employees' Equivalent Retirement Plan (collectively the "Retirement Plans").
As an employee whose age plus years of service at the effective date of
any Involuntary Termination will equal or exceed 65, the Executive will be
entitled to have his early retirement benefit under the Retirement Plans
computed in accordance with the current section 7(c) of the FMC Pension Plan
(which is attached as Schedule "A") even if at the date of such termination he
is not age 55 or more.
While employed by the Company:
the Executive shall be entitled to four weeks' vacation per year,
to be scheduled at the mutual convenience of the parties; and
the Executive shall be entitled to the regular holidays schedule
recognized by the Company location at which he works.
Other Executive Benefits
------------------------
The Company will provide the Executive with an automobile, subject to
such conditions as the Company may establish from time to time.
While employed by the Company, the Company will provide the Executive
with Long Term Disability coverage substantially similar to the Long Term
Disability coverage which the Executive had elected to receive in May, 1996
under the FMC employee benefits program.
Reimbursement of Expenses
-------------------------
The Executive shall be reimbursed for all expenses incurred by him in
compliance with Company policies, as may be modified from time to time.
Officer of the Company
----------------------
So long as the Board of Directors, in its sole discretion, shall desire,
the Executive shall serve as a officer of the Company or any subsidiary or
affiliate, without any additional remuneration to the Executive.
Termination
-----------
In the event the Executive's employment with the Company is terminated
by reason of the Executive's death,
by reason of the Executive becoming Permanently Disabled as
described in subparagraph 7.3, or
for Cause,
<PAGE>
- 3 -
then except as otherwise provided in subparagraphs 3.1, 3.2, and 7.3, all
obligations of the Company hereunder shall terminate. If the Executive's
employment with the Company shall terminate for Cause, or due to death,
disability or Voluntary Termination, any portion of his fixed salary pursuant to
subparagraph 2.1 which is earned but unpaid as of the date of death shall be
paid to the Executive, or his designated beneficiary in the event of his death,
or if known to his then living spouse, or if none, to the duly appointed
personal representative of his estate.
If the Executive's employment with the Company shall terminate by reason
of an Involuntary Termination, the Executive shall be entitled to payment
(within 14 days of the Termination Date) of any portion of his fixed salary
pursuant to subparagraph 2.1 which is earned but unpaid as of the Termination
Date and to severance pay and benefits as follows:
Severance Pay. The Company shall, not later than 14 days after
-------------
the Termination Date, pay to the Executive a lump sum amount
equal to the Executive's Regular Monthly Compensation multiplied
by 18.
Medical and Dental Benefits. The Company must, at the election
---------------------------
of the Executive made within ten days after the Termination Date,
either:
not later than 14 days after the Termination Date, pay to
the Executive a lump sum amount equal to the aggregate
cost to the Company (without discount or present
valuation) of the Regular Employee Benefits for the
Termination Period; or
continue to make the contributions necessary to maintain
the Executive's coverage pursuant to the Regular Employee
Benefits until the earlier of (i) the end of the
Termination Period, or (ii) the month after the Executive
obtains comparable replacement benefits at any alternative
employment.
Incentive. The Company will pay to the Executive the Current
---------
Year's Incentive Plan(s) Amount prorated in proportion to the
number of months in the year before the Termination Date and on a
percentage basis comparable to the average of the preceding two
years' Plan.
Outplacement Assistance. Professional executive outplacement
-----------------------
services will be provided to the Executive at the Company's
expense. The cost of such services will not exceed 15% of the
Executive's annual base salary.
Automobile. The Company will ensure that the Executive retains
----------
possession of the automobile supplied by the Company immediately
prior to the Termination Date, and the Company shall continue to
pay for the leasing cost of such automobile for the shorter of
the balance of the lease or the Termination Period and the
Company will permit the Executive to purchase the automobile
provided that the Executive notify the Company of his intention
to purchase the automobile seven days prior to the earlier of the
expiry of the lease or the end of the Termination Period. The
purchase price shall be the depreciated value of the automobile
as quoted to the Company by the company which leased the
automobile to the Company plus applicable taxes.
If, during the Executive's employment with the Company the Executive
becomes Permanently Disabled, the Company shall have the right, on not less than
60 days' written notice to the Executive, to terminate the Executive's
employment. In the event that the Executive's employment is terminated on
account of Disability, the Executive shall continue to be eligible for long-term
disability benefits in accordance with the provision of the long-term disability
policy then in effect and the Retirement Plans benefits will be payable as
described therein. Except for such long-term disability benefits and the
Retirement Plans benefits, the Executive shall not be entitled to receive any
further compensation or benefits pursuant to this Agreement other than those
accrued to the date of the Executive's termination hereunder.
Any unused and accrued vacation will be paid with the final check
following any termination of employment with the Company.
<PAGE>
- 4 -
Restrictive Covenant
--------------------
During the Executive's employment with the Company and for a period of
eighteen months following the termination of the Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, the Executive shall not interfere with the relationship between
the Company and any of its employees, agents or representatives.
Non-disclosure of Confidential Information
------------------------------------------
The Executive acknowledges that the Company may disclose certain
confidential information to the Executive during the term of this Agreement to
enable him to perform his duties hereunder. The Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information shall include, but not be limited to, any scientific
or technical information, design, process, procedure, formula, improvement,
confidential business or financial information, records notes memoranda, data,
ideas, processes, methods, techniques, systems, patents, models, devices,
programs, customer software, writings, research, or personnel or customer
information.
The foregoing paragraph shall not be applicable if and to the extent
Executive is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge issued after Executive and
his legal counsel urge that the aforementioned confidentiality be preserved.
The Executive agrees promptly to reduce to writing to disclose and
assign, and hereby does assign, to the Company, its parent, subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, capable of use in connection with the business of the
Company, which employee may make or conceive, either solely or jointly with
others, during the period of his employment by the Company, its parent,
subsidiaries or successors.
The Executive agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge and deliver to the Company all such papers,
including applications for patents, application soft copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
The Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatsoever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries or successors. All
such discoveries, inventions and improvements which are applicable in any way to
the Company's business shall be the sole and exclusive property of the Company.
The covenants set forth in this paragraph which are made by the
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, the Executive during his employment by the
Company. The foregoing covenants will not prohibit Executive from disclosing
confidential or other information to other employees of the company or third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.
Additional Remedies
-------------------
The Executive recognizes that irreparable injury will result to the
Company and to its business and properties in the event of any breach Executive
of any of the provisions of Paragraphs 8 and 9 of this Agreement or either of
them, and that the Executive's continued employment is predicated on the
commitments undertaken by him pursuant to said paragraphs. In the event of any
breach of any of the Executive's commitments pursuant to Paragraphs 8 and 9 or
either of them, the Company shall be entitled, in addition to any other remedies
and damages
<PAGE>
- 5 -
available, to injunctive relief to restrain the violation of such commitments by
the Executive or by any person or persons acting for or with the Executive in
any capacity whatsoever.
Non-Assignment
--------------
This Agreement is personal to Executive and shall not be assigned by
him. Executive shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may assign
this Agreement without Executive's consent to any other entity who, in
connection with such assignment, acquires all or substantially all of the
Company's assets or into or with which the Company is merged or consolidated.
Waiver
------
The waiver by the Company of a breach by Executive of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach by
Executive.
Arbitration, Interpretation, etc.
---------------------------------
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, except a claimed violation of Sections 8 and 9, shall be
settled by arbitration in accordance with Title 9 of the U.S. Code and the
Employment Dispute Resolution Rules of the American Arbitration Association in
Reno, Nevada, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. All statutes of limitations
which would otherwise be applicable shall apply to any arbitration proceeding
pursuant to this paragraph. All reasonable legal costs of the Executive relating
to the arbitration proceedings will be paid by the Company.
If any clause, phrase, provision or portion of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement, which shall be
construed as if such invalid or unenforceable provision were omitted.
The division of this Agreement into Paragraphs, Articles and Sections
and the insertion of headings are for the convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Paragraphs, Articles, Sections and clauses are to Paragraphs,
Articles, Sections and clauses of this Agreement.
In this Agreement, words importing the singular number only shall
include the plural and vice versa, and words importing the masculine gender
shall include the feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
The Company shall withhold from any amounts payable under this Agreement
such taxes and other amounts as may be required to be withheld pursuant to any
applicable law or regulation.
In consideration of the payments provided for in subparagraph 7.2, the
Executive agrees to execute before a witness and deliver to the Company a
release in the form of the attached Schedule "B" and agrees to be bound by its
terms.
The Executive hereby acknowledges receipt of a copy of this Agreement
duly signed by the Company.
The Executive agrees that after any termination of his employment, he
will tender his resignation from any position he may hold as an officer or
director of the Company or any of its affiliated or associated companies.
<PAGE>
- 6 -
Benefit
-------
The provisions of this Agreement shall inure to the benefit of the
Company, its successors and assigns, and shall be binding upon the Company and
Executive, its and his heirs, personal representatives and successors, including
without limitation Executive's estate and the executors, administrators, or
trustees of such estate.
Relevant Law
------------
This Agreement shall be construed and enforced in accordance with the
laws of the State of Nevada.
Notices
-------
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 72 hours after mailing at any general or branch
United States or Canadian Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
(a) If to the Company:
5011 Meadowood Way
Reno, NV 89502
(b) If to the Executive:
c/o Meridian Gold Company
5011 Meadowood Way
Reno, NV 89502
Entire Agreement
----------------
The parties hereto agree that this Agreement contains the whole
agreement and understanding of the parties and supersedes and replaces all oral
or written contracts or representations, in particular the Executive Incentive
and Severance Plan between FMC Gold Company and the Executive as it appears on
page A-18 of the Proxy Statement/Prospectus dated June 24, 1996 and that this
Agreement cannot be amended, modified or supplemented in any respect except by
subsequent written agreement signed by both parties hereto.
Further Assurances
------------------
The parties hereto shall do such things and sign such documents as may
be necessary and desirable to give full effect and force to this Agreement.
Definitions
-----------
For the purposes of this Agreement,
"Cause" shall be deemed to exist if, and only if:
the Executive willfully refuses to perform services hereunder;
the Executive materially breaches Paragraph 8 or Paragraph 9 of
this Agreement;
the Executive engages in acts of dishonesty or fraud in
connection with his services hereunder; or
<PAGE>
- 7 -
the Executive engages in other serious misconduct of such a
nature that the continued employment of the Executive may
reasonably be expected to adversely affect the business or
properties of the Company,
provided that, if the Company determines that a reason constituting cause for
termination under clauses (a), (b) or (d) has occurred, it shall give the
Executive written notice thereof at least 14 days prior to the proposed date of
termination of employment. If the Executive shall take the necessary steps to
remedy the condition constituting Cause within 10 days after the receipt of such
notice, then a reason for termination for Cause shall be deemed not to have
occurred. If the Executive shall not remedy the condition constituting Cause
within such time period to the reasonable satisfaction of the Company, then
termination for Cause shall occur on the date set forth in the notice from the
Company.
"Change of Control" shall mean any of:
a sale, transfer or other disposition of all or substantially all
of the property or assets of the Company other than to an
affiliate, within the meaning of Rule 405 of Regulation C adopted
under the Securities Act of 1933 (Federal).
a merger or consolidation of the Company;
any change in the holding, direct or indirect of shares in the
capital of the Company as a result of which a person, or a group
of persons or persons acting jointly or in concert, or persons
associated or affiliated with any such person or group within the
meaning of section 13(d)(3) of the Securities Exchange Act of
1934 (Federal) are in a position to exercise effective control of
the Company, provided that for the purposes of this Agreement a
person or group of persons holding shares and/or other securities
in excess of the number which, directly or following conversion
thereof, would entitle the holders thereof to cast more than 30%
of the votes attaching to all shares in the capital of the
Company which may be cast to elect directors of the Company shall
be deemed to be in a position to exercise effective control of
the Company, and further provided that at the time of such
acquisition, no other person or group of persons shall hold
securities entitled to more than 30% of such votes;
Incumbent Directors no longer constituting at least a majority of
the Board at or prior to the conclusion of the first twelve (12)
months from the Effective Date.
"Effective Date" means the date upon which this Agreement takes effect;
"Good Reason" means:
a reduction by the Company to the Executive's base salary;
the failure by the Company to continue in effect any Plan in
which the Employee participates, unless such Plan (a) is replaced
by a successor Plan providing to Executive substantially similar
compensation and benefits (which replacement Plan shall continue
to be subject to this provision) or (b) terminates as a result of
the normal expiration of such Plan in accordance with its terms;
or the taking of any other action, or the failure to act, by the
Company which would materially adversely affect the Executive's
continued participation in any of such Plans without the consent
of the Executive, including by materially reducing the
Executive's benefits in the future under any of such plans;
effecting a diminution in the position or duties and
responsibilities of the Executive;
provided, however, that the events set out above in this subparagraph 19.2 shall
be considered to be Good Reason only if the Executive either before or within 30
days following notification from the Company of the occurrence of any such
event, notifies the Company that the event is not acceptable to the Executive
and the Company does not,
<PAGE>
- 8 -
within 14 days after such notice, rescind or rectify to the reasonable
satisfaction of the Executive the event that was not acceptable to the
Executive. Failure to object to an event set out above shall not, however,
preclude the Executive from reliance on such event if the Executive objects to a
subsequent event or events in accordance with this subparagraph 19.2.
"Permanently Disabled" means that the Executive, by reason of illness,
disease, mental or physical disability or similar cause as determined by a
qualified medical practitioner mutually agreed to by the Executive and the
Company ("Disability"), is permanently disabled so as to be unable to fulfil the
Executive's duties, responsibilities and obligations hereunder and such
Disability shall continue for any consecutive 365-day period or for any period
of 365 days (whether or not consecutive) in any consecutive 24-month period.
"Incumbent Directors" shall mean those persons who are directors of the
Company on the Effective Date and shall include any person who becomes a
director of the Company thereafter and whose election, or nomination for
election, by the Company's shareholders was approved by a majority of the
Incumbent Directors then on the Board of Directors.
"Involuntary Termination" means:
the termination of the Executive's employment by the Company,
except for Cause or pursuant to subparagraph 7.3;
the termination of the Executive's employment by the Executive
for Good Reason; or
termination of the executive's employment on September 1, 2001
pursuant to the notice given by the Company under subparagraph
1.3(a),
resignation from employment by the Executive following a Change
of Control, provided that the resignation occurs within twelve
(12) months from the Change of Control;
provided, however, a reassignment of the Executive to a position reasonably
comparable in responsibilities and duties to the position created under this
Agreement with a subsidiary, affiliate or related entity to the Company (the
"successor employer") will not constitute an Involuntary Termination under (a),
(b) and (c) above if the successor employer agrees to enter into an agreement
with the Executive that is substantially similar to this Agreement.
"Regular Monthly Compensation" shall mean one-twelfth (1/12) of the sum
of:
annual salary as at Termination Date, plus
either (i) the average of the awards of cash compensation (or if
such awards were not made in cash, the cash equivalent thereof)
paid or payable to the executive under any Incentive Plan(s) in
respect of the three calendar years completed immediately prior
to his termination from employment, or (ii) if the Executive has
not been employed for at least three calendar years before the
Termination Date, the Current Year's Incentive Plan(s) Amount.
"Incentive Plan(s)" shall mean executive compensation or bonus or
incentive plans established by the Company, and shall include any bonus or other
plans established both prior and subsequent to the date of this Agreement.
"Termination Period" shall mean the shorter of (i) the period starting
with the month in which the Executive's termination occurs and ending on the
last day of the 18th month thereafter, or (ii) the period starting with the
month in which the Executive's termination occurs and ending on his normal
retirement date (as defined in the Pension Plan).
"Voluntary Termination" means the resignation from employment by the
Executive except for "Good Reason".
<PAGE>
- 9 -
"Termination Date" shall mean:
in the case of an Involuntary Termination as defined in
subparagraph 19.7(a), the effective date of termination of the
Executive's employment;
in the case of an Involuntary Termination as defined in
subparagraph 19.7(b), the date notice is given by the Executive
to the Company of the termination of the Executive's employment
by the Executive for Good Reason; and
(c) in the case of an Involuntary Termination as defined in
subparagraph 19.7(d), the date notice of resignation is given by
the Executive to the Company.
"Current Year's Incentive Plan(s) Amount" means the amount that would
otherwise be payable to the Executive under the Incentive Plan(s) in the year in
which the Termination Date occurs had the Executive remained employed to the end
of the Termination Period calculated on the basis that all targets and the
performance objectives under the Incentive Plan(s) were achieved.
"Regular Employee Benefits" means those medical or insurance benefits
which the Company provides to the Executive.
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement on the day and year first above written.
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)
) l/s
-----------------------------
) DONALD L. BECKWITH
- ------------------------------------
Witness )
MERIDIAN GOLD COMPANY
By: c/s
-----------------------
<PAGE>
- 1 -
EXHIBIT 2.7
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made the 1st day of December, 1996 BETWEEN: MERIDIAN GOLD
COMPANY (hereinafter referred to as the "Company") OF THE FIRST PART and EDWARD
H. COLT (hereinafter referred to as the "Executive") OF THE SECOND PART
(hereinafter collectively referred to as the "Parties").
WHEREAS the Company wishes to retain the services of the Executive and
the Executive wishes to be retained by the Company on the terms and conditions
specified herein;
AND WHEREAS the Company and the Executive desire to enter into a written
agreement which contains the agreed-upon terms and conditions of employment;
NOW THEREFORE for the good and valuable consideration of the mutual
covenants and agreements hereinafter contained, the Parties mutually covenant
and agree as follows:
Employment
----------
The Company hereby agrees to employ the Executive in the position of
Vice-President, Finance and Chief Financial Officer, and the Executive hereby
accepts such employment.
The Executive shall serve the Company in the capacity of Vice-President,
Finance and Chief Financial Officer to perform such duties and exercise such
powers as may be reasonably required of him or be vested in him by the Board of
Directors of the Company. During his employment hereunder, the Executive shall
devote his full time and attention and exert his best efforts, knowledge, skill
and energy to his employment hereunder and will not, without the prior written
consent of the Board of Directors, assume other employment or engage in any
other business. The Executive shall report to the President.
Term -
----
The term of the Executive's employment shall commence on December 1,
1996 and shall, upon written notice from one party to the other given no
later than June 1, 2001, terminate on December 1, 2001, unless
terminated sooner pursuant to Paragraph 7.
If neither party gives to the other notice of termination pursuant to
subparagraph 1.3(a) above, the term of the Executive's employment shall
be automatically renewed for a second term, which shall automatically
terminate on December 1, 2006, unless terminated sooner pursuant to
Paragraph 7.
Compensation
------------
Base Salary - During the first year of his employment, the Executive
-----------
shall receive an annual base salary of U.S. $125,000 (less required statutory
and other deductions authorized by the Executive), which base salary shall be
paid in accordance with the Company's normal payroll practices. The Executive's
base salary shall be reviewed by the Compensation Committee of the Board of
Directors on an annual basis thereafter. Any adjustment to the Executive's base
salary shall be determined in the sole discretion of the Board of Directors of
the Company ("Board of Directors") based on the recommendations of the
Compensation Committee.
Bonus - If the Board of Directors of the Company determines to establish
-----
a bonus plan for any of its employees, the Executive shall be entitled to
participate in such bonus plan in accordance with its terms.
Stock Options - If the Board of Directors of the Company determines to
-------------
establish a stock option plan for any of its employees, the Executive shall be
entitled to participate in such stock option plan in accordance with its terms.
<PAGE>
- 2 -
Benefits and Vacation
---------------------
While employed by the Company, the Company shall make available to the
Executive the benefits under the Company's employee benefits program which, in
its sole discretion, it makes available to other employees of the Company from
time to time. These benefits include, without limitation, participation in the
Company Salaried Employees' Retirement Plan (the "Pension Plan") and Salaried
Employees' Equivalent Retirement Plan (collectively the "Retirement Plans").
While employed by the Company:
the Executive shall be entitled to four weeks' vacation per year, to be
scheduled at the mutual convenience of the Parties; and
the Executive shall be entitled to the regular holidays schedule
recognized by the Company location at which he works.
Other Executive Benefits
------------------------
The Executive shall participate in the supplementary benefits made
available by the Company generally to its employees from time to time.
Reimbursement of Expenses
-------------------------
The Executive shall be reimbursed for all expenses incurred by him in
compliance with Company policies, as may be modified from time to time.
Officer of the Company
----------------------
So long as the Board of Directors, in its sole discretion, shall desire,
the Executive shall serve as a officer of the Company or any subsidiary or
affiliate, without any additional remuneration to the Executive.
Termination
-----------
In the event the Executive's employment with the Company is terminated
by reason of the Executive's death,
by reason of the Executive becoming Permanently Disabled as described in
subparagraph 7.3, or
for Cause,
then except as otherwise provided in subparagraphs 3.1, 3.2, and 7.3, all
obligations of the Company hereunder shall terminate. If the Executive's
employment with the Company shall terminate for Cause, or due to death,
disability or Voluntary Termination, any portion of his fixed salary pursuant to
subparagraph 2.1 which is earned but unpaid as of the date of termination shall
be paid to the Executive, or his designated beneficiary in the event of his
death, or if known to his then living spouse, or if none, to the duly appointed
personal representative of his estate.
If the Executive's employment with the Company shall terminate by reason
of an Involuntary Termination, the Executive shall be entitled to payment
(within 14 days of the Termination Date) of any portion of his fixed salary
pursuant to subparagraph 2.1 which is earned but unpaid as of the Termination
Date and to severance pay and benefits as follows:
Severance Pay.The Company shall, not later than 14 days after the
-------------
Termination Date, pay to the Executive a lump sum amount equal to the
Executive's Regular Monthly Compensation multiplied by 18.
<PAGE>
- 3 -
Medical and Dental Benefits. The Company must, at the election of the
---------------------------
Executive made within ten days after the Termination Date, either:
not later than 14 days after the Termination Date, pay to the
Executive a lump sum amount equal to the aggregate cost to the
Company (without discount or present valuation) of the Regular
Employee Benefits for the Termination Period; or
continue to make the contributions necessary to maintain the
Executive's coverage pursuant to the Regular Employee Benefits
until the earlier of (i) the end of the Termination Period, or
(ii) the month after the Executive obtains comparable replacement
benefits at any alternative employment.
Incentive. The Company will pay to the Executive the Current Year's
---------
Incentive Plan(s) Amount prorated in proportion to the number of months
in the year before the Termination Date and on a percentage basis
comparable to the average for executives paid in the preceding two
years. If the Executive has been employed for less than two years, the
Executive will receive his base percentage bonus.
Outplacement Assistance. Professional executive outplacement services
-----------------------
will be provided to the Executive at the Company's expense. The cost of
such services will not exceed 15% of the Executive's annual base salary.
If, during the Executive's employment with the Company the Executive
becomes Permanently Disabled, the Company shall have the right, on not less than
60 days' written notice to the Executive, to terminate the Executive's
employment. In the event that the Executive's employment is terminated on
account of Disability, the Executive shall continue to be eligible for long-term
disability benefits in accordance with the provision of the long-term disability
policy then in effect and the Retirement Plans benefits will be payable as
described therein. Except for such long-term disability benefits and the
Retirement Plans benefits, the Executive shall not be entitled to receive any
further compensation or benefits pursuant to this Agreement other than those
accrued to the date of the Executive's termination hereunder.
Any unused and accrued vacation will be paid with the final check
following any termination of employment with the Company.
Restrictive Covenant
--------------------
During the Executive's employment with the Company and for a period of
eighteen months following the termination of the Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, the Executive shall not interfere with the relationship between
the Company and any of its employees, agents or representatives.
Non-disclosure of Confidential Information
------------------------------------------
The Executive acknowledges that the Company may disclose certain
confidential information to the Executive during the term of this Agreement to
enable him to perform his duties hereunder. The Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information shall include, but not be limited to, any scientific
or technical information, design, process, procedure, formula, improvement,
confidential business or financial information, records notes memoranda, data,
ideas, processes, methods, techniques, systems, patents, models, devices,
programs, customer software, writings, research, or personnel or customer
information.
The foregoing paragraph shall not be applicable if and to the extent
Executive is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge issued after Executive and
his legal counsel urge that the aforementioned confidentiality be preserved.
<PAGE>
- 4 -
The Executive agrees promptly to reduce to writing to disclose and
assign, and hereby does assign, to the Company, its parent, subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, capable of use in connection with the business of the
Company, which employee may make or conceive, either solely or jointly with
others, during the period of his employment by the Company, its parent,
subsidiaries or successors.
The Executive agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge and deliver to the Company all such papers,
including applications for patents, application soft copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
The Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatsoever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries or successors. All
such discoveries, inventions and improvements which are applicable in any way to
the Company's business shall be the sole and exclusive property of the Company.
The covenants set forth in this paragraph which are made by the
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, the Executive during his employment by the
Company. The foregoing covenants will not prohibit Executive from disclosing
confidential or other information to other employees of the company or third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.
The covenants set forth in paragraphs 8.1, 9.1, 9.2, 9.3 and 10 shall
survive the expiration or termination of this Agreement and shall continue in
full force and effect in accordance with the terms of such obligations.
Additional Remedies
-------------------
The Executive recognizes that irreparable injury will result to the
Company and to its business and properties in the event of any breach Executive
of any of the provisions of Paragraphs 8 and 9 of this Agreement or either of
them, and that the Executive's continued employment is predicated on the
commitments undertaken by him pursuant to said paragraphs. In the event of any
breach of any of the Executive's commitments pursuant to Paragraphs 8 and 9 or
either of them, the Company shall be entitled, in addition to any other remedies
and damages available, to injunctive relief to restrain the violation of such
commitments by the Executive or by any person or persons acting for or with the
Executive in any capacity whatsoever.
Non-Assignment
--------------
This Agreement is personal to Executive and shall not be assigned by
him. Executive shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may assign
this Agreement without Executive's consent to any other entity who, in
connection with such assignment, acquires all or substantially all of the
Company's assets or into or with which the Company is merged or consolidated.
Waiver
------
The waiver by the Company of a breach by Executive of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach by
Executive.
<PAGE>
- 5 -
Arbitration, Interpretation, etc.
--------------------------------
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, except a claimed violation of Sections 8 and 9, shall be
settled by arbitration in accordance with Title 9 of the U.S. Code and the
Employment Dispute Resolution Rules of the American Arbitration Association in
Reno, Nevada, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. All statutes of limitations
which would otherwise be applicable shall apply to any arbitration proceeding
pursuant to this paragraph. All reasonable legal costs relating to the
arbitration proceedings shall be paid by the Company.
If any clause, phrase, provision or portion of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement, which shall be
construed as if such invalid or unenforceable provision were omitted.
The division of this Agreement into Paragraphs, Articles and Sections
and the insertion of headings are for the convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Paragraphs, Articles, Sections and clauses are to Paragraphs,
Articles, Sections and clauses of this Agreement.
In this Agreement, words importing the singular number only shall
include the plural and vice versa, and words importing the masculine gender
shall include the feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
The Company shall withhold from any amounts payable under this Agreement
such taxes and other amounts as may be required to be withheld pursuant to any
applicable law or regulation.
In consideration of the payments provided for in subparagraph 7.2, the
Executive agrees to execute before a witness and deliver to the Company a
release in the form of the attached Schedule "A" and agrees to be bound by its
terms.
The Executive hereby acknowledges receipt of a copy of this Agreement
duly signed by the Company.
The Executive agrees that after any termination of his employment, he
will tender his resignation from any position he may hold as an officer or
director of the Company or any of its affiliated or associated companies.
Benefit
-------
The provisions of this Agreement shall inure to the benefit of the
Company, its successors and assigns, and shall be binding upon the Company and
Executive, its and his heirs, personal representatives and successors, including
without limitation Executive's estate and the executors, administrators, or
trustees of such estate.
Relevant Law
------------
This Agreement shall be construed and enforced in accordance with the
laws of the State of Nevada.
Notices
-------
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 72 hours after facsimile transmission and/or
mailing at any general or branch United States or Canadian Post Office, by
registered or certified mail, postage prepaid, addressed as follows, or to such
other address as shall have been designated in writing by the addressee:
<PAGE>
- 6 -
(a) If to the Company:
5011 Meadowood Way
Reno, NV 89502
Facsimile: 702-827-7133
(b) If to the Executive:
c/o Meridian Gold Company
5011 Meadowood Way
Reno, NV 89502
Facsimile: 702-827-7133
Entire Agreement
----------------
The Parties hereto agree that this Agreement contains the whole
agreement and understanding of the Parties and supersedes and replaces all oral
or written contracts or representations, and that this Agreement cannot be
amended, modified or supplemented in any respect except by subsequent written
agreement signed by both Parties hereto.
Further Assurances
------------------
The Parties hereto shall do such things and sign such documents as may
be necessary and desirable to give full effect and force to this Agreement.
Definitions
-----------
For the purposes of this Agreement,
"Cause" shall be deemed to exist if, and only if:
the Executive willfully refuses to perform services hereunder;
the Executive materially breaches Paragraph 8 or Paragraph 9 of this
Agreement;
the Executive engages in acts of dishonesty or fraud in connection with
his services hereunder; or
the Executive engages in other serious misconduct of such a nature that
the continued employment of the Executive may reasonably be expected to
adversely affect the business or properties of the Company,
provided that, if the Company determines that a reason constituting cause for
termination under clauses (a), (b) or (d) has occurred, it shall give the
Executive written notice thereof at least 14 days prior to the proposed date of
termination of employment. If the Executive shall take the necessary steps to
remedy the condition constituting Cause within 10 days after the receipt of such
notice, then a reason for termination for Cause shall be deemed not to have
occurred. If the Executive shall not remedy the condition constituting Cause
within such time period to the reasonable satisfaction of the Company, then
termination for Cause shall occur on the date set forth in the notice from the
Company.
"Change of Control" shall mean any of:
a sale, transfer or other disposition of all or substantially all of the
property or assets of the Company other than to an affiliate, within the
meaning of Rule 405 of Regulation C adopted under the Securities Act of
1933.
<PAGE>
- 7 -
a merger or consolidation of the Company;
any change in the holding, direct or indirect of shares in the capital
of the Company as a result of which a person, or a group of persons or
persons acting jointly or in concert, or persons associated or
affiliated with any such person or group within the meaning of section
13(d)(3) of the Securities Exchange Act of 1934 are in a position to
exercise effective control of the Company, provided that for the
purposes of this Agreement a person or group of persons holding shares
and/or other securities in excess of the number which, directly or
following conversion thereof, would entitle the holders thereof to cast
more than 30% of the votes attaching to all shares in the capital of the
Company which may be cast to elect directors of the Company shall be
deemed to be in a position to exercise effective control of the Company,
and further provided that at the time of such acquisition, no other
person or group of persons shall hold securities entitled to more than
30% of such votes;
Incumbent Directors no longer constituting at least a majority of the
Board at or prior to the conclusion of the first twelve (12) months from
the Effective Date.
"Effective Date" means the date upon which this Agreement takes effect;
"Good Reason" means:
a reduction by the Company to the Executive's base salary;
the failure by the Company to continue in effect any Plan in which the
Employee participates, unless such Plan (a) is replaced by a successor
Plan providing to Executive substantially similar compensation and
benefits (which replacement Plan shall continue to be subject to this
provision) or (b) terminates as a result of the normal expiration of
such Plan in accordance with its terms; or the taking of any other
action, or the failure to act, by the Company which would materially
adversely affect the Executive's continued participation in any of such
Plans without the consent of the Executive, including by materially
reducing the Executive's benefits in the future under any of such plans;
effecting a diminution in the position or duties and responsibilities of
the Executive; or
Company requiring the Executive to be based anywhere more than 45 miles
from the location of the Executive's office immediately prior to the
date hereof;
provided, however, that the events set out above in this subparagraph 19.2 shall
be considered to be Good Reason only if the Executive either before or within 30
days following notification from the Company of the occurrence of any such
event, notifies the Company that the event is not acceptable to the Executive
and the Company does not, within 14 days after such notice, rescind or rectify
to the reasonable satisfaction of the Executive the event that was not
acceptable to the Executive. Failure to object to an event set out above shall
not, however, preclude the Executive from reliance on such event if the
Executive objects to a subsequent event or events in accordance with this
subparagraph 19.2.
"Permanently Disabled" means that the Executive, by reason of illness,
disease, mental or physical disability or similar cause as determined by a
qualified medical practitioner mutually agreed to by the Executive and the
Company ("Disability"), is permanently disabled so as to be unable to fulfil the
Executive's duties, responsibilities and obligations hereunder and such
Disability shall continue for any consecutive 365-day period or for any period
of 365 days (whether or not consecutive) in any consecutive 24-month period.
"Incumbent Directors" shall mean those persons who are directors of the
Company on the Effective Date and shall include any person who becomes a
director of the Company thereafter and whose election, or nomination for
election, by the Company's shareholders was approved by a majority of the
Incumbent Directors then on the Board of Directors.
<PAGE>
- 8 -
"Involuntary Termination" means:
the termination of the Executive's employment by the Company, except for
Cause or pursuant to subparagraph 7.3;
the termination of the Executive's employment by the Executive for Good
Reason; or
termination of the Executive's employment on September 1, 2001 pursuant
to the notice given by the Company under subparagraph 1.3(a),
resignation from employment by the Executive following a Change of
Control, provided that both the resignation and Change of Control occur
within twelve (12) months from the Effective Date;
provided, however, a reassignment of the Executive to a position reasonably
comparable in responsibilities and duties to the position created under this
Agreement with a subsidiary, affiliate or related entity to the Company (the
"successor employer") will not constitute an Involuntary Termination under (a),
(b) and (c) above if the successor employer agrees to enter into an agreement
with the Executive that is substantially similar to this Agreement.
"Regular Monthly Compensation" shall mean one-twelfth (1/12) of the sum
of:
annual salary as at Termination Date, plus
either (i) the average of the awards of cash compensation (or if such
awards were not made in cash, the cash equivalent thereof) paid or
payable to the executive under any Incentive Plan(s) in respect of the
three calendar years completed immediately prior to his termination from
employment, or (ii) if the Executive has not been employed for at least
three calendar years before the Termination Date, the Current Year's
Incentive Plan(s) Amount.
"Incentive Plan(s)" shall mean executive compensation or bonus or
incentive plans established by the Company, and shall include any bonus or other
plans established both prior and subsequent to the date of this Agreement.
"Termination Period" shall mean the shorter of (i) the period starting
with the month in which the Executive's termination occurs and ending on the
last day of the 18th month thereafter, or (ii) the period starting with the
month in which the Executive's termination occurs and ending on his normal
retirement date (as defined in the Pension Plan).
"Voluntary Termination" means the resignation from employment by the
Executive except for "Good Reason".
"Termination Date" shall mean:
in the case of an Involuntary Termination as defined in subparagraph
19.7(a), the effective date of termination of the Executive's
employment;
in the case of an Involuntary Termination as defined in subparagraph
19.7(b), the date notice is given by the Executive to the Company of the
termination of the Executive's employment by the Executive for Good
Reason; and
(c) in the case of an Involuntary Termination as defined in subparagraph
19.7(d), the date notice of resignation is given by the Executive to the
Company.
"Current Year's Incentive Plan(s) Amount" means the amount that would
otherwise be payable to the Executive under the Incentive Plan(s) in the year in
which the Termination Date occurs had the Executive remained
<PAGE>
- 9 -
employed to the end of the Termination Period calculated on the basis that all
targets and the performance objectives under the Incentive Plan(s) were
achieved.
"Regular Employee Benefits" means those medical or insurance benefits
which the Company provides to the Executive.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement on
the day and year first above written.
SIGNED, SEALED AND DELIVERED )
In the presence of: )
) l/s
--------------------------------
) EDWARD H. COLT
- --------------------------------
Witness )
MERIDIAN GOLD COMPANY
By: c/s
------------------------
<PAGE>
-1-
EXHIBIT 2.8
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made the 31st day of July, 1996 BETWEEN: MERIDIAN GOLD
COMPANY (hereinafter referred to as the "Company") OF THE FIRST PART and BRIAN
J. KENNEDY (hereinafter referred to as the "Executive") OF THE SECOND PART
(hereinafter collectively referred to as the "Parties").
WHEREAS the Company wishes to retain the services of the Executive and
the Executive wishes to be retained by the Company on the terms and conditions
specified herein;
AND WHEREAS the Executive has worked for the business of the Company and
its predecessor since 1987;
AND WHEREAS the Company and the Executive desire to enter into a written
agreement which contains the agreed-upon terms and conditions of employment;
NOW THEREFORE for the good and valuable consideration of the mutual
covenants and agreements hereinafter contained, the Parties mutually covenant
and agree as follows:
EMPLOYMENT
----------
The Company hereby agrees to employ the Executive in the position of
President and Chief Executive Officer ("President"), and the Executive hereby
accepts such employment.
The Executive shall serve the Company in the capacity of President to
perform such duties and exercise such powers as may be reasonably required of
him or be vested in him by the Board of Directors of the Company. During his
employment hereunder, the Executive shall devote his full time and attention and
exert his best efforts, knowledge, skill and energy to his employment hereunder
and will not, without the prior written consent of the Board of Directors,
assume other employment or engage in any other business.
Term -
----
The term of the Executive's employment shall commence on August
1, 1996, and shall, upon written notice from one party to the
other given no later than March 1, 2001, terminate on September
1, 2001, unless terminated sooner pursuant to Paragraph 7.
If neither party gives to the other notice of termination
pursuant to subparagraph 1.3(a) above, the term of the
Executive's employment shall be automatically renewed for a
second term, which shall automatically terminate on September 1,
2006, unless terminated sooner pursuant to Paragraph 7.
COMPENSATION
------------
Base Salary - During the first year of his employment, the Executive
-----------
shall receive an annual base salary of U.S. $170,000 (less required statutory
and other deductions authorized by the Executive), which base salary shall be
paid in accordance with the Company's normal payroll practices. The Executive's
base salary shall be reviewed by the Compensation Committee of the Board of
Directors on an annual basis during thereafter. Any adjustment to the
Executive's base salary shall be determined in the sole discretion of the Board
of Directors of the Company ("Board of Directors") based on the recommendations
of the Compensation Committee.
Bonus - If the Board of Directors of the Company determines to establish
-----
a bonus plan for any of its employees, the Executive shall be entitled to
participate in such bonus plan in accordance with its terms.
<PAGE>
-2-
Stock Options - If the Board of Directors of the Company determines to
-------------
establish a stock option plan for any of its employees, the Executive shall be
entitled to participate in such stock option plan in accordance with its terms.
BENEFITS AND VACATION
---------------------
While employed by the Company, the Company shall make available to the
Executive the benefits under the Company's employee benefits program which, in
its sole discretion, it makes available to other employees of the Company from
time to time. These benefits include, without limitation, participation in the
Company Salaried Employees' Retirement Plan (the "Pension Plan") and Salaried
Employees' Equivalent Retirement Plan (collectively the "Retirement Plans").
As an employee whose age plus years of service at the effective date of
any Involuntary Termination will equal or exceed 65, the Executive will be
entitled to have his early retirement benefit under the Retirement Plans
computed in accordance with the current section 7(c) of the FMC Pension Plan
(which is attached as Schedule "A") even if at the date of such termination he
is not age 55 or more.
While employed by the Company:
the Executive shall be entitled to five weeks' vacation per year,
to be scheduled at the mutual convenience of the parties; and
the Executive shall be entitled to the regular holidays schedule
recognized by the Company location at which he works.
The Company will provide the Executive with the following benefits until
at least October 8, 1998:
Medical and Dental Insurance;
Life Insurance.
and shall provide benefits substantially similar to the insurance that was
provided by the Executive's employer as of May 1, 1996 under the FMC employee
benefits program, provided that the Company is able to purchase such insurance.
OTHER EXECUTIVE BENEFITS
------------------------
The Company will provide the Executive with an automobile, subject to
such conditions as the Company may establish from time to time.
While employed by the Company, the Company will provide the Executive
with Long Term Disability coverage substantially similar to the Long Term
Disability coverage which the Executive had elected to receive in May, 1996
under the FMC employee benefits program.
REIMBURSEMENT OF EXPENSES
-------------------------
The Executive shall be reimbursed for all expenses incurred by him in
compliance with Company policies, as may be modified from time to time.
OFFICER OF THE COMPANY
----------------------
So long as the Board of Directors, in its sole discretion, shall desire,
the Executive shall serve as a officer of the Company or any subsidiary or
affiliate, without any additional remuneration to the Executive.
<PAGE>
-3-
TERMINATION
-----------
In the event the Executive's employment with the Company is terminated
by reason of the Executive's death,
by reason of the Executive becoming Permanently Disabled as
described in subparagraph 7.3, or
for Cause,
then except as otherwise provided in subparagraphs 3.1, 3.2, 3.4 and 7.3, all
obligations of the Company hereunder shall terminate. If the Executive's
employment with the Company shall terminate for Cause, or due to death,
disability or Voluntary Termination, any portion of his fixed salary pursuant to
subparagraph 2.1 which is earned but unpaid as of the date of death shall be
paid to the Executive, or his designated beneficiary in the event of his death,
or if known to his then living spouse, or if none, to the duly appointed
personal representative of his estate.
If the Executive's employment with the Company shall terminate by reason
of an Involuntary Termination, the Executive shall be entitled to payment
(within 14 days of the Termination Date) of any portion of his fixed salary
pursuant to subparagraph 2.1 which is earned but unpaid as of the Termination
Date and to severance pay and benefits as follows:
Severance Pay. The Company shall, not later than 14 days after
-------------
the Termination Date, pay to the Executive a lump sum amount
equal to the Executive's Regular Monthly Compensation multiplied
by 24.
Medical and Dental Benefits. The Company must, at the election of
---------------------------
the Executive made within ten days after the Termination Date,
either:
not later than 14 days after the Termination Date, pay to
the Executive a lump sum amount equal to the aggregate
cost to the Company (without discount or present
valuation) of the Regular Employee Benefits for the
Termination Period; or
continue to make the contributions necessary to maintain
the Executive's coverage pursuant to the Regular Employee
Benefits until the earlier of (i) the end of the
Termination Period, or (ii) the month after the Executive
obtains comparable replacement benefits at any alternative
employment.
Incentive. The Company will pay to the Executive the Current
---------
Year's Incentive Plan(s) Amount prorated in proportion to the
number of months in the year before the Termination Date and on a
percentage basis comparable to the average of the preceding two
years' Plan.
Outplacement Assistance. Professional executive outplacement
-----------------------
services will be provided to the Executive at the Company's
expense. The cost of such services will not exceed 15% of the
Executive's annual base salary.
Automobile. The Company will ensure that the Executive retains
----------
possession of the automobile supplied by the Company immediately
prior to the Termination Date, and the Company shall continue to
pay for the leasing cost of such automobile for the shorter of
the balance of the lease or the Termination Period and the
Company will permit the Executive to purchase the automobile
provided that the Executive notify the Company of his intention
to purchase the automobile seven days prior to the earlier of the
expiry of the lease or the end of the Termination Period. The
purchase price shall be the depreciated value of the automobile
as quoted to the Company by the company which leased the
automobile to the Company plus applicable taxes.
<PAGE>
-4-
If the Involuntary Termination occurs on or before August, 1997
and if the Executive notifies the Company he intends to sell
either his home in Modesto, California or Reno, Nevada (but not
both), the Company will provide marketing assistance and realtor
fees to a maximum of $25,000.
If, during the Executive's employment with the Company the Executive
becomes Permanently Disabled, the Company shall have the right, on not less than
60 days' written notice to the Executive, to terminate the Executive's
employment. In the event that the Executive's employment is terminated on
account of Disability, the Executive shall continue to be eligible for long-term
disability benefits in accordance with the provision of the long-term disability
policy then in effect and the Retirement Plans benefits will be payable as
described therein. Except for such long-term disability benefits and the
Retirement Plans benefits, the Executive shall not be entitled to receive any
further compensation or benefits pursuant to this Agreement other than those
accrued to the date of the Executive's termination hereunder.
Any unused and accrued vacation will be paid with the final check
following any termination of employment with the Company.
RESTRICTIVE COVENANT
--------------------
During the Executive's employment with the Company and for a period of
two years following the termination of the Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, the Executive shall not interfere with the relationship between
the Company and any of its employees, agents or representatives.
NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
------------------------------------------
The Executive acknowledges that the Company may disclose certain
confidential information to the Executive during the term of this Agreement to
enable him to perform his duties hereunder. The Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information shall include, but not be limited to, any scientific
or technical information, design, process, procedure, formula, improvement,
confidential business or financial information, records notes memoranda, data,
ideas, processes, methods, techniques, systems, patents, models, devices,
programs, customer software, writings, research, or personnel or customer
information.
The foregoing paragraph shall not be applicable if and to the extent
Executive is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge issued after Executive and
his legal counsel urge that the aforementioned confidentiality be preserved.
The Executive agrees promptly to reduce to writing to disclose and
assign, and hereby does assign, to the Company, its parent, subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, capable of use in connection with the business of the
Company, which employee may make or conceive, either solely or jointly with
others, during the period of his employment by the Company, its parent,
subsidiaries or successors.
The Executive agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge and deliver to the Company all such papers,
including applications for patents, application soft copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
The Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatsoever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries
<PAGE>
-5-
or successors. All such discoveries, inventions and improvements which are
applicable in any way to the Company's business shall be the sole and exclusive
property of the Company.
The covenants set forth in this paragraph which are made by the
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, the Executive during his employment by the
Company. The foregoing covenants will not prohibit Executive from disclosing
confidential or other information to other employees of the company or third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.
ADDITIONAL REMEDIES
-------------------
The Executive recognizes that irreparable injury will result to the
Company and to its business and properties in the event of any breach Executive
of any of the provisions of Paragraphs 8 and 9 of this Agreement or either of
them, and that the Executive's continued employment is predicated on the
commitments undertaken by him pursuant to said paragraphs. In the event of any
breach of any of the Executive's commitments pursuant to Paragraphs 8 and 9 or
either of them, the Company shall be entitled, in addition to any other remedies
and damages available, to injunctive relief to restrain the violation of such
commitments by the Executive or by any person or persons acting for or with the
Executive in any capacity whatsoever.
NON-ASSIGNMENT
--------------
This Agreement is personal to Executive and shall not be assigned by
him. Executive shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may assign
this Agreement without Executive's consent to any other entity who, in
connection with such assignment, acquires all or substantially all of the
Company's assets or into or with which the Company is merged or consolidated.
WAIVER
------
The waiver by the Company of a breach by Executive of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach by
Executive.
ARBITRATION, INTERPRETATION, ETC.
---------------------------------
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, except a claimed violation of Sections 8 and 9, shall be
settled by arbitration in accordance with Title 9 of the U.S. Code and the
Employment Dispute Resolution Rules of the American Arbitration Association in
Reno, Nevada, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. All statutes of limitations
which would otherwise be applicable shall apply to any arbitration proceeding
pursuant to this paragraph. All reasonable legal costs of the Executive relative
to the arbitration proceedings shall be paid by the Company.
If any clause, phrase, provision or portion of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement, which shall be
construed as if such invalid or unenforceable provision were omitted.
The division of this Agreement into Paragraphs, Articles and Sections
and the insertion of headings are for the convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Paragraphs, Articles, Sections and clauses are to Paragraphs,
Articles, Sections and clauses of this Agreement.
<PAGE>
-6-
In this Agreement, words importing the singular number only shall
include the plural and vice versa, and words importing the masculine gender
shall include the feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
The Company shall withhold from any amounts payable under this Agreement
such taxes and other amounts as may be required to be withheld pursuant to any
applicable law or regulation.
In consideration of the payments provided for in subparagraph 7.2, the
Executive agrees to execute before a witness and deliver to the Company a
release in the form of the attached Schedule "B" and agrees to be bound by its
terms.
The Executive hereby acknowledges receipt of a copy of this Agreement
duly signed by the Company.
The Executive agrees that after any termination of his employment, he
will tender his resignation from any position he may hold as an officer or
director of the Company or any of its affiliated or associated companies.
BENEFIT
-------
The provisions of this Agreement shall inure to the benefit of the
Company, its successors and assigns, and shall be binding upon the Company and
Executive, its and his heirs, personal representatives and successors, including
without limitation Executive's estate and the executors, administrators, or
trustees of such estate.
RELEVANT LAW
------------
This Agreement shall be construed and enforced in accordance with the
laws of the State of Nevada.
NOTICES
-------
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 72 hours after mailing at any general or branch
United States or Canadian Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
(a) If to the Company:
5011 Meadowood Way
Reno, NV 89502
(b) If to the Executive:
c/o Meridian Gold Company
5011 Meadowood Way
Reno, NV 89502
ENTIRE AGREEMENT
----------------
The parties hereto agree that this Agreement contains the whole
agreement and understanding of the parties and supersedes and replaces all oral
or written contracts or representations, in particular the Executive Incentive
and Severance Plan between FMC Gold Company and the Executive as it appears on
page A-18 of the Proxy Statement/Prospectus dated June 24, 1996 and that this
Agreement cannot be amended, modified or supplemented in any respect except by
subsequent written agreement signed by both parties hereto.
<PAGE>
-7-
FURTHER ASSURANCES
------------------
The parties hereto shall do such things and sign such documents as may
be necessary and desirable to give full effect and force to this Agreement.
DEFINITIONS
-----------
For the purposes of this Agreement,
"Cause" shall be deemed to exist if, and only if:
the Executive willfully refuses to perform services hereunder;
the Executive materially breaches Paragraph 8 or Paragraph 9 of
this Agreement;
the Executive engages in acts of dishonesty or fraud in
connection with his services hereunder; or
the Executive engages in other serious misconduct of such a
nature that the continued employment of the Executive may
reasonably be expected to adversely affect the business or
properties of the Company,
provided that, if the Company determines that a reason constituting cause for
termination under clauses (a), (b) or (d) has occurred, it shall give the
Executive written notice thereof at least 14 days prior to the proposed date of
termination of employment. If the Executive shall take the necessary steps to
remedy the condition constituting Cause within 10 days after the receipt of such
notice, then a reason for termination for Cause shall be deemed not to have
occurred. If the Executive shall not remedy the condition constituting Cause
within such time period to the reasonable satisfaction of the Company, then
termination for Cause shall occur on the date set forth in the notice from the
Company.
"Change of Control" shall mean any of:
a sale, transfer or other disposition of all or substantially all
of the property or assets of the Company other than to an
affiliate, within the meaning of Rule 405 of Regulation C adopted
under the Securities Act of 1933 (Federal).
a merger or consolidation of the Company;
any change in the holding, direct or indirect of shares in the
capital of the Company as a result of which a person, or a group
of persons or persons acting jointly or in concert, or persons
associated or affiliated with any such person or group within the
meaning of section 13(d)(3) of the Securities Exchange Act of
1934 (Federal) are in a position to exercise effective control of
the Company, provided that for the purposes of this Agreement a
person or group of persons holding shares and/or other securities
in excess of the number which, directly or following conversion
thereof, would entitle the holders thereof to cast more than 30%
of the votes attaching to all shares in the capital of the
Company which may be cast to elect directors of the Company shall
be deemed to be in a position to exercise effective control of
the Company, and further provided that at the time of such
acquisition, no other person or group of persons shall hold
securities entitled to more than 30% of such votes;
Incumbent Directors no longer constituting at least a majority of
the Board at or prior to the conclusion of the first twelve (12)
months from the Effective Date.
<PAGE>
-8-
"Effective Date" means the date upon which this Agreement takes effect;
"Good Reason" means:
a reduction by the Company to the Executive's base salary;
the failure by the Company to continue in effect any Plan in
which the Employee participates, unless such Plan (a) is replaced
by a successor Plan providing to Executive substantially similar
compensation and benefits (which replacement Plan shall continue
to be subject to this provision) or (b) terminates as a result of
the normal expiration of such Plan in accordance with its terms;
or the taking of any other action, or the failure to act, by the
Company which would materially adversely affect the Executive's
continued participation in any of such Plans without the consent
of the Executive, including by materially reducing the
Executive's benefits in the future under any of such plans;
effecting a diminution in the position or duties and
responsibilities of the Executive; and
Company requiring the Executive to be based anywhere more than 45
miles from the location of the Executive's office immediately
prior to the date hereof;
provided, however, that the events set out above in this subparagraph 19.2 shall
be considered to be Good Reason only if the Executive either before or within 30
days following notification from the Company of the occurrence of any such
event, notifies the Company that the event is not acceptable to the Executive
and the Company does not, within 14 days after such notice, rescind or rectify
to the reasonable satisfaction of the Executive the event that was not
acceptable to the Executive. Failure to object to an event set out above shall
not, however, preclude the Executive from reliance on such event if the
Executive objects to a subsequent event or events in accordance with this
subparagraph 19.2.
"Permanently Disabled" means that the Executive, by reason of illness,
disease, mental or physical disability or similar cause as determined by a
qualified medical practitioner mutually agreed to by the Executive and the
Company ("Disability"), is permanently disabled so as to be unable to fulfil the
Executive's duties, responsibilities and obligations hereunder and such
Disability shall continue for any consecutive 365-day period or for any period
of 365 days (whether or not consecutive) in any consecutive 24-month period.
"Incumbent Directors" shall mean those persons who are directors of the
Company on the Effective Date and shall include any person who becomes a
director of the Company thereafter and whose election, or nomination for
election, by the Company's shareholders was approved by a majority of the
Incumbent Directors then on the Board of Directors.
"Involuntary Termination" means:
the termination of the Executive's employment by the Company,
except for Cause or pursuant to subparagraph 7.3;
the termination of the Executive's employment by the Executive
for Good Reason; or
termination of the Executive's employment on September 1, 2001
pursuant to the notice given by the Company under subparagraph
1.3(a);
resignation from employment by the Executive following a Change
of Control, provided that the resignation occurs within twelve
(12) months from the Change of Control;
provided, however, a reassignment of the Executive to a position reasonably
comparable in responsibilities and duties to the position created under this
Agreement with a subsidiary, affiliate or related entity to the Company (the
<PAGE>
-9-
"successor employer") will not constitute an Involuntary Termination under (a),
(b) and (c) above if the successor employer agrees to enter into an agreement
with the Executive that is substantially similar to this Agreement.
"Regular Monthly Compensation" shall mean one-twelfth (1/12) of the sum
of:
annual salary as at Termination Date, plus
either (i) the average of the awards of cash compensation (or if
such awards were not made in cash, the cash equivalent thereof)
paid or payable to the executive under any Incentive Plan(s) in
respect of the three calendar years completed immediately prior
to his termination from employment, or (ii) if the Executive has
not been employed for at least three calendar years before the
Termination Date, the Current Year's Incentive Plan(s) Amount.
"Incentive Plan(s)" shall mean executive compensation or bonus or
incentive plans established by the Company, and shall include any bonus or other
plans established both prior and subsequent to the date of this Agreement.
"Termination Period" shall mean the shorter of (i) the period starting
with the month in which the Executive's termination occurs and ending on the
last day of the 24th month thereafter, or (ii) the period starting with the
month in which the Executive's termination occurs and ending on his normal
retirement date (as defined in the Pension Plan).
"Voluntary Termination" means the resignation from employment by the
Executive except for "Good Reason".
"Termination Date" shall mean:
in the case of an Involuntary Termination as defined in
subparagraph 19.7(a), the effective date of termination of the
Executive's employment;
in the case of an Involuntary Termination as defined in
subparagraph 19.7(b), the date notice is given by the Executive
to the Company of the termination of the Executive's employment
by the Executive for Good Reason; and
(c) in the case of an Involuntary Termination as defined in
subparagraph 19.6(d), the date notice of resignation is given by
the Executive to the Company.
"Current Year's Incentive Plan(s) Amount" means the amount that would
otherwise be payable to the Executive under the Incentive Plan(s) in the year in
which the Termination Date occurs had the Executive remained employed to the end
of the Termination Period calculated on the basis that all targets and the
performance objectives under the Incentive Plan(s) were achieved.
"Regular Employee Benefits" means those medical or insurance benefits
which the Company provides to the Executive, including, without limitation, the
benefits set out in subparagraph 3.4, and short and long term disability
insurance.
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement on the day and year first above written.
SIGNED, SEALED AND DELIVERED )
In the presence of: )
) ---------------------- l/s
) BRIAN J. KENNEDY
- ------------------------------------
Witness )
MERIDIAN GOLD COMPANY
By: c/s
-------------------
<PAGE>
EXHIBIT 2.9
-1-
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT made the 31st day of July, 1996 BETWEEN: MERIDIAN GOLD
COMPANY (hereinafter referred to as the "Company") OF THE FIRST PART and RICHARD
C. LORSON (hereinafter referred to as the "Executive") OF THE SECOND PART
(hereinafter collectively referred to as the "Parties").
WHEREAS the Company wishes to retain the services of the Executive and
the Executive wishes to be retained by the Company on the terms and conditions
specified herein;
AND WHEREAS the Executive has worked for the business of the Company and
its predecessor since 1987;
AND WHEREAS the Company and the Executive desire to enter into a written
agreement which contains the agreed-upon terms and conditions of employment;
NOW THEREFORE for the good and valuable consideration of the mutual
covenants and agreements hereinafter contained, the Parties mutually covenant
and agree as follows:
Employment
----------
The Company hereby agrees to employ the Executive in the position of
Vice-President, Exploration, and the Executive hereby accepts such employment.
The Executive shall serve the Company in the capacity of Vice-President,
Exploration to perform such duties and exercise such powers as may be reasonably
required of him or be vested in him by the Board of Directors of the Company.
During his employment hereunder, the Executive shall devote his full time and
attention and exert his best efforts, knowledge, skill and energy to his
employment hereunder and will not, without the prior written consent of the
Board of Directors, assume other employment or engage in any other business. The
Executive shall report to the President.
Term -
----
The term of the Executive's employment shall commence on August
1, 1996 and shall, upon written notice from one party to the
other given no later than March 1, 2001, terminate on September
1, 2001, unless terminated sooner pursuant to Paragraph 7.
If neither party gives to the other notice of termination
pursuant to subparagraph 1.3(a) above, the term of the
Executive's employment shall be automatically renewed for a
second term, which shall automatically terminate on September 1,
2006, unless terminated sooner pursuant to Paragraph 7.
Compensation
------------
Base Salary - During the first year of his employment, the Executive
-----------
shall receive an annual base salary of U.S. $108,000 (less required statutory
and other deductions authorized by the Executive), which base salary shall be
paid in accordance with the Company's normal payroll practices. The Executive's
base salary shall be reviewed by the Compensation Committee of the Board of
Directors on an annual basis during thereafter. Any adjustment to the
Executive's base salary shall be determined in the sole discretion of the Board
of Directors of the Company ("Board of Directors") based on the recommendations
of the Compensation Committee.
Bonus - If the Board of Directors of the Company determines to establish
-----
a bonus plan for any of its employees, the Executive shall be entitled to
participate in such bonus plan in accordance with its terms.
<PAGE>
-2-
Stock Options - If the Board of Directors of the Company determines to
-------------
establish a stock option plan for any of its employees, the Executive shall be
entitled to participate in such stock option plan in accordance with its terms.
Benefits and Vacation
---------------------
While employed by the Company, the Company shall make available to the
Executive the benefits under the Company's employee benefits program which, in
its sole discretion, it makes available to other employees of the Company from
time to time. These benefits include, without limitation, participation in the
Company Salaried Employees' Retirement Plan (the "Pension Plan") and Salaried
Employees' Equivalent Retirement Plan (collectively the "Retirement Plans").
While employed by the Company:
the Executive shall be entitled to four weeks' vacation per year,
to be scheduled at the mutual convenience of the parties; and
the Executive shall be entitled to the regular holidays schedule
recognized by the Company location at which he works.
Other Executive Benefits
------------------------
While employed by the Company, the Company will provide the Executive
with Long Term Disability coverage substantially similar to the Long Term
Disability coverage which the Executive had elected to receive in May, 1996
under the FMC employee benefits program.
Reimbursement of Expenses
-------------------------
The Executive shall be reimbursed for all expenses incurred by him in
compliance with Company policies, as may be modified from time to time.
Officer of the Company
----------------------
So long as the Board of Directors, in its sole discretion, shall desire,
the Executive shall serve as a officer of the Company or any subsidiary or
affiliate, without any additional remuneration to the Executive.
Termination
-----------
In the event the Executive's employment with the Company is terminated
by reason of the Executive's death,
by reason of the Executive becoming Permanently Disabled as
described in subparagraph 7.3, or
for Cause,
then except as otherwise provided in subparagraphs 3.1, 3.2, and 7.3, all
obligations of the Company hereunder shall terminate. If the Executive's
employment with the Company shall terminate for Cause, or due to death,
disability or Voluntary Termination, any portion of his fixed salary pursuant to
subparagraph 2.1 which is earned but unpaid as of the date of death shall be
paid to the Executive, or his designated beneficiary in the event of his death,
or if known to his then living spouse, or if none, to the duly appointed
personal representative of his estate.
If the Executive's employment with the Company shall terminate by reason
of an Involuntary Termination, the Executive shall be entitled to payment
(within 14 days of the Termination Date) of any portion of his fixed
<PAGE>
-3-
salary pursuant to subparagraph 2.1 which is earned but unpaid as of the
Termination Date and to severance pay and benefits as follows:
Severance Pay. The Company shall, not later than 14 days after
-------------
the Termination Date, pay to the Executive a lump sum amount
equal to the Executive's Regular Monthly Compensation multiplied
by 18.
Medical and Dental Benefits. The Company must, at the election of
---------------------------
the Executive made within ten days after the Termination Date,
either:
not later than 14 days after the Termination Date, pay to
the Executive a lump sum amount equal to the aggregate
cost to the Company (without discount or present
valuation) of the Regular Employee Benefits for the
Termination Period; or
continue to make the contributions necessary to maintain
the Executive's coverage pursuant to the Regular Employee
Benefits until the earlier of (i) the end of the
Termination Period, or (ii) the month after the Executive
obtains comparable replacement benefits at any alternative
employment.
Incentive. The Company will pay to the Executive the Current
---------
Year's Incentive Plan(s) Amount prorated in proportion to the
number of months in the year before the Termination Date and on a
percentage basis comparable to the average for executives paid in
the preceding two years.
Outplacement Assistance. Professional executive outplacement
-----------------------
services will be provided to the Executive at the Company's
expense. The cost of such services will not exceed 15% of the
Executive's annual base salary.
If, during the Executive's employment with the Company the Executive
becomes Permanently Disabled, the Company shall have the right, on not less than
60 days' written notice to the Executive, to terminate the Executive's
employment. In the event that the Executive's employment is terminated on
account of Disability, the Executive shall continue to be eligible for long-term
disability benefits in accordance with the provision of the long-term disability
policy then in effect and the Retirement Plans benefits will be payable as
described therein. Except for such long-term disability benefits and the
Retirement Plans benefits, the Executive shall not be entitled to receive any
further compensation or benefits pursuant to this Agreement other than those
accrued to the date of the Executive's termination hereunder.
Any unused and accrued vacation will be paid with the final check
following any termination of employment with the Company.
Restrictive Covenant
--------------------
During the Executive's employment with the Company and for a period of
eighteen months following the termination of the Executive's employment with the
Company for any reason, including termination occasioned by the expiration of
this Agreement, the Executive shall not interfere with the relationship between
the Company and any of its employees, agents or representatives.
Non-disclosure of Confidential Information
------------------------------------------
The Executive acknowledges that the Company may disclose certain
confidential information to the Executive during the term of this Agreement to
enable him to perform his duties hereunder. The Executive hereby covenants and
agrees that he will not, without the prior written consent of the Company,
during the term of this Agreement or at any time thereafter, disclose or permit
to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"confidential information shall include, but not be limited to, any scientific
or technical information, design, process, procedure, formula, improvement,
confidential business or financial information, records notes memoranda, data,
ideas, processes,
<PAGE>
-4-
methods, techniques, systems, patents, models, devices, programs, customer
software, writings, research, or personnel or customer information.
The foregoing paragraph shall not be applicable if and to the extent
Executive is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge issued after Executive and
his legal counsel urge that the aforementioned confidentiality be preserved.
The Executive agrees promptly to reduce to writing to disclose and
assign, and hereby does assign, to the Company, its parent, subsidiaries,
successors, assigns and nominees, all inventions, discoveries, improvements,
copyrightable material, trademarks, programs, computer software and ideas
concerning the same, capable of use in connection with the business of the
Company, which employee may make or conceive, either solely or jointly with
others, during the period of his employment by the Company, its parent,
subsidiaries or successors.
The Executive agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge and deliver to the Company all such papers,
including applications for patents, application soft copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns or nominees.
The Executive will promptly report to the Company all discoveries,
inventions, or improvements of whatsoever nature conceived or made by him at any
time he was employed by the Company, its parent, subsidiaries or successors. All
such discoveries, inventions and improvements which are applicable in any way to
the Company's business shall be the sole and exclusive property of the Company.
The covenants set forth in this paragraph which are made by the
Executive are in consideration of the employment, or continuing employment of,
and the compensation paid to, the Executive during his employment by the
Company. The foregoing covenants will not prohibit Executive from disclosing
confidential or other information to other employees of the company or third
parties to the extent that such disclosure is necessary to the performance of
his duties under this Agreement.
Additional Remedies
-------------------
The Executive recognizes that irreparable injury will result to the
Company and to its business and properties in the event of any breach Executive
of any of the provisions of Paragraphs 8 and 9 of this Agreement or either of
them, and that the Executive's continued employment is predicated on the
commitments undertaken by him pursuant to said paragraphs. In the event of any
breach of any of the Executive's commitments pursuant to Paragraphs 8 and 9 or
either of them, the Company shall be entitled, in addition to any other remedies
and damages available, to injunctive relief to restrain the violation of such
commitments by the Executive or by any person or persons acting for or with the
Executive in any capacity whatsoever.
Non-Assignment
--------------
This Agreement is personal to Executive and shall not be assigned by
him. Executive shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may assign
this Agreement without Executive's consent to any other entity who, in
connection with such assignment, acquires all or substantially all of the
Company's assets or into or with which the Company is merged or consolidated.
Waiver
------
The waiver by the Company of a breach by Executive of any provision of
this Agreement shall not be construed as a waiver of any subsequent breach by
Executive.
<PAGE>
-5-
Arbitration, Interpretation, etc.
--------------------------------
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, except a claimed violation of Sections 8 and 9, shall be
settled by arbitration in accordance with Title 9 of the U.S. Code and the
Employment Dispute Resolution Rules of the American Arbitration Association in
Reno, Nevada, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. All statutes of limitations
which would otherwise be applicable shall apply to any arbitration proceeding
pursuant to this paragraph. [ALL REASONABLE LEGAL COSTS RELATING TO THE
ARBITRATION PROCEEDINGS SHALL BE PAID BY THE COMPANY.]
If any clause, phrase, provision or portion of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remainder of this Agreement, which shall be
construed as if such invalid or unenforceable provision were omitted.
The division of this Agreement into Paragraphs, Articles and Sections
and the insertion of headings are for the convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms
"this Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Paragraphs, Articles, Sections and clauses are to Paragraphs,
Articles, Sections and clauses of this Agreement.
In this Agreement, words importing the singular number only shall
include the plural and vice versa, and words importing the masculine gender
shall include the feminine and neuter genders and vice versa, and words
importing persons shall include individuals, partnerships, associations, trusts,
unincorporated organizations and corporations.
The Company shall withhold from any amounts payable under this Agreement
such taxes and other amounts as may be required to be withheld pursuant to any
applicable law or regulation.
In consideration of the payments provided for in subparagraph 7.2, the
Executive agrees to execute before a witness and deliver to the Company a
release in the form of the attached Schedule "A" and agrees to be bound by its
terms.
The Executive hereby acknowledges receipt of a copy of this Agreement
duly signed by the Company.
The Executive agrees that after any termination of his employment, he
will tender his resignation from any position he may hold as an officer or
director of the Company or any of its affiliated or associated companies.
Benefit
-------
The provisions of this Agreement shall inure to the benefit of the
Company, its successors and assigns, and shall be binding upon the Company and
Executive, its and his heirs, personal representatives and successors, including
without limitation Executive's estate and the executors, administrators, or
trustees of such estate.
Relevant Law
------------
This Agreement shall be construed and enforced in accordance with the
laws of the State of Nevada.
Notices
-------
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 72 hours after mailing at any general or branch
United States or Canadian Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
<PAGE>
-6-
(a) If to the Company:
5011 Meadowood Way
Reno, NV 89502
(b) If to the Executive:
c/o Meridian Gold Company
5011 Meadowood Way
Reno, NV 89502
Entire Agreement
----------------
The parties hereto agree that this Agreement contains the whole
agreement and understanding of the parties and supersedes and replaces all oral
or written contracts or representations, and that this Agreement cannot be
amended, modified or supplemented in any respect except by subsequent written
agreement signed by both parties hereto.
Further Assurances
------------------
The parties hereto shall do such things and sign such documents as may
be necessary and desirable to give full effect and force to this Agreement.
Definitions
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For the purposes of this Agreement,
"Cause" shall be deemed to exist if, and only if:
the Executive willfully refuses to perform services hereunder;
the Executive materially breaches Paragraph 8 or Paragraph 9 of
this Agreement;
the Executive engages in acts of dishonesty or fraud in
connection with his services hereunder; or
the Executive engages in other serious misconduct of such a
nature that the continued employment of the Executive may
reasonably be expected to adversely affect the business or
properties of the Company,
provided that, if the Company determines that a reason constituting cause for
termination under clauses (a), (b) or (d) has occurred, it shall give the
Executive written notice thereof at least 14 days prior to the proposed date of
termination of employment. If the Executive shall take the necessary steps to
remedy the condition constituting Cause within 10 days after the receipt of such
notice, then a reason for termination for Cause shall be deemed not to have
occurred. If the Executive shall not remedy the condition constituting Cause
within such time period to the reasonable satisfaction of the Company, then
termination for Cause shall occur on the date set forth in the notice from the
Company.
"Change of Control" shall mean any of:
a sale, transfer or other disposition of all or substantially all
of the property or assets of the Company other than to an
affiliate, within the meaning of Rule 405 of Regulation C adopted
under the Securities Act of 1933 (Federal).
a merger or consolidation of the Company;
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any change in the holding, direct or indirect of shares in the
capital of the Company as a result of which a person, or a group
of persons or persons acting jointly or in concert, or persons
associated or affiliated with any such person or group within the
meaning of section 13(d)(3) of the Securities Exchange Act of
1934 (Federal) are in a position to exercise effective control of
the Company, provided that for the purposes of this Agreement a
person or group of persons holding shares and/or other securities
in excess of the number which, directly or following conversion
thereof, would entitle the holders thereof to cast more than 30%
of the votes attaching to all shares in the capital of the
Company which may be cast to elect directors of the Company shall
be deemed to be in a position to exercise effective control of
the Company, and further provided that at the time of such
acquisition, no other person or group of persons shall hold
securities entitled to more than 30% of such votes;
Incumbent Directors no longer constituting at least a majority of
the Board at or prior to the conclusion of the first twelve (12)
months from the Effective Date.
"Effective Date" means the date upon which this Agreement takes effect;
"Good Reason" means:
a reduction by the Company to the Executive's base salary;
the failure by the Company to continue in effect any Plan in
which the Employee participates, unless such Plan (a) is replaced
by a successor Plan providing to Executive substantially similar
compensation and benefits (which replacement Plan shall continue
to be subject to this provision) or (b) terminates as a result of
the normal expiration of such Plan in accordance with its terms;
or the taking of any other action, or the failure to act, by the
Company which would materially adversely affect the Executive's
continued participation in any of such Plans without the consent
of the Executive, including by materially reducing the
Executive's benefits in the future under any of such plans;
effecting a diminution in the position or duties and
responsibilities of the Executive; or
Company requiring the Executive to be based anywhere more than 45
miles from the location of the Executive's office immediately
prior to the date hereof;
provided, however, that the events set out above in this subparagraph 19.2 shall
be considered to be Good Reason only if the Executive either before or within 30
days following notification from the Company of the occurrence of any such
event, notifies the Company that the event is not acceptable to the Executive
and the Company does not, within 14 days after such notice, rescind or rectify
to the reasonable satisfaction of the Executive the event that was not
acceptable to the Executive. Failure to object to an event set out above shall
not, however, preclude the Executive from reliance on such event if the
Executive objects to a subsequent event or events in accordance with this
subparagraph 19.2.
"Permanently Disabled" means that the Executive, by reason of illness,
disease, mental or physical disability or similar cause as determined by a
qualified medical practitioner mutually agreed to by the Executive and the
Company ("Disability"), is permanently disabled so as to be unable to fulfil the
Executive's duties, responsibilities and obligations hereunder and such
Disability shall continue for any consecutive 365-day period or for any period
of 365 days (whether or not consecutive) in any consecutive 24-month period.
"Incumbent Directors" shall mean those persons who are directors of the
Company on the Effective Date and shall include any person who becomes a
director of the Company thereafter and whose election, or nomination for
election, by the Company's shareholders was approved by a majority of the
Incumbent Directors then on the Board of Directors.
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"Involuntary Termination" means:
the termination of the Executive's employment by the Company,
except for Cause or pursuant to subparagraph 7.3;
the termination of the Executive's employment by the Executive
for Good
Reason; or
termination of the Executive's employment on September 1, 2001
pursuant to the notice given by the Company under subparagraph
1.3(a),
resignation from employment by the Executive following a Change
of Control, provided that both the resignation and Change of
Control occur within twelve (12) months from the Effective Date;
provided, however, a reassignment of the Executive to a position reasonably
comparable in responsibilities and duties to the position created under this
Agreement with a subsidiary, affiliate or related entity to the Company (the
"successor employer") will not constitute an Involuntary Termination under (a),
(b) and (c) above if the successor employer agrees to enter into an agreement
with the Executive that is substantially similar to this Agreement.
"Regular Monthly Compensation" shall mean one-twelfth (1/12) of the sum
of:
annual salary as at Termination Date, plus
either (i) the average of the awards of cash compensation (or if
such awards were not made in cash, the cash equivalent thereof)
paid or payable to the executive under any Incentive Plan(s) in
respect of the three calendar years completed immediately prior
to his termination from employment, or (ii) if the Executive has
not been employed for at least three calendar years before the
Termination Date, the Current Year's Incentive Plan(s) Amount.
"Incentive Plan(s)" shall mean executive compensation or bonus or
incentive plans established by the Company, and shall include any bonus or other
plans established both prior and subsequent to the date of this Agreement.
"Termination Period" shall mean the shorter of (i) the period starting
with the month in which the Executive's termination occurs and ending on the
last day of the 18th month thereafter, or (ii) the period starting with the
month in which the Executive's termination occurs and ending on his normal
retirement date (as defined in the Pension Plan).
"Voluntary Termination" means the resignation from employment by the
Executive except for "Good Reason".
"Termination Date" shall mean:
in the case of an Involuntary Termination as defined in
subparagraph 19.7(a), the effective date of termination of the
Executive's employment;
in the case of an Involuntary Termination as defined in
subparagraph 19.7(b), the date notice is given by the Executive
to the Company of the termination of the Executive's employment
by the Executive for Good Reason; and
(c) in the case of an Involuntary Termination as defined in
subparagraph 19.7(d), the date notice of resignation is given by
the Executive to the Company.
"Current Year's Incentive Plan(s) Amount" means the amount that would
otherwise be payable to the Executive under the Incentive Plan(s) in the year in
which the Termination Date occurs had the Executive remained
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employed to the end of the Termination Period calculated on the basis that all
targets and the performance objectives under the Incentive Plan(s) were
achieved.
"Regular Employee Benefits" means those medical or insurance benefits
which the Company provides to the Executive.
IN WITNESS WHEREOF the Parties hereto have executed this
Agreement on the day and year first above written.
SIGNED, SEALED AND DELIVERED )
In the presence of: )
)-------------------------------l/s
) RICHARD C. LORSON
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Witness )
MERIDIAN GOLD COMPANY
By:
--------------------------c/s
