<PAGE> 1
As filed with the Securities and Exchange Commission on June 11, 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C., 20549
FORM 20-F
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934.
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended ____________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ______________ to _______________
Commission File Number:
INTERNATIONAL URANIUM CORPORATION
(Exact name of Registrant as specified in its charter)
ONTARIO, CANADA
(Jurisdiction of incorporation or organization)
INDEPENDENCE PLAZA, SUITE 950, 1050 SEVENTEENTH STREET, DENVER, CO 80265
(Address of principal executive offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act:
NONE
Securities registered or to be registered pursuant to
Section 12(g) of the Act:
COMMON STOCK WITHOUT PAR VALUE
(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 Registrant's classes
of capital or common stock as of the close of the period covered by the annual
report:
<TABLE>
<CAPTION>
ISSUED AND OUTSTANDING
TITLE OF CLASS AS OF MARCH 31, 1998
<S> <C>
Common Stock, Without Par Value 65,743,066 common shares
</TABLE>
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 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.
NOT APPLICABLE
YES NO
---------- ----------
Indicate by check mark which financial statement item the registrant has
elected to follow:
ITEM 17 X ITEM 18
----------- ------------
<PAGE> 2
CURRENCY TRANSLATIONS
In this Registration Statement, unless otherwise specified, all dollar amounts
herein are expressed in United States dollars. The following table sets forth
the exchange rates for one Canadian dollar expressed in terms of one U.S.
dollar for the past five fiscal years and the calendar quarters ended 12/31/97
and 3/31/98.
<TABLE>
<CAPTION>
===================================================================================
YEAR AVERAGE LOW - HIGH September 30
===================================================================================
<S> <C> <C> <C>
1993 0.7855 0.7475 - 0.8417 0.7530
- -----------------------------------------------------------------------------------
1994 0.7365 0.7166 - 0.7731 0.7457
- -----------------------------------------------------------------------------------
1995 0.7275 0.7023 - 0.7478 0.7438
- -----------------------------------------------------------------------------------
1996 0.7329 0.7235 - 0.7513 0.7301
- -----------------------------------------------------------------------------------
1997 0.7221 0.6947- 0.7483 0.7236
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
===================================================================================
Calendar Quarter Ended Average Low-High Last Day of Quarter
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/97 0.7127 0.6947- 0.7292 0.6995
- -----------------------------------------------------------------------------------
03/31/98 0.6994 0.6821- 0.7105 0.7045
- -----------------------------------------------------------------------------------
</TABLE>
Exchange rates are based upon the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the
Federal Reserve Bank of New York.
The noon rate of exchange on May 15, 1998 reported by the United States Federal
Reserve Bank of New York for the conversion of Canadian dollars into United
States dollars was $1.4485.
(U.S.$1.00 = Cdn $).
GLOSSARY OF TERMS
ALTERNATE FEED Ore or residues from other processing facilities
that contain uranium in quantities or forms that
are either uneconomic to recover or cannot be
recovered at these other facilities, but can be
economically recovered either alone or in
conjunction with other co-products at the
Registrant's facilities.
BLM Means the United States Bureau of Land Management;
CCD CIRCUIT The counter current decantation circuit at the
White Mesa Mill, in which uranium-bearing solution
is separated from the crushed waste solids;
CONCENTRATES Means product from a uranium mining and milling or
in situ leach facility, which is commonly referred
to as yellowcake or U(3)O(8);
CONVERSION A process whereby the purified uranium obtained in
the refining process is converted into forms
suitable for making nuclear fuel (UO2) or for
enrichment (UF(6));
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 legal, technical, and
economic factors have been resolved;
$ Means United States dollars and "CDN$" means
Canadian dollars;
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<PAGE> 3
ENRICHMENT A process whereby the U-235 isotope content is
increased from the natural level of 0.711% to a
concentration of 3% to 5% as required in fuel for
light water reactors;
EPA The United States Environmental Protection Agency;
FEE LAND Means private land;
HECTARE Measurement of an area of land equivalent to 10,000
square meters or 2.47 acres;
MINERALIZATION Means a natural aggregate of one or more metallic
minerals;
NATURAL URANIUM Means uranium, any one of U(3)O(8), UO2 or UF(6),
neither irradiated nor enriched and which has a
U-235 isotope content of about 0.711%;
NRC The United States Nuclear Regulatory Commission;
ORE A natural aggregate of one or more minerals which,
at a specified time and place, may be mined and
sold at a profit or from which some part may be
profitably separated;
POSSIBLE GEOLOGICAL
RESOURCES A mineral resource inferred from geoscientific
evidence, drill holes, underground openings or
other sampling procedures where the lack of data is
such that continuity cannot be predicted with
confidence and where geoscientific data may not be
known with a reasonable level of confidence;
PROBABLE GEOLOGICAL
RESOURCES A mineral resource sampled by drill holes,
underground openings or other sampling procedures
at locations too widely spaced to ensure continuity
but close enough to give a reasonable indication of
continuity and where geoscientific data are known
with a reasonable level of reliability. A probable
geological resource estimate will be based on more
data, and therefore will be more reliable, than a
possible geological resource estimate;
PROBABLE MINEABLE
RESERVES Means ore reserves stated in terms of mineable tons
or volumes and grades where the corresponding
identified geological reserve has been defined by
drilling, sampling or excavation (including
extensions beyond actual openings and drill holes),
and where the geological factors that control the
ore body are known with sufficient confidence that
the geological reserve is categorized as
"Indicated";
PROVEN GEOLOGICAL
RESOURCES A mineral resource intersected and tested by drill
holes, underground openings proven or other
sampling procedures at locations which are spaced
closely enough to confirm continuity and where
geoscientific data are reliably known. A proven
geological resource estimate will be based on a
substantial amount of reliable data, interpretation
and evaluation of which allows a clear
determination to be made of shapes, sizes,
densities and grades;
PROVEN MINEABLE RESERVES Ore reserves stated in terms of mineable tons or
volumes and grades in which the corresponding
identified geological reserve has been defined in
three dimensions by excavation or drilling
(including minor extensions beyond actual openings
and drill holes), and where the geological factors
that limit the ore body are known with sufficient
confidence that the geological reserve is
categorized as "Measured";
3
<PAGE> 4
REFINING A process whereby concentrates, containing an
average of 60-80% uranium, are chemically refined
to separate the uranium from impurities to produce
purified uranium;
S2MS Saskatoon Mining & Mineral Services Ltd.;
SAG MILL The semi-autogenous grinding mill at the White Mesa
Mill in which the uranium ore is ground prior to
the leaching process;
TAILINGS Waste material from a mineral processing mill after
the metals and minerals of a commercial nature have
been extracted;
TON A short ton (2,000 pounds);
TONNE A metric tonne (2,204.6 pounds);
URANIUM OR U Means natural uranium; 1% U=1.18% U(3)O(8);
EU(3)O(8) U(3)O(8) equivalent;
UF(6) Means natural uranium hexafluoride, produced by
conversion from U(3)O(8) , which is not yet
enriched or depleted;
U(3)O(8) Triuranium octoxide. U(3)O(8) is often referred
to as yellowcake.
V2O5 Vanadium pentoxide;
WHITE MESA MILL Means the 2,000 ton per day uranium mill, with a
vanadium or other co-product recovery circuit,
located near Blanding, Utah that is owned by IUC
White Mesa, LLC
YELLOWCAKE Means U(3)O(8).
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Except for the statements of historical fact contained therein, the information
under the headings "Item 2 - Description of Property", "Item 9 - Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Registration Statement constitutes forward looking statements
("Forward Looking Statements") within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such Forward Looking Statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Registrant to differ materially
from any future results, performance or achievements projected or implied by
such Forward Looking Statements. Such factors include, among others, the
factual results of current exploration activities, conclusions of feasibility
studies now underway, changes in project parameters and the factors set forth
in the section entitled "Risk Factors".
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
International Uranium Corporation (the "Registrant") is the product of an
amalgamation under the Business Corporations Act (Ontario) (the "Act") of two
companies; namely, International Uranium Corporation, incorporated on October
3, 1996 under the laws of the Province of Ontario pursuant to the Act, and
Thornbury Capital Corporation, incorporated under the laws of the Province of
Ontario by Letters Patent ("Thornbury") on September 29, 1950. The
amalgamation was made effective on May 9, 1997, pursuant to a Certificate of
Amalgamation dated that date. The amalgamated companies were continued under
the name "International Uranium Corporation" (see "Amalgamation").
4
<PAGE> 5
The head office of the Registrant is located at Independence Plaza, Suite 950,
1050 Seventeenth Street, Denver, CO 80265. The registered office of the
Corporation is located at Suite 2100, Scotia Plaza, 40 King Street West,
Toronto, Ontario, M5H 3C2.
The Registrant is engaged in the business of producing uranium concentrates and
in the selling and trading of these concentrates in the international nuclear
fuel market. As a co-product of its uranium production, the Registrant also
produces and sells vanadium.
The Registrant entered the uranium industry in May 1997 by acquiring
substantially all of the uranium producing assets of Energy Fuels Ltd., Energy
Fuels Exploration Company, and Energy Fuels Nuclear, Inc. (collectively "Energy
Fuels"). The Registrant raised Cdn$47.25 million through a special warrant
private placement and used cash of approximately Cdn$29.3 million to purchase
the Energy Fuels' assets (see "Acquisition" for further details). Energy Fuels
was a uranium producer with properties in the United States and Mongolia.
The Energy Fuels' assets acquired included several developed mines on standby,
several partially developed mines, numerous targeted mines and exploration
properties within the states of Colorado, Utah, Arizona, Wyoming and South
Dakota, as well as the 2,000 ton per day White Mesa Mill near Blanding, Utah.
The White Mesa Mill is a fully permitted dual circuit uranium/vanadium mill in
the United States that has been operating over the last 10 years. Since its
start-up in 1980, the White Mesa Mill, which also has a vanadium and other co-
product recovery circuit, has produced over 27 million pounds of uranium and
over 43 million pounds of vanadium in six separate milling campaigns. As a
result of the acquisition, the Registrant's U.S. properties comprise over
50,000 acres and contain proven and probable geological resources of 42 million
pounds of uranium and 62 million pounds of vanadium in the U.S.. Potential
additional geological resources are estimated to be 58 million pounds of
uranium and 29 million pounds of vanadium. In addition to the U.S. properties,
the Registrant also acquired a 70% interest in a joint venture with the
government of Mongolia and a Russian geological concern to develop and produce
uranium reserves in Mongolia. The Mongolian concessions encompass
approximately 4,000,000 acres with an estimated potential uranium geological
resource of 100 million pounds.
The following chart illustrates the Registrant's corporate structure, including
all significant subsidiaries, their jurisdictions of incorporation and the
percentage interest held.
5
<PAGE> 6
[FLOW CHART]
6
<PAGE> 7
International Uranium (Bermuda I) Ltd. and International Uranium Company
(Mongolia) Ltd., were incorporated solely for the purposes of holding shares of
Gurvan Saihan Joint Venture Corp. In the event the Registrant expands its
operations to include additional assets or assets in other countries, it is
possible that these assets may also be held through one or more additional
offshore entities, some of the shares of which may be held by International
Uranium (Bermuda I) Ltd.
The White Mesa Mill is held by IUC White Mesa LLC (see "White Mesa Mill"), the
exploration properties are held by IUC Exploration LLC, the Sunday Mine Complex
is held by IUC Sunday Mine LLC (see "Sunday Mine Complex"), the remainder of
the Colorado Plateau mines are held by IUC Colorado Plateau LLC (see "Colorado
Plateau"), the Reno Creek Property is held by IUC Reno Creek LLC (See Reno
Creek Property"), the Arizona Strip mines are held by IUC Arizona Strip LLC
(see "Arizona Strip") and the mines that are in reclamation are held by IUC
Properties LLC, each of which is a limited liability company under the laws of
Colorado. International Uranium (USA) Corporation is the operating company
that is responsible for operations in the United States and Mongolia. It does
not hold assets of any significance other than permits and licenses, and the
head office administrative assets. The operational management team for the
United States and Mongolia and the employees of the United States operations
are employed by International Uranium (USA) Corporation. Most of the remaining
assets purchased from Energy Fuels are held directly by International Uranium
Holdings Corporation.
International Uranium U.S. Finance LLC ("Finance") is a limited liability
company, which was originally formed to provide financing to International
Uranium Holdings Corporation ("Holdings") and its subsidiaries, as required.
All financing previously provided by Finance to Holdings and its subsidiaries
has been repaid and Finance has been merged into Holdings. As consideration
in the merger, Holdings issued preferred stock to the Registrant in the face
amount of $1.5 million.
The Registrant's principal strategy is to maintain and build upon its position
as a producer of uranium concentrates to the international nuclear fuel market.
The Registrant will also continue to produce and sell vanadium as a co-product
of its uranium production. The Registrant intends to implement its strategy
through (i) continued capital expenditures for purposes of exploration and
development; (ii) the restart of developed mines currently on stand-by; (iii)
the purchase of uranium ore mined by third parties; (iv) the processing of
uranium bearing by-products; and (v) the continued mining of the Registrant's
uranium-producing properties. The Registrant continues to actively pursue a
variety of exploration programs and targets, primarily for uranium, in a number
of countries around the world.
AMALGAMATION
The predecessor, International Uranium Corporation ("Old IUC"), and Thornbury
were amalgamated effective May 9, 1997 under the provisions of the Business
Corporations Act (Ontario) to form the Registrant in accordance with the terms
of an agreement entered into between Old IUC and Thornbury dated February 13,
1997 (the "Amalgamation Agreement"). The primary purpose of the Amalgamation
was to effect an acquisition of Thornbury by Old IUC in that upon completion of
the Amalgamation the shareholders of Old IUC immediately prior to the
Amalgamation would hold the controlling interest in the Registrant, a public
company.
BACKGROUND ON THORNBURY
Thornbury was incorporated under the laws of Ontario on September 29, 1950.
Thornbury's common shares were quoted for trading on the Canadian Dealing
Network Inc. Thornbury's principal assets consisted of marketable securities
with a market value as at December 31, 1996 of Cdn$495,480 and eight mining
claims situated in the Mayo Mining District, Yukon Territory, which expire
between 1999 and 2009.
SHARE EXCHANGE RATIOS
The Amalgamation received the approval of the shareholders of both Old IUC and
Thornbury. On amalgamation, each shareholder of Old IUC received one (1) share
of the Registrant, a newly formed amalgamated company, for each one (1) common
share held in Old IUC, and each shareholder of Thornbury received one (1) share
of the Registrant for each five (5) common shares held in Thornbury.
Fractional shares resulting from the foregoing were rounded down to the next
whole number.
After giving effect to the amalgamation, there were a total of 65,743,066
common shares of the Registrant issued and outstanding. This figure was based
on 26,500,000 previously issued common shares of Old IUC, 37,800,000 common
shares of Old IUC issued upon conversion of the special warrants and 7,215,334
common shares of
7
<PAGE> 8
Thornbury which were outstanding prior to the amalgamation being effective
(1,443,066 post-amalgamation common shares).
AMALGAMATION AGREEMENT
Old IUC and Thornbury entered into an amalgamation agreement (the "Amalgamation
Agreement") which contained such representations and warranties, covenants,
indemnification and other provisions as are customarily found in an
amalgamation agreement entered into by parties dealing at arm's length.
ACQUISITION
The Registrant entered the uranium industry by acquiring substantially all of
the uranium producing assets of Energy Fuels. On December 19, 1996, Old IUC,
through its subsidiary, International Uranium Holdings Corporation, entered
into an agreement (the "Acquisition Agreement") to acquire the Energy Fuels'
Assets for cash of $20.5 million, subject to adjustment. The terms of the
acquisition were approved by the United States Bankruptcy Court following a
lengthy bidding procedure as required under United States bankruptcy laws (see
"Bankruptcy of Oren Benton and Nuexco"). The acquisition was completed on May
9, 1997.
ENERGY FUELS
HISTORICAL BACKGROUND
The Energy Fuels group of companies was founded in August 1976 to capitalize on
uranium mining, purchasing and processing opportunities in the Colorado Plateau
area of western Colorado and eastern Utah. In the 1980's, Energy Fuels was one
of the largest producers of uranium in the United States. First efforts were in
the activation of old mines, exploration and development of new mines and the
construction of ore buying stations at Hanksville and Blanding, Utah.
In order to process the ores mined and purchased from the Colorado Plateau,
Energy Fuels commenced construction of a 2,000 ton per day mill near Blanding,
Utah in June 1979 at a total cost of approximately $40 million. Known as the
White Mesa Mill, the facility is a dual-circuit uranium mill. Since its
start-up in May 1980, the White Mesa Mill, which also has a vanadium and other
co-product recovery circuit, has produced over 27 million pounds of uranium and
over 43 million pounds of vanadium in six separate milling campaigns.
The cost of construction of the White Mesa Mill was funded in large part by
Kernkraftwerk Goesgen-Daeniken AG, and Nordostschweizerische Kraftwerke AG, the
former limited partners in certain of the Energy Fuels Assets (the "Swiss
Utilities"), who, in consideration for this funding, acquired a 40% limited
partnership interest in all of Energy Fuels' United States assets. In 1995,
this 40% limited partnership interest was converted into a 9% royalty on all
uranium produced and a 5% royalty on vanadium and all other minerals produced
from the United States properties. The Swiss utilities have agreed to a
reduction in this royalty on most properties until December 31, 2000. See
"Swiss Royalty Interest".
In the early 1980's Energy Fuels expanded its operations to include breccia
pipe uranium mining in the Arizona Strip district of northern Arizona. Since
1980, Energy Fuels had mined over 19 million pounds of uranium from seven mines
in the Arizona Strip. The land position of Energy Fuels in the Arizona Strip
district acquired by the Registrant includes three developed or partially
developed mines as well as several targeted mines and numerous other
exploration targets.
In 1984 Energy Fuels formed a limited partnership with Union Carbide
Corporation ("Union Carbide") pursuant to which Union Carbide acquired a 70%
undivided interest in and became the operator of the White Mesa Mill. As a
result of subsequent negotiations in 1987, Union Carbide's mines and properties
in the Colorado Plateau were added to this limited partnership and, as a
result, Energy Fuels acquired a 25% undivided interest in those mines. In 1994
this partnership was dissolved and Energy Fuels re-acquired 100% of the White
Mesa Mill as well as certain of Union Carbide's mines on the Colorado Plateau.
In the Colorado Plateau district, Energy Fuels then owned several uranium and
vanadium mines on standby, several partially developed mines as well as
additional acreage with exploration potential.
8
<PAGE> 9
In 1994, in an effort to expand into the global uranium marketplace, Energy
Fuels acquired a 70% interest in a joint venture with the government of
Mongolia and a Russian geological concern to develop and produce uranium
reserves in Mongolia over a vast area.
In the early 1990's, Energy Fuels also acquired two significant ore bodies
intended to be mined by in-situ type mining technology: the Reno Creek property
in Wyoming, and the Dewey Burdock property in South Dakota.
From 1990 through the date of the Acquisition, Energy Fuels did not engage in
mining activities on its properties.
In early 1995, Energy Fuels filed for protection under Chapter 11 of the United
States Bankruptcy Code as a result of providing guarantees to an affiliated
company and its majority shareholder. See "Bankruptcy of Oren Benton and
Nuexco".
BANKRUPTCY OF OREN BENTON AND NUEXCO
On February 23, 1995, Oren L. Benton ("Benton") and two entities which Benton
controlled -- Nuexco Trading Corporation ("Nuexco") and CSI Enterprises, Inc.
("CSI") -- filed for protection under Chapter 11 of the United States
Bankruptcy Code.
Energy Fuels, Ltd. ("EFL") and Energy Fuels Exploration Company ("EFEX") filed
for protection under Chapter 11 of the United States Bankruptcy Code on
February 23, 1995. EFL and EFEX were both controlled by Benton through Energy
Fuels Mining Joint Venture ("EFMJV"). EFL and EFEX were forced into bankruptcy
because Benton, as controlling shareholder, caused them to guarantee certain of
Benton's and Nuexco's investment and trading activities. EFMJV filed for
protection under Chapter 11 on August 12, 1996.
The bankruptcy of Benton, Nuexco, CSI, EFL, EFEX and EFMJV involved numerous
other affiliated and subsidiary entities, of which Energy Fuels was a
relatively small part.
Under the provisions of Chapter 11 of the United States Bankruptcy Code, Benton
maintained control of the assets of his estate, including the Energy Fuels
Assets, but was under a fiduciary duty to reorganize his estate either under a
plan of reorganization or through the sale of portions of the assets from time
to time ("Section 363 Sales"). In order to protect the rights of creditors in
this process, a committee of selected creditors was formed (the "Creditors
Committee") as required under the provisions of Chapter 11 of the United States
Bankruptcy Code.
Benton and the Creditors Committee filed a joint Section 363 Sale motion on
October 21, 1996 with the Registrant as the lead bidder for the sale of the
Energy Fuels Assets to the Registrant for cash of $20.5 million, subject to
adjustments.
On December 4, 1996, the bankruptcy court approved the Acquisition Agreement
and the sale of the Energy Fuels Assets to the Registrant. The effect of the
court order was to eliminate substantially all known and existing claims and
liabilities of all creditors against the Energy Fuels Assets, so that the
Registrant would acquire the Energy Fuels Assets free and clear of all such
liabilities.
SUMMARY OF ENERGY FUELS ASSETS ACQUIRED BY THE REGISTRANT
UNITED STATES ASSETS
The Energy Fuels Assets acquired by the Registrant pursuant to the Acquisition
Agreement located in the United States included the following:
o the White Mesa Mill, a 2,000 ton per day uranium and
vanadium processing plant in Blanding, Utah. See "White
Mesa Mill".
o the Arizona Strip Properties, developed and partially
developed mines and exploration properties in north
central Arizona, including the Arizona 1 and Canyon mines,
both currently on standby. See "Arizona Strip", "Arizona 1
Mine", "Canyon Mine" and "Pinenut Mine".
o the Colorado Plateau properties, developed and partially
developed mines and exploration properties straddling the
south/central Colorado and Utah border, including the West
Sunday Mine Complex and the Rim Mine, both of which are
currently in production. See "Colorado Plateau" and
"Sunday Mine Complex".
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o the Reno Creek in situ leach project, a uranium deposit in
the Powder River Basin area of Wyoming in advanced stages
of exploration and permitting. See "Reno Creek Property".
o the Dewey Burdock in situ leach project, a uranium deposit
in South Dakota. See "Dewey Burdock Property".
o the Bullfrog project, a uranium deposit in south central
Utah. See "Bullfrog Property".
o substantial mining equipment. See "Other Assets".
o various uranium supply, waste processing contracts, and
joint venture contracts. See "Other Assets" and
"Alternate Feeds".
o various field and administrative offices. See "Other
Assets".
THE MONGOLIA PROPERTY
Energy Fuels owned a 70% interest in the Gurvan-Saihan Joint Venture in
Mongolia. The Registrant, as a result of the Acquisition, acquired this
interest. The other parties are the Mongolian Government as to 15% and
Geologorazvedka, a Russian geological concern, as to the remaining 15%. The
Gurvan-Saihan Joint Venture currently holds some 4 million acres of uranium
exploration properties in Mongolia. See "Mongolia Property".
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<PAGE> 11
SUMMARY OF RESERVES AND RESOURCES
The following is a summary of the reserves and resources that the Registrant
acquired on completion of the Energy Fuels' Asset Acquisition:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
MILLION LBS U(3)O(8) MILLION LBS V(2)O(5)
- -------------------------------------------------------------------------------------------------------------------------
PROVEN/PROBABLE ADDITIONAL POTENTIAL PROVEN/PROBABLE ADDITIONAL POTENTIAL
MINEABLE GEOLOGICAL ADDITIONAL MINEABLE GEOLOGICAL ADDITIONAL
RESERVES(1) RESOURCES(2) RESOURCES(2) RESERVES(1) RESOURCES(2) RESOURCES(2)
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ARIZONA STRIP -- -- 39 -- -- --
(conventional mining)
- -------------------------------------------------------------------------------------------------------------------------
ARIZONA 1 MINE 1.0 -- -- -- -- --
(standby)
- -------------------------------------------------------------------------------------------------------------------------
CANYON MINE (partially 2.0 -- 1.0 -- -- --
developed)
- -------------------------------------------------------------------------------------------------------------------------
PINENUT MINE (standby) -- 0.9 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
COLORADO PLATEAU 1.0 (3) 10.3 5.0 7 (3) 55 29
(conventional mining)
- -------------------------------------------------------------------------------------------------------------------------
BULLFROG PROJECT -- 12.9 7.0 -- -- --
(conventional mining)
- -------------------------------------------------------------------------------------------------------------------------
RENO CREEK 5.1 2.4 5.0 -- -- --
(in-situ mining)
- -------------------------------------------------------------------------------------------------------------------------
DEWEY BURDOCK (in-situ -- 6.6 (4) 1.2 (4) -- -- --
mining)
- -------------------------------------------------------------------------------------------------------------------------
GURVAN SAIHAN JV -- 17.2 (4) 100 -- -- --
(in-situ mining)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TOTALS 9.1 50.3 158.2 7 55 29
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As delineated by S2MS in the S2MS Report.
(2) As stated by management of Registrant. Note, significant portions of
these geological resources were stated by management of Registrant to be
mineable reserves; however, in the time available, S2MS was not able to
verify these reserves.
(3) Does not include 364,000 lbs. of U(3)O(8) and 3,460,000 lbs. of
V(2)O(5) currently in the mine plan at the Rim Mine. See "Rim Mine".
(4) Updated by Registrant
INDEPENDENT EXPERT'S REPORT
In September 1996, the Registrant engaged Saskatoon Mining & Mineral Services
Ltd. ("S2MS"), an independent engineering firm specializing in the uranium
industry, to review and report on certain of Energy Fuels' assets. S2MS
prepared a report entitled "Acquisition Study of Energy Fuels Nuclear Inc."
dated November 1996 (the "S2MS Report").
Where indicated, S2MS has reviewed certain of the reserves and other costs set
forth herein.
CALCULATION OF RESERVES AND RESOURCES
The Registrant maintains estimates of reserves and resources on the various
properties. The Registrant estimates that its properties (including Mongolia)
contained approximately 59 million pounds of U(3)O(8) as proven and probable
geological resources. In addition, the Registrant estimates that there are at
least another 40 million pounds of potential resources of U(3)O(8) in the
Arizona Strip area, and at least another 5 million pounds of potential
resources of U(3)O(8) in the Colorado Plateau area. In both cases, these
estimates of potential resources were based upon years of historical experience
in those areas. See "Arizona Strip -- Exploration Potential" and "Colorado
Plateau -- Exploration Potential".
Of these resources, the Registrant calculates 10.5 million pounds as mineable
in its current mine plan: 1 million from the Sunday Mine Complex; 0.4 million
from the Rim Mine; 1 million from the Arizona 1 Mine; 3 million
11
<PAGE> 12
from the Canyon Mine (which includes 1 million pounds that are technically in
the potential reserve category but which management, based on years of
experience with breccia pipe mines, believes will be proven as mineable
reserves once underground drilling is completed in the course of mine
development); and 5.1 million pounds from the Reno Creek Property (to which a
75% recovery factor is applied). See "Sunday Mine Complex", "Rim Mine",
"Arizona 1 Mine", "Canyon Mine" and "Reno Creek Property".
The Registrant's current mine plan covers anticipated production for the next 5
years from the Sunday Mine Complex, the Rim Mine, the Arizona 1 Mine and the
Canyon Mine and anticipated production from the Reno Creek Property over its
expected mine life of approximately 6 years. The Registrant's current mine
plan does not address other mines that may also be brought into production
during the next 5 years at various price levels of U(3)O(8) and vanadium, nor
the additional reserves and mines that are expected to be developed in the
future, thereby extending the mining plan beyond 5 years.
The Registrant has accepted these reserve numbers and recovery factors as its
base case, rather than the slightly lower numbers calculated by S2MS, because
it believes that the historic production on the Colorado Plateau will continue
for many years to come; that past experience with breccia pipes leads to the
reasonable expectation that additional reserves will be delineated in the
Canyon Mine once underground drilling is completed; and that a 75% recovery
factor for the Reno Creek Property is reasonable, in light of the fact that
other positive factors for increasing reserves at that project have been
ignored.
Furthermore, the Registrant believes that the production estimates set out in
its current mine plan for the next five years can be continued for many
additional years depending on commodity prices, with the additional potential
on the Colorado Plateau and the Arizona Strip.
S2MS' CALCULATIONS OF RESERVES AND RESOURCES
As part of the Registrant's due diligence prior to the completion of the
bidding procedures for the Energy Fuels Assets, S2MS carried out a review of
the Sunday Mine Complex, the Arizona 1 Mine, the Canyon Mine, the Reno Creek
Property, the Dewey Burdock Property, the Mongolia Property and the White Mesa
Mill during the two months prior to the December 4, 1996 Section 363 Sale
confirmation hearing. S2MS spent approximately 1,500 hours completing their
review of these properties. However, given the limited amount of time
available, S2MS was not asked to review any other mines or properties of Energy
Fuels, and in particular did not review the Deer Creek, Rim, Egnar Plains,
Thunderbolt or Monogram mines on the Colorado Plateau, the Pinenut Mine on the
Arizona Strip, the Bull Frog Property or any of the exploration properties on
the Colorado Plateau or the Arizona Strip. In addition, given the absence of
historical data in some cases, S2MS was not able to fully evaluate all of the
reserves and resources in the Sunday Mine Complex.
Based on their review, S2MS was able to delineate mineable reserves of 9.1
million pounds. However, S2MS was unable to delineate all of the reserves in
the Registrant's mine plan. The reserve estimates for the Arizona 1 Mine of 1
million pounds of U(3)O(8) were confirmed. However, because S2MS was not able
to recognize formally the additional 1 million pounds that the Registrant
delineated as mineable reserves at the Canyon Mine once underground drilling is
completed, S2MS was only able to delineate 2 million pounds of U(3)O(8) at the
Canyon Mine. Finally S2MS applied a recovery factor of 65% to the reserves at
the Reno Creek Property, compared to the 75% recovery factor applied by the
Registrant, thereby reducing the number of pounds of uranium that is expected
to be recovered from those reserves by approximately 500,000 pounds. In
addition, as S2MS was not asked to review the Rim Mine, the 364,000 lbs. of
U(3)O(8) and 3,460,000 lbs. of V(2)O(5) in the current mine plan for the Rim
Mine were not included in S2MS's report. See "Rim Mine".
In its report, however, S2MS did recognize that it was unable to fully evaluate
all of the reserves at the Sunday Mine Complex, given the lack of time and data
and that additional potential exists. S2MS also acknowledged that it is
possible that with additional underground drilling at the Canyon Mine, the
Registrant's estimate of 3 million pounds of reserves at that mine could be
achieved. Finally, S2MS acknowledged that potential exists at the Reno Creek
Property to delineate additional reserves.
12
<PAGE> 13
CLAIMS ARISING OUT OF THE ACQUISITION
Under the Acquisition Agreement, Energy Fuels made certain representations and
warranties concerning title to the various properties and mining claims
acquired by the Registrant and various other matters. Energy Fuels agreed to
indemnify the Registrant from any losses and damages incurred by the Registrant
(subject to a cap of $1,500,000) and arising out of a breach of Energy Fuels'
representations and warranties. A total of $1,500,000 of the purchase price
paid by the Registrant was placed in escrow to secure Energy Fuels' indemnity
obligations. On May 8 and 9, 1998, the Registrant submitted a claim against
all amounts held in escrow alleging various breaches of Energy Fuels'
representations and warranties. The liquidating trustee for the bankruptcy
estates of Energy Fuels has denied the claims of the Registrant. At this time,
it is not known whether the Registrant will prevail on its claims against the
amounts held in escrow or the amount, if any, to be recovered on such claims.
RISK FACTORS
VOLATILITY AND SENSITIVITY TO PRICES, COSTS AND EXCHANGE RATES
Because a significant portion of the Registrant's revenues are expected to be
derived from the sale of uranium and vanadium, the Registrant's net earnings
will be closely related to the long- and short-term market price of U(3)O(8)
and V(2)O(5). Historically, uranium prices have been subject to fluctuation,
and the price of uranium has been and will continue to be affected by numerous
factors beyond the Registrant's control, such as demand for nuclear power,
political and economic conditions in uranium producing and consuming countries,
such as the United States, Canada and Russia and other republics of the CIS,
and production levels and costs of production in countries such as Russia,
Canada and other republics of the CIS and Australia.
COMPETITION FROM ALTERNATIVE ENERGY SOURCES AND PUBLIC ACCEPTANCE OF NUCLEAR
ENERGY
Nuclear energy competes with other sources of energy, including oil and gas,
coal and hydro-electricity. These alternative energy sources are to some extent
interchangeable with nuclear energy, particularly over the longer term. Lower
prices of oil, gas, coal and hydro-electricity for an extended period of time
may make nuclear power a less attractive fuel source for the generation of
electricity, thus resulting in lower demand for uranium. Furthermore, the
growth of the uranium and nuclear power industry beyond its current level will
depend upon continued and increased acceptance of nuclear technology as a means
of generating electricity. Because of unique political, technological and
environmental factors that affect the nuclear industry, the industry is subject
to public opinion risks which could have an adverse impact on the demand for
nuclear power and increase the regulation of the nuclear power industry.
URANIUM INDUSTRY COMPETITION AND INTERNATIONAL TRADE RESTRICTIONS
The international uranium industry is highly competitive in many respects,
including the supply of uranium. The Registrant markets uranium to utilities in
direct competition with supplies available from a relatively small number of
Western World uranium mining companies, from certain republics of the CIS and
Mainland China and from excess inventories, including inventories made
available from decommissioning of military weapons. To some extent the effects
of the supply of uranium from the CIS republics are mitigated by a number of
international trade agreements and policies, including suspension agreements
entered into by the United States with certain republics of the CIS, including
Russia, that restrict imports into the United States market. In addition, in
January 1994, the United States and Russia signed a 20-year agreement to
convert HEU from former Russian nuclear weapons to a grade suitable for use in
nuclear power plants. During 1995, the United States also amended its
suspension agreements with the Republics of Kazakhstan and Uzbekistan, which
increased the limit on the supply of uranium from those republics into the
United States for a 10-year period. The European Community also has an informal
policy limiting annual consumption of uranium sourced from the CIS republics.
These agreements and any similar future agreements, governmental policies or
trade restrictions are beyond the control of the Registrant and may affect the
supply of uranium available in the United States, which is the largest market
for uranium in the world.
13
<PAGE> 14
IMPRECISION OF RESERVE AND RESOURCE ESTIMATES
Reserve and resource estimates included in this document for uranium and
vanadium are estimates, and no assurances can be given that the indicated
levels of recovery will be realized. Such estimates are expressions of judgment
based on knowledge, mining experience, and analysis of drilling results and
industry practices. Valid estimates made at a given time may significantly
change when new information becomes available. While the Registrant believes
that the reserve and resource estimates included in this document are well
established and reflect management's best estimates, by their nature, reserve
and resource estimates are imprecise and depend, to a certain extent, upon
statistical inferences which may ultimately prove unreliable. Furthermore,
market price fluctuations in uranium and vanadium, as well as increased
production costs or reduced recovery rates, may render ore reserves containing
lower grades of mineralization uneconomic and may ultimately result in a
restatement of reserves. The extent to which resources may ultimately be
reclassified as proven or probable reserves is dependent upon future
inspection, sampling, and measurement. The evaluation of resources or reserves
is also influenced by economic and technological factors, which may change over
time. Resource figures included here have not been adjusted in consideration of
these risks and, therefore, no assurances can be given that any resource
estimate will ultimately be reclassified as proven or probable reserves.
REPLACEMENT OF RESERVES
The Sunday Mine Complex, Rim, Arizona 1, Canyon and Reno Creek Mines are the
Registrant's principal sources of uranium at this time. Unless uranium
properties such as Dewey Burdock and Mongolia are developed and placed into
production or other reserves on the Colorado Plateau, the Arizona Strip or
elsewhere are discovered or extensions to existing ore bodies are found, the
Registrant's total uranium reserves will decrease over time as its current
uranium producing properties are depleted. Although in the past the
Registrant's predecessors have successfully replenished their reserves through
ongoing exploration, development and acquisition programs, there can be no
assurance that additional uranium properties will be developed and placed into
production or that the Registrant's future exploration, development and
acquisition efforts will be successful.
MINING RISKS AND INSURANCE
The mining of uranium is a capital intensive commodity business, and is
generally subject to a number of risks and hazards, including environmental
pollution, accidents or spills, industrial accidents, labor disputes, changes
in the regulatory environment, natural phenomena (such as inclement weather
conditions, underground flooding and earthquakes), and encountering unusual or
unexpected geological conditions. Many of the foregoing risks and hazards could
result in damage to, or destruction of, the Registrant's mineral properties,
personal injury or death, environmental damage, delays in or cessation of
production from the Registrant's mines or in its exploration or development
activities, monetary losses and potential legal liability. In addition, due to
the radioactive nature of the materials handled in uranium mining and milling,
additional costs are incurred by the Registrant on a regular and ongoing basis.
The Registrant intends to maintain insurance against certain risks that are
typical in the uranium industry, including business interruption insurance for
the White Mesa Mill. Although the Registrant maintains insurance in amounts it
believes to be reasonable, such insurance may not provide adequate coverage in
the event of certain unforeseen circumstances. Insurance against certain risks
(including certain liabilities for environmental pollution or other hazards as
a result of production, development or exploration), is generally not available
to the Registrant or to other companies within the uranium mining and milling
business.
GOVERNMENTAL REGULATION AND POLICY RISKS
Mining and milling operations and exploration activities, particularly uranium
mining and milling in the United States, are subject to extensive regulation by
state and federal governments. Such regulation relates to production,
development, exploration, exports, taxes and royalties, labor standards,
occupational health, waste disposal, protection and remediation of the
environment, mine reclamation, mine safety, toxic substances and other matters.
Compliance with such laws and regulations has increased the costs of exploring,
drilling, developing, constructing, operating and closing the Registrant's
mines and other facilities. It is possible that, in the future, the costs,
delays and other effects associated with such laws and regulations may have an
impact on the Registrant's decisions as to whether to continue to operate
existing mines or refining and other facilities or, with respect to exploration
and development properties, whether to proceed with exploration or development.
Furthermore, future changes in governments, regulations and policies, could
materially adversely affect the Registrant's results of operations in a
14
<PAGE> 15
particular period or its long-term business prospects. In addition, should
certain recent proposals being considered by the U.S. Congress become law, a
royalty on production of minerals from unpatented mining claims located on
federal lands could be imposed, which could adversely impact the Registrant's
proposed business and uranium prospects.
Worldwide demand for uranium is directly tied to the demand for energy produced
by the nuclear electric industry, which is also subject to extensive government
regulation and policies in the United States and elsewhere. The development of
mines and related facilities is contingent upon governmental approvals which
are complex and time consuming to obtain and which, depending upon the location
of the project, involve various governmental agencies. The duration and success
of such approvals are subject to many variables outside the Registrant's
control. In addition, as described below under "The Uranium Industry", the
international marketing of uranium is subject to certain trade restrictions,
such as those imposed by the suspension agreements entered into by the United
States with certain republics of the CIS and the agreement between the United
States and Russia related to the supply of Russian HEU into the United States.
ENVIRONMENTAL RISKS
The Registrant has expended significant resources, both financial and
managerial, to comply with environmental protection laws and regulations and
permitting requirements, and the Registrant anticipates that it will be
required to continue to do so in the future. Although the Registrant believes
that its operations are in compliance, in all material respects, with all
relevant permits, licenses and regulations involving worker health and safety
as well as the environment, the historical trend toward stricter environmental
regulation may continue. The uranium industry is subject to not only the worker
health and safety and environmental risks associated with all mining
businesses, but also to additional risks uniquely associated with uranium
mining and milling. The possibility of more stringent regulations exists in the
areas of worker health and safety, the disposition of wastes, the
decommissioning and reclamation of mining and milling sites, and other
environmental matters, each of which could have a material adverse effect on
the costs or the viability of a particular project.
DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS
The Registrant expects that it will rely heavily on a relatively small number
of customers to purchase a significant portion of its production of uranium.
The loss of any of the Registrant's largest customers or curtailment of
purchases by such customers could have a material adverse effect on the
Registrant's financial condition and results from operations.
MONGOLIA PROPERTY
An important component of the Registrant's business plan is the development of
the Mongolia Property in Mongolia. As with any foreign operation, the Mongolia
Property may be subject to certain risks, such as adverse political and
economic developments in Mongolia, foreign currency controls and fluctuations,
as well as risks of war and civil disturbances. Other events may limit or
disrupt the project, restrict the movement of funds, result in a deprivation of
contract rights or the taking of property by nationalization or expropriation
without fair compensation, increases in taxation or the placing of limits on
repatriation of earnings. No assurance can be given that current policies of
Mongolia or the political situation within that country will not change so as
to affect adversely the value or continued viability of the Registrant's
interests in the Mongolia Property. The Registrant intends to monitor this
investment with a view to anticipating political, economic or other events that
may affect the Registrant's interests in the Mongolia Property.
TITLE
The Registrant is satisfied that it has good and proper right, title and
interest in and to the mining properties that it intends to explore and
develop, subject to the description of such properties appearing elsewhere in
this document. No assurance, however, can be given that such properties are not
subject to prior unregistered agreements or interests or undetected claims or
interests, which could be material and adverse to the Registrant.
15
<PAGE> 16
RELIANCE ON ALTERNATE FEED REVENUE
A significant portion of the Registrant's expected revenues and income over the
next several years is expected to result from the processing of Alternate Feed
Materials through the White Mesa Mill. See ""Alternate Feeds".
Although the Registrant believes that Alternate Feed sources will continue to
generate revenues and income for the Registrant over this time period, there
can be no guarantees or assurance that this will be the case.
DEPENDENCE ON KEY PERSONNEL
The Registrant's success will largely depend on the efforts and abilities of
certain senior officers and key employees. Certain of these individuals have
significant experience in the uranium mining industry. The number of
individuals with significant experience in this industry is small. While the
Registrant does not foresee any reason why such officers and key employees will
not remain with the Registrant, if for any reason they do not, the Registrant
could be adversely affected. The Registrant has not purchased key man life
insurance for any of these individuals.
CONFLICTS OF INTEREST
Certain of the directors of the Registrant also serve as directors of other
companies involved in natural resource exploration and development, and
consequently there exists the possibility for such directors to be in a
position of conflict. Any decision made by such directors involving the
Registrant will be made in accordance with the duties and obligations of
directors to deal fairly and in good faith with the Registrant and such other
companies. In addition, such directors must declare, and refrain from voting
on, any matter in which such directors may have a conflict of interest.
ITEM 2 - DESCRIPTION OF PROPERTY
The following is an overview of the properties currently held by the
Registrant:
WHITE MESA MILL
OVERVIEW
The White Mesa Mill is located approximately 6 miles south of the city of
Blanding, Utah. Access is by state highway.
Construction of the White Mesa Mill (also referred to herein as the "Mill")
started in 1979, and ore was first processed in May 1980. The Mill is in
compliance with NRC and EPA standards and is a dual-circuit uranium mill. The
cost of constructing the Mill and tailings ponds was approximately $40 million.
The Mill is a standard design with both uranium and vanadium circuits.
Nameplate capacities are 2,000 tons per day of ore, 6 million pounds uranium
per year from Arizona Strip ore or 3-1/2 million pounds per year of uranium
from Colorado Plateau ore, and up to 18 million pounds per year of vanadium.
Since its commissioning in May 1980, the Mill has produced over 27 million
pounds of uranium and over 43 million pounds of vanadium in 6 separate milling
campaigns in 1980-83, 1985-1988, 1989-1990, 1995, 1996, and 1997.
The ore is received at the White Mesa Mill and stockpiled. Amenability tests
are run on ore lots from individual mines to determine if blending of the ores
will increase overall recovery. The ore is initially fed to an 18-foot diameter
SAG Mill, then stored in slurry form in one of the two pulp storage tanks. The
White Mesa Mill utilizes a two-stage leach process where overflow solution from
the No. 1 CCD Thickener is combined, in an "acid kill" step, with feed from the
pulp storage tanks. The slurry from this first stage leach is then separated in
the pre-leach thickener, with the solids going to the second stage leach and
the solution is clarified and sent to the solvent extraction circuits.
Concentrated sulfuric acid, steam, and an oxidizer are added in the second
stage leach. This slurry is subsequently fed to the 8-stage CCD Circuit where
the underflow is discharged to tailings.
In full operation, the Mill employs approximately 100 people.
16
<PAGE> 17
CURRENT CONDITION
The Mill is generally in good operating condition, but with a need for capital
expenditures to reline tailings Cell #4A, and refurbish the vanadium circuit
before vanadium can be produced. The claricone clarifier has failed
structurally and has been repaired once. Further repairs are currently required
at an estimated cost of $15,000, should it be deemed that the claricone
clarifier will be necessary for future operations. Since the date of the
acquisition, approximately $400,000 has been spent refurbishing the vanadium
circuit, which is expected to be fully restored by mid 1998.
TAILINGS
Synthetic lined cells are used to contain tailings and, in one case, solutions
for evaporation. Currently there is sufficient volume available for another
500,000 tons of tailings solids. Thereafter, an additional cell will be needed,
at a cost of approximately $2.5 million.
The current license for the Mill permits that a total of three forty-acre
tailings cells may be added. Each additional tailings cell can accommodate
approximately two million tons of tailings, for a total of nine years of
operation at 2,000 tons per day.
Difficulties have been encountered with leaking seams in the liner for Cell
#4A. This cell contains no tailings at present, and leaking is due to working
of the liner by thermal stress, since it is exposed to full sunlight. The cell
must be relined with a better quality material before using it to deposit
tailings. The Registrant estimates an expenditure of $1.5 million for this
purpose.
REQUIRED CAPITAL EXPENDITURES
Four significant capital projects are anticipated over the next three years
with respect to operation of the White Mesa Mill:
<TABLE>
<CAPTION>
ITEM ESTIMATED COSTS
---- -----------------
<S> <C>
Vanadium circuit refurbishing $ 460,000*
Modifications to allow operation at reduced tonnage 100,000
Tailings Cell #4A reline 1,500,000
Additional tailings cell 2,500,000
TOTAL $4,560,000
</TABLE>
* To date, approximately $400,000 has been spent in connection with
refurbishing the vanadium circuit.
RECENT OPERATIONS
Since January of 1995 the White Mesa Mill has completed three campaigns: the
processing in 1995 and 1996 of approximately 200,000 tons of stockpiled ore,
mainly from the Arizona Strip; the processing in 1996 of an alternate feed
source, and the processing in 1997 of three alternate feed sources. The
Registrant is currently processing an additional alternate feed source in 1998,
in another campaign. Except for the milling campaigns in 1995 and 1996, the mill
was not in active operation for the seven year period prior to the Acquisition.
OPERATION AT REDUCED CAPACITY
The White Mesa Mill in its current design capacity, 2,000 tons per day, is
oversized for the foreseeable tonnages expected over the next few years. The
Mill is currently only capable of milling ore at its full design capacity. The
larger the capacity, the larger the interval between Mill runs, as ore is
stockpiled to provide adequate Millfeed.
The Registrant proposes to bring the White Mesa Mill into production at a
reduced effective capacity of approximately 750 tons per day. (1050 tons per
day, operating 5 of 7 days per week). This will allow the Mill to be run more
frequently and will reduce the amount of time that ore is stockpiled waiting
for processing. However, the unit cost of milling ore increases as the capacity
of the Mill is reduced.
Running at a lower tonnage is possible if relatively minor modifications are
made to the Mill. The Registrant estimates that the capital expenditure
required to reduce the capacity of the Mill is approximately $100,000, and that
the capital expenditures required to increase capacity at a later date are
approximately the same. Approximately one half of this amount has been spent
in preparation for alternate feed processing in 1998.
17
<PAGE> 18
CLOSURE
The estimate of closure costs for the White Mesa Mill was revised by the
Registrant after discussion with the NRC and reviewing costs for demolition.
The current estimated closure costs are summarized as follows:
WHITE MESA MILL CLOSURE COSTS
<TABLE>
<S> <C>
CATEGORY
--------
Mill dismantling and decommissioning(1) $ 1,438,636
Cover tailings cell #2(2) 1,674,447
Cover tailings cell #3(2) 2,107,991
Cover tailings cell #4A(2)(4) 304,819
Cover tailings cell #1(2) 1,663,119
Miscellaneous -- management, hygiene, radiation, etc. 1,395,372
-----------
Direct Costs 8,584,384
Contractors' Profit @ 10% 858,438
Contingency @ 15% 1,287,244
Licensing and bonding 171,976
Long term care fund 567,417
-----------
TOTAL ESTIMATED COSTS $11,469,459(3)
===========
</TABLE>
(1) In the S2MS report, S2MS was asked to review the cost estimates for the
reclamation of the Mill. As a check, S2MS determined that this equates
to 35,000 hours @ $40/hour which S2MS concluded should be sufficient for
this work. S2MS concluded that some equipment could be salvaged and
resold, for example the grinding mill and drive, agitators, gearboxes,
etc. S2MS concluded that as much as $1 million could be realized,
although this has not been included.
(2) The tailings cells are filled up to a 5 foot freeboard then the walls
are "contoured" and the cell contents covered with four layers of
material- a 4 foot random fill, then a 2 foot clay cover (to stop radon
emission), then another 2 feet of random fill, and finally a 2 inch top
cover of crushed and compacted rock. The last layer is meant to prevent
re-vegetation on the surface that root action might open as a pathway
for radon emission.
The closure plan would involve transfer of solution from Cell #4A to
Cell #3, followed by sediment and the plastic lining. Cell #2 is already
nearly covered; Cell #3 is partially covered.
(3) The total estimated reclamation costs are bonded. The Registrant has
posted security in the amount of 65% of the bond amount. See "White Mesa
Mill -- Reclamation Bond".
(4) The cost estimate for reclaiming tailings Cell #4A assumes that no
tailings sands are deposited in Cell #4A. Tailings sands are expected to
be deposited in to Cell #4A in the second year of operations. Once
tailings sands are deposited in tailings Cell #4A, the reclamation cost
of that cell will be approximately $2 million.
SEQUENTIAL RECLAMATION
Under the Mill's NRC permit, the Mill is only allowed to have two tailings
cells open at any one time. Prior to depositing tailings in to Cell #4A, the
Registrant intends to close tailings Cell #2 and commence reclamation of Cell
#2 for approximately $1,675,000. This will allow tailings Cell #4A to be
opened. The result is that the total cost of reclamation at any one time, and
hence the amount of the bond required, is not expected to increase as Cell #4A
is brought into use.
As each pond, or cell, is filled with tailings, the water is drawn off and
pumped to the evaporation pond and the sands allowed to dry. As each cell
reaches final capacity, reclamation will begin with placement of 6 to 8 feet of
clay and rock over the tailings. Additional cells are excavated into the
ground, and the overburden is used to reclaim previous cells. In this way there
is an ongoing reclamation process, and the total cost of reclamation at any
point in time is not expected to increase significantly over the amounts set
out in the table above, other than due to inflationary factors.
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<PAGE> 19
COLORADO PLATEAU DISTRICT
OVERVIEW
The Uravan mineral belt in the Colorado Plateau (the "Colorado Plateau
District") has a lengthy mining history, with the first ore shipment made to
France in 1898. World War II brought increased attention to the uranium ores in
the Uravan area, and by the 1950's this district was one of the world's
foremost producers of both uranium and vanadium. Production continued more or
less uninterrupted until 1984 when low uranium prices forced the closure of all
operations. Production resumed in 1987 but once again ceased in 1990. Total
production from the Union Carbide mines (many of which were later purchased by
Energy Fuels, and hence the Registrant) in the Uravan area is reported at 47
million pounds of U(3)O(8) and 273 million pounds of vanadium, yielding an
overall ratio of V(2)O(5)/U(3)O(8) of 5.79.
EXPLORATION POTENTIAL
The types of uranium reserves found in the Colorado Plateau were deposited as
alluvial fans by braided streams. The shape and size of the ore seams are
extremely variable. As a result, exploration and mining have historically to a
large part involved conducting exploration to find a seam and then merely
following its erratic path, with little additional exploration other than
development drilling in the course of following the seam. This is unlike other
types of mining where ore bodies are almost completely delineated by
explorative drilling prior to mining.
The unusual nature of these ore bodies has therefore traditionally resulted in
a limited amount of resources being dedicated to delineate reserves prior to
mining. Traditionally, there will be some ore reserves that have been
delineated at the beginning of each year, uranium will be mined during the year
and approximately the same amount of reserves will remain delineated at the end
of the year. This pattern has persisted since the 1940's.
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<PAGE> 20
The following figure shows the mining history from the Union Carbide Properties
on the Colorado Plateau since 1949:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR TONS %GRADE %GRADE POUNDS POUNDS V/U TONS MINED %GRADE %GRADE POUNDS POUNDS V/U
---- ---- ------ ------ ------ ------ --- ---------- ------ ------ ------ ------ ---
RESERVE V(2)O(5) U(3)O(8) V(2)O(5) U(3)O(8) RATIO V(2)O(5) U(3)O(8) V(2)O(5) U(3)O(8) RATIO
------- -------- -------- -------- -------- ----- -------- -------- -------- -------- -----
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1949 DATA NOT AVAILABLE 54,006 1.80 0.36 1,944,210 388,843 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
1950 DATA NOT AVAILABLE 74,410 1.83 0.38 2,723,406 565,516 4.32
- ---------------------------------------------------------------------------------------------------------------------------------
1951 917,678 DATA NOT AVAILABLE 89,684 1.94 0.39 2,703,739 543,535 4.97
- ---------------------------------------------------------------------------------------------------------------------------------
1952 994,000 DATA NOT AVAILABLE 100,693 1.82 0.35 3,665,225 704,851 5.20
- ---------------------------------------------------------------------------------------------------------------------------------
1953 1,068,000 DATA NOT AVAILABLE 113,911 1.75 0.35 3,986,885 797,377 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
1954 1,267,580 DATA NOT AVAILABLE 91,026 1.80 0.36 3,278,938 655,387 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
1955 1,332,870 DATA NOT AVAILABLE 92,056 1.85 0.33 3,037,848 607,570 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
1956 1,784,450 DATA NOT AVAILABLE 162,620 1.80 0.32 5,203,840 1,040,765 5.00
- ---------------------------------------------------------------------------------------------------------------------------------
1957 2,242,331 DATA NOT AVAILABLE 310,311 1.28 0.25 7,943,952 1,551,555 5.12
- ---------------------------------------------------------------------------------------------------------------------------------
1958 2,141,529 1.46 0.26 82,532,647 11,135,951 5.62 371,183 1.37 0.27 10,170,414 2,004,388 5.07
- ---------------------------------------------------------------------------------------------------------------------------------
1959 2,048,028 1.40 0.25 57,361,584 10,243,140 5.60 453,258 1.38 0.25 12,509,921 2,266,290 5.52
- ---------------------------------------------------------------------------------------------------------------------------------
1960 2,527,850 1.32 0.25 66,735,240 12,639,250 5.28 541,653 1.27 0.24 13,757,966 2,599,934 5.29
- ---------------------------------------------------------------------------------------------------------------------------------
1961 2,107,418 1.32 0.25 55,835,835 10,537,090 5.28 488,914 1.33 0.25 12,951,912 2,434,570 5.52
- ---------------------------------------------------------------------------------------------------------------------------------
1962 1,904,184 1.33 0.25 50,651,294 9,520,920 5.32 477,716 1.24 0.24 11,847,357 2,293,037 5.17
- ---------------------------------------------------------------------------------------------------------------------------------
1963 1,722,478 1.31 0.25 45,128,871 8,612,380 5.24 359,171 1.32 0.23 9,482,114 1,652,187 5.74
- ---------------------------------------------------------------------------------------------------------------------------------
1964 1,406,769 1.25 0.25 35,169,225 7,033,845 5.00 270,398 1.43 0.23 7,733,383 1,243,831 6.22
- ---------------------------------------------------------------------------------------------------------------------------------
1965 1,359,730 1.33 0.21 36,168,818 5,710,866 6.33 260,250 1.55 0.24 8,067,750 1,249,200 6.46
- ---------------------------------------------------------------------------------------------------------------------------------
1966 1,485,000 1.37 0.23 40,690,644 6,831,276 5.96 355,047 1.35 0.22 9,586,269 1,562,207 6.14
- ---------------------------------------------------------------------------------------------------------------------------------
1967 1,543,689 1.31 0.22 40,444,652 6,792,232 5.95 286,233 1.22 0.20 6,954,085 1,144,932 6.10
- ---------------------------------------------------------------------------------------------------------------------------------
1968 1,007,200 1.32 0.22 26,590,080 4,431,680 6.00 382,738 1.13 0.21 8,649,879 1,607,500 5.38
- ---------------------------------------------------------------------------------------------------------------------------------
1969 860,900 1.32 0.21 22,272,760 3,615,780 6.29 354,538 1.18 0.20 8,367,050 1,418,144 5.90
- ---------------------------------------------------------------------------------------------------------------------------------
1970 782,900 1.34 0.22 20,961,720 3,444,760 6.09 391,843 1.26 0.20 9,869,404 1,566,572 6.30
- ---------------------------------------------------------------------------------------------------------------------------------
1971 639,600 1.50 0.21 19,188,000 2,686,320 7.14 344,048 1.15 0.20 7,913,104 1,376,192 5.75
- ---------------------------------------------------------------------------------------------------------------------------------
1972 736,300 1.43 0.19 21,058,180 2,797,940 7.53 184,605 1.30 0.19 4,799,730 701,499 8.84
- ---------------------------------------------------------------------------------------------------------------------------------
1973 1,043,285 1.38 0.19 28,794,666 3,964,483 7.26 140,319 1.32 0.19 3,704,422 533,212 8.95
- ---------------------------------------------------------------------------------------------------------------------------------
1974 1,210,872 1.34 0.19 32,451,370 4,601,314 7.05 274,136 1.13 0.15 6,195,474 822,408 7.53
- ---------------------------------------------------------------------------------------------------------------------------------
1975 1,733,800 1.24 0.19 42,995,240 6,588,440 8.53 297,508 1.22 0.17 7,259,195 1,011,527 7.16
- ---------------------------------------------------------------------------------------------------------------------------------
1976 2,274,650 1.24 0.19 56,411,320 8,643,670 8.53 344,414 1.18 0.18 8,128,170 1,239,890 6.56
- ---------------------------------------------------------------------------------------------------------------------------------
1977 2,433,550 1.24 0.20 60,352,040 9,734,200 8.20 413,979 1.09 0.17 9,024,742 1,407,529 6.41
- ---------------------------------------------------------------------------------------------------------------------------------
1978 2,489,125 1.15 0.20 57,249,875 9,958,500 5.75 407,350 1.09 0.17 8,880,230 1,384,990 6.41
- ---------------------------------------------------------------------------------------------------------------------------------
1979 2,935,550 1.08 0.19 62,233,660 11,155,090 5.58 440,238 1.00 0.16 8,804,720 1,408,755 6.25
- ---------------------------------------------------------------------------------------------------------------------------------
1980 3,099,600 1.07 0.19 66,331,440 11,778,480 5.63 446,071 1.03 0.17 9,230,263 1,523,441 6.06
- ---------------------------------------------------------------------------------------------------------------------------------
1981 2,967,600 1.07 0.19 63,934,640 11,352,880 5.63 325,266 1.06 0.18 7,025,746 1,170,958 6.00
- ---------------------------------------------------------------------------------------------------------------------------------
1982 2,949,500 1.07 0.19 63,119,300 11,208,100 5.63 299,638 1.02 0.18 6,112,615 1,078,697 5.67
- ---------------------------------------------------------------------------------------------------------------------------------
1983 2,842,300 1.07 0.19 60,825,220 10,800,740 5.63 167,260 1.02 0.18 3,412,104 802,136 5.67
- ---------------------------------------------------------------------------------------------------------------------------------
1984 3,466,000 1.07 0.19 74,172,400 13,170,800 5.63 31,812 1.02 0.17 712,589 106,161 8.59
- ---------------------------------------------------------------------------------------------------------------------------------
1985 3,470,750 1.07 0.19 74,274,050 13,188,850 5.63 NO MINING
- ---------------------------------------------------------------------------------------------------------------------------------
1986 3,491,550 1.07 0.19 74,719,170 13,267,890 5.63 NO MINING
- ---------------------------------------------------------------------------------------------------------------------------------
1987 3,519,625 1.06 0.19 74,636,235 13,342,685 5.59 71,693 1.44 0.25 2,203,763 398,131 5.54
- ---------------------------------------------------------------------------------------------------------------------------------
1988 4,450,275 1.11 0.20 98,934,965 17,714,275 5.59 154,868 1.47 0.26 4,553,465 795,003 5.73
- ---------------------------------------------------------------------------------------------------------------------------------
1989 3,929,000 1.16 0.22 92,880,760 17,006,540 5.46 235,476 1.42 0.23 6,869,526 1,075,941 6.20
- ---------------------------------------------------------------------------------------------------------------------------------
1990 3,798,200 1.16 0.22 88,280,920 16,427,180 5.37 180,927 1.41 0.23 4,552,312 733,384 6.21
- ---------------------------------------------------------------------------------------------------------------------------------
1991 3,993,700 1.17 0.22 93,393,860 17,186,760 5.43 NO MINING
- ---------------------------------------------------------------------------------------------------------------------------------
1992 3,785,000 1.16 0.22 88,047,960 18,395,340 5.37 NO MINING
- ---------------------------------------------------------------------------------------------------------------------------------
1993 3,575,600 1.16 0.22 82,943,220 15,537,900 5.34 NO MINING
- ---------------------------------------------------------------------------------------------------------------------------------
1994 DATA NOT AVAILABLE
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Mining stopped on the Colorado Plateau in 1990 as a result of low uranium and
vanadium prices and not as a result of the depletion of reserves.
20
<PAGE> 21
Based on this history of production from the Colorado Plateau, the Registrant
believes that the potential to continue this pattern of production exists for
many years to come and that additional reserves will be delineated each year as
mining continues.
Presently 1.3 million pounds of mineable reserves of uranium and 10.3 million
pounds of additional geological resources of uranium have been identified by
the Registrant. The Registrant has also identified 10.5 million pounds of
mineable resources of vanadium and 55 million pounds of additional geological
resources of vanadium. In addition, the Registrant has identified several
previously unexplored prospective areas in the Colorado Plateau between
existing mines.
GEOLOGY
The Registrant's properties on this geographic area are typical uranium-
vanadium deposits of the Colorado Plateau type located in the southern end of
the Uravan mineral belt. The rocks of the Colorado Plateau are predominately
sedimentary ranging in age from Precambrian to Tertiary and, although uranium
mineralization occurs in sediments of different ages, the most important
deposits of the Uravan belt occur in the Salt Wash Member of the Jurassic
Morrison Formation.
The Salt Wash Member consists of light gray to light brown sandstones
interbedded with red-green siltstones and mudstones. The sandstones, which are
generally fine-grained and well to moderately sorted, are considered to have
been deposited as alluvial fans by braided streams. The mineralization occurs
in the lenticular sandstone deposits as tabular, elongate bodies generally
parallel to the bedding following the palaeo-channels. All of the large
deposits within the Morrison Formation are in the upper sandstone lens of the
Salt Wash Member, commonly known as the third rim. Fine-grained uraninite is
the sominant uranium mineral accompanied by lesser amounts of coffinite. The
chief vanadium mineral is nontrosite. In the oxidized parts of the deposits
the distinctive yellow coloured uranyl-vanadate mineral, carnotite, is common.
Individual deposits are small, varying in length from a few hundred to several
thousand feet and in width from a hundred to a thousand feet. Thicknessesses
vary from a few inches to several tens of feet, but generally average between
two to five feet. Mines often contain several such ore bodies. The host
sediments are generally flat lying to low dipping with little structural
deformation.
The Registrant's principal mining complexes on the Colorado Plateau District
consist of the Deer Creek, Monogram, Thunderbolt, Sunday, Egnar Plains and East
Canyon (Rim) zones.
The Registrant has also established a central office, maintenance shop, and
equipment storage facility at Dove Creek, Colorado approximately 60 miles south
of the Sunday Mine Complex. This facility is used for major repair work such as
overhauls and is centrally located to serve several widely spaced mines
The bulk of the reserves and resources and the nearest term mining potential in
the Colorado Plateau District are contained in three areas, the Sunday Mine
Complex, the Deer Creek complex, which includes the La Sal and Pandora, mines
and the East Canyon Area, which includes the Rim Mine, all of these areas have
developed, permitted mines, with the Sunday and Rim Mines currently in
production. Production at certain other mines in these areas could be resumed
on relatively short notice. Given the limited time available, only the Sunday
Mine Complex, which is currently in production, was examined by S2MS. See
"Sunday Mine Complex". Since the Acquisition, given the current high prices
of V(2)O(5), the Registrant has elected to bring the Rim Mine into production.
The Rim Mine has a high ratio of V(2)O(5) to U(3)O(8). See "Rim Mine".
SUNDAY MINE COMPLEX
OVERVIEW
The Sunday Mine Complex is located in the Colorado Plateau District of Colorado
approximately 100 miles by road from the White Mesa Mill. Access is by state
highway and county roads.
The Sunday Mine Complex is comprised of the Sunday, West Sunday, Carnation,
Topaz, Le May and Leonard Clark zones which are contiguous or near contiguous
partially worked mines and virgin exploration areas.
21
<PAGE> 22
The Sunday Mine Complex is held by the Registrant under a large number of 1,500
feet x 600 feet rectangular standard BLM mining claims, some of which were
owned outright and some of which were purchased or leased from former holders
and are subject to various NSR royalty agreements.
The Sunday Mine Complex is one of several mining areas owned by the Registrant
in the Colorado Plateau District. See "Colorado Plateau District".
PERMITTING
The Sunday Mine Complex is permitted for mining. However, recent changes in
Colorado laws gives the Colorado state authorities the right to require mines
such as the Sunday Mine Complex in certain circumstances to submit a revised
Environmental Protection Plan for approval when mining activities are
re-initiated. See "Permitting". Mining activities have commenced at the Sunday
Mine Complex and as of the filing date the Registrant has not been notified of
any additional permitting requirements.
GEOLOGICAL RESOURCES
The geological resources of the Sunday Mine Complex, calculated by the
Registrant, are 845,400 tons grading approximately 0.21% U(3)O(8) and
approximately 1.40% V(2)O(5) resulting in 3,493,700 pounds of U(3)O(8) and
23,612,300 pounds of V(2)O(5).
Prior to the acquisition of the Energy Fuels assets, the Registrant asked S2MS
to evaluate the Sunday Mine Complex ore reserve estimates. Due to time
constraints, an assessment of the reserve by S2MS focused on the West Sunday
area and new areas immediately available to new development from the West
Sunday workings. These are the Le May zone, Leonard Clark zone and West Sunday
zone itself. In addition, S2MS spent some time attempting to verify the
resource estimates for the Sunday and Carnation zones but found that there was
not sufficient data to verify all these resources, in the time available.
The final probable geologic resources for the Sunday Mine Complex zones
calculated by S2MS, including approximately 50,000 tons from the Carnation
zone, were 318,190 tons grading approximately 0.25% U(3)O(8) and approximately
1.69% V(2)O(5) resulting in 1,594,690 pounds of U(3)O(8) and 10,682,050 pounds
of V(2)O(5).
The overall total for the Le May, Leonard Clark and West Sunday zones compares
with 235,000 tons grading 0.24% U(3)O(8) quoted for the same areas by Energy
Fuels which makes the S2MS estimate 14% higher in tons and 19% higher in
contained pounds of U(3)O(8). As a result, S2MS has concluded that the
estimates made by Energy Fuels for these areas were slightly conservative and
are realistic numbers for planning future mining operations.
SUNDAY MINE COMPLEX -- MINING
MINEABLE RESERVES
The Registrant's ore reserve for the Sunday Mine Complex includes a total of
845,400 tons at 1.40% V(2)O(5) and 0.21% U(3)O(8). As discussed above, only a
portion of the reserve areas addressed in that statement were independently
verified by S2MS and included in the S2MS Report. Based on the geological
resources that S2MS was able to verify with the available data, mineable ore
reserves as calculated by S2MS were 221,579 tons grading approximately 0.24%
U(3)O(8) and approximately 1.67% V(2)O(5), resulting in 1,070,124 pounds of
U(3)O(8) and 7,393,822 pounds of V(2)O(5).
MINE DEVELOPMENT
The Sunday Mine Complex is accessed by a number of declines from surface. The
declines grade at approximately minus 12% and are collared in the valley wall
and generally follow the ore zones down, which dip at about 11 degrees. The
valley rises up steeply over the ore zones such that at the top of the valley
wall the ore is some 800 feet below surface.
Originally each of the mines in the Sunday Mine Complex were developed as
separate stand alone mines, but now they have been joined together by drifts
such that they can be considered as one extensive mine.
The Sunday Mine Complex is an operating mine and as such has all the necessary
facilities required for operations. Adjacent to the West Sunday portal is a
building containing a single bay maintenance shop, change room, office and
22
<PAGE> 23
small warehouse. A second building houses a compressor. Water, electricity, and
other services are all installed. At the Sunday portal one building houses a
four bay maintenance shop and a second building provides a change room and
offices. There are several other utility buildings as well at this site. As the
Sunday Mine was operated as a separate mine it is set up as a stand-alone
facility with all the required services installed.
An additional building housing a compressor is located on the hill above the
West Sunday. A number of ventilation fans remain installed on the collar of
ventilation raises.
Additional access and ventilation development is required for mining of certain
ore zones. A 2,400-foot long drift from the Topaz to the Le May zone is being
driven and a new 700-foot long vertical borehole to surface would be bored to
supply ventilation to the zone. To further develop the West Sunday ore, 600
feet of additional drifting is required to connect the upper and lower West
Sunday ore zones.
MINING METHODS
The mining method is random room and pillar in which no set pillar pattern is
established but rather both the sizes of the rooms and the pillars is left up
to the operators on a day to day basis. Whenever possible, pillars would be
left in waste or low-grade areas. A typical room is about 20 feet wide with
pillars as small as 12 feet square in highly mined areas.
Because of the limited height of the ore, mining must necessarily be quite
selective in order to maintain a satisfactory production grade. This is done by
following the ore zones closely and by the technique of "split shooting"
wherein the ore and waste are blasted separately in a two-stage operation.
Miners are generally organized into small production teams, each operating in a
different area of the mine. Drilling is carried out by hand held jacklegs. Each
drill crew is assigned a vehicle equipped with a full set of gear for drilling
so that location changes can be made quickly and efficiently. Mucking is
accomplished by one or two cubic yard scooptrams loading ore or waste into 8 or
10 ton trucks for haulage to surface. Ore is dumped in a stockpile near the
portal collar.
The surface truck haulage contractor is responsible for loading his own trucks
as well as hauling the ore to the Mill near Blanding, Utah. PRODUCTION
FORECAST AND SCHEDULE
Based on 200 tons per day for a five-day week and 250 working days per year, an
annual production rate of 50,000 tons or 230,000 pounds of recoverable uranium
and 1.3 million pounds of recoverable vanadium is considered by the Registrant
to be reasonable.
The Registrant began actual ore production from the Sunday Mine Complex in
November of 1997 after several months of mine dewatering and general
refurbishment. The Registrant also began refurbishment of the old Topaz
decling, and driving new decline toward the LeMay orebody. As of the end of
April 1998, the Registrant had produced 16,084 tons of ore.
OPERATING COSTS
The Registrant based on experience and expected vanadium prices estimates that
its total mining and milling costs will be in the range of $9.00 to $12.50 per
lb. of uranium produced from the Sunday Mine Complex.
The Registrant is evaluating options to contract out a portion of the east end
of the Sunday Mine Complex (the GMG area) to an independent contractor. The
approach would be an all-inclusive one in which the contractor would be
responsible for all mining activities and support services. The contractor
would pay for power, fuel, maintenance of all equipment and buildings, roads,
as well as direct mining costs. The Registrant would compensate the contractor
by paying the contractor for tons of ore delivered at the White Mesa Mill. To
encourage good grade control, the mining contract would be set up to pay a
premium for increasing ore grade relative to the reserve grade. The payment
basis would be recalculated monthly based on the current market prices of
uranium and vanadium. The contractor would assume all risk for profit and loss
based on his ability to maintain profitable quantities and grades of ore from a
mostly depleted reserve area.
23
<PAGE> 24
PURCHASED ORE
In order to supplement its own mining operations and production, the Registrant
has entered into agreements with other independent miners in the Colorado
Plateau region to purchase their ore based on a schedule which takes into
account the U(3)O(8) and V(2)O(5) content of the ore, current market prices,
and appropriate discounts for milling costs and profits. It is anticipated
that these purchase prices will compare favorably with the company's own mining
costs for similar ore.
RIM MINE
OVERVIEW
The Rim Mine is located in the Colorado Plateau District of Utah approximately
60 miles by road from the White Mesa Mill. Access is by state highway and
county roads.
The Rim Mine is comprised of the Rim, Cressler, Columbus, and Humbug claims,
which are contiguous or near contiguous partially worked mines and virgin
exploration areas.
The Rim Mine is held by the Registrant under a large number of 1,500 feet x 600
feet rectangular standard load mining claims, some of which are owned outright
and some of which are leased and are subject to various royalty agreements.
The Rim Mine is one of several mining areas owned by the Registrant in the
Colorado Plateau District. See "Colorado Plateau District ".
PERMITTING
The Rim Mine is permitted for mining by the State of Utah Division of Oil ,Gas
and Mining. The Mine has a current Utah NPDES (National Pollution Discharge
Elimination System) Permit allowing for treatment and discharge of excess mine
water.
GEOLOGICAL RESOURCES
The geological resources of the Rim Mine, calculated by the Registrant, are
108,000 tons grading approximately 0.18% U(3)O(8) and approximately 1.72%
V(2)O(5) resulting in approximately 394,800 pounds of U(3)O(8) and
approximately 3,712,400 pounds of V(2)O(5). The Registrant projects an
additional 40,000 tons of probable ore reserves based on geologic favorability
and nearness to the known orebody at the Rim Mine. These probable reserves
contain 152,000 pounds of U(3)O(8) and 1,528,000 pounds of V(2)O(5) at grades
of 0.19% U(3)O(8) and 1.91% V(2)O(5).
MINEABLE RESERVES
The Registrant's ore reserve for the Rim Mine includes a total of 100,000 tons
at 0.182% U(3)O(8) and 1.73% V(2)O(5) resulting in 364,000 pounds of U(3)O(8)
and 3,460,000 pounds of V(2)O(5).
MINE DEVELOPMENT
The Rim Mine is accessed by a single vertical shaft, 500 feet in depth, and a
decline from the adjacent canyon wall. The decline grades at approximately
minus 6%, and is collared in the valley wall and generally follows the ore
zones down.
The Rim Mine was an operating mine when it was shut down in 1990. The
Registrant re-commenced mining activities in early 1998. Adjacent to the shaft
is a small building containing a single bay maintenance shop, change room,
office and small warehouse. A second building houses a compressor. Water,
electricity, and other services are all installed. At the Rim portal only basic
surface facilities are in place. The mine plan calls for ventilation and mine
dewatering to be facilitated through the vertical shaft and for all mine waste
and ore removal to take place through the decline. The mine was allowed to
flood after it was shut down in 1990, and consequently required a significant
amount of cleanout and repair prior to mining.
24
<PAGE> 25
MINING METHODS
The mining method is random room and pillar in which no set pillar pattern is
established but rather both the sizes of the rooms and the pillars are left up
to the operators on a day by day basis. Whenever possible, pillars are left in
waste or low-grade areas. A typical room is about 20 feet wide with pillars as
small as 12 feet square in highly mined areas.
Because of the limited height of the ore, mining must necessarily be quite
selective in order to maintain a satisfactory production grade. This is done by
following the ore zones closely and by the technique of "split shooting"
wherein the ore and waste are blasted separately in a two-stage operation.
The Rim mine is being operated as a contract mine. The contractor is
responsible for all mining activities and support services. The contractor is
operating the mine and pays for power, fuel, maintenance of all equipment and
buildings, roads, as well as direct mining costs. The Registrant compensates
the contractor by paying the contractor for tons of ore delivered at the White
Mesa Mill. To encourage good grade control, the mining contract has been set up
to pay a premium for increasing ore grade relative to the reserve grade. The
payment basis is recalculated monthly based on the current market prices of
uranium and vanadium. The contractor has assumed all risk for profit and loss
based on his ability to maintain profitable quantities and grades of ore from
the current reserve area. The contractor is responsible for haulage of the ore
to the Mill near Blanding, Utah, as part of the per ton contract rate. Based
on the current payment schedule and current market prices, the Registrant is
estimating a production cost similar to that of the Registrant's own mining
operations.
PRODUCTION FORECAST AND SCHEDULE
Based on 75-100 tons per day for a five-day week and 250 working days per year,
an annual production rate of 18,750-25,000 tons or 65,500-87,300 pounds of
recoverable uranium and 506,000-675,000 pounds of recoverable vanadium is
considered by the Registrant to be reasonable.
The Registrant began actual ore production from the Rim Mine in January of 1998
after three months of mine dewatering and general refurbishment. As of the end
of April 1998, the contractor had produced 990 tons of ore, primarily from
cleanup and development work.
25
<PAGE> 26
ARIZONA STRIP
OVERVIEW
The Arizona Strip is an area bounded on the north by the Arizona/Utah state
line; on the east by the Colorado River and Marble Canyon; on the West by the
Grand Wash cliffs; and on the south by a mid-point between the city of
Flagstaff and the Grand Canyon. The area encompasses approximately 13,000
square miles. The Arizona Strip is separate and distinct from the Colorado
Plateau District. The two mining districts are located approximately 200 air
miles (310 road miles) apart and have been historically administered as two
separate mining camps.
The Registrant owns a number of permitted mines on standby, partially developed
mines, known deposits and well developed prospects in the Arizona Strip.
Since 1980, when mine development first began at Hack Canyon II, the Arizona
Strip has produced in excess of 19 million pounds of uranium, averaging 0.65%
U(3)O(8) from seven mines, each of which was owned and operated by Energy
Fuels. Of these mines, Hack Canyon I, II, and III and Pigeon are mined out and
have been reclaimed; Hermit is partially reclaimed; Pinenut, Kanab North,
Canyon and Arizona 1 have remaining reserves and have been placed on a standby
basis.
The following table summarizes Energy Fuels' mining history from the Arizona
Strip:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
MINE NAME PRODUCTION PERIOD TONS MINED GRADE TOTAL
(% U(3)O(8)) (LBS U(3)O(8))
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hack Canyon I 1981 - 1987 133,822 0.530 1,419,623
- ----------------------------------------------------------------------------------------------------------------
Hack Canyon II 1980 - 1987 497,099 0.704 7,000,273
- ----------------------------------------------------------------------------------------------------------------
Hack Canyon III 1981 - 1987 111,263 0.504 1,121,748
- ----------------------------------------------------------------------------------------------------------------
Pigeon 1985 - 1990 406,794 0.643 5,651,862
- ----------------------------------------------------------------------------------------------------------------
Kanab North(1) 1988 - 1991 260,818 0.531 2,767,570
- ----------------------------------------------------------------------------------------------------------------
Pinenut(1) 1988 25,807 1.020 526,350
- ----------------------------------------------------------------------------------------------------------------
Hermit 1989 - 1990 36,339 0.760 552,449
- ----------------------------------------------------------------------------------------------------------------
TOTAL 1,471,942 0.647 19,039,875
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These deposits have remaining ore reserves
Currently the Registrant has four mines in the Arizona Strip district, all of
which are permitted and have identified mineral reserves remaining. These are
the Kanab North, Pinenut, Arizona 1, and the Canyon. Due to time constraint
only two mines; the Arizona 1 and Canyon, are parts of the S2MS Report.
There are a central office, maintenance shop, and equipment storage facility at
Fredonia, Arizona to service the Arizona Strip mines. Fredonia is located north
of the Grand Canyon and approximately 45 miles from the Arizona 1 Mine. The
Canyon Mine is approximately 80 miles directly south of the Fredonia facility
but due to the Grand Canyon, the mine is over 200 road miles away, accessed via
highway 180.
Ore from both mines can be hauled by truck from the mine site to the White Mesa
Mill. The Arizona 1 Mine is 307 road miles and the Canyon Mine is 316 road
miles from the Mill.
DEVELOPMENT SEQUENCE IN THE ARIZONA STRIP
The ore zones occur in collapsed breccia pipes and range from 1,000 to 1,800
feet below surface with a vertical extent of up to 600 feet thick. Each of the
mines in the Arizona Strip consists of one breccia pipe. The pipes typically
are 200 to 400 feet in diameter. Within this envelope the ore can be at times
massive but often is irregular and discontinuous. Some ore has also been mined
in "ring fractures" just outside the limits of the pipes.
Definition of the ore reserve for these breccia pipe uranium ore bodies is, by
necessity a two stage process. Drilling from the surface provides the initial
data of depth, thickness and grade of ore intercepts determined by downhole
natural gamma logging. Depending on the diameter of the pipe, which ranges from
200 to 400 feet, as many as 40 surface holes, controlled to minimize drift, are
completed, logged and drift surveyed.
26
<PAGE> 27
From this surface drill data, computed proven, probable and possible reserves
are utilized for the decision as to whether or not the sinking of a shaft is
feasible.
A 1,000 to 1,600 foot deep shaft is generally required to access the deposits.
In the case of the Hack Canyon I, II, and III mines, access was obtained
through declines driven from nearby canyons. The average cost for sinking a
shaft is approximately $1,900 per foot.
Once the shaft sinking commences and stations are cut, the second phase of
reserve definition commences. Arrays of long holes and diamond core holes are
completed from the stations cut as the shaft sinking continues to total depth.
From natural gamma logs of the long holes and core holes, integrated and
correlated with the surface drill data, a final proven reserve is computed and
is regarded as the final feasibility study reserve.
In the case of the Arizona 1 Mine where the shaft is completed, the requisite
longhole and core drilling, ore definition is complete. The generated ore
reserve for Arizona 1 is therefore regarded as proven.
The Canyon Mine shaft is not complete, necessitating ore definition from
surface drilling only, yielding reserves characterized as proven, probable and
possible. Based on past experience, Energy Fuels projected that a significant
amount of further reserves would be delineated once underground drilling is
completed.
An Energy Fuels feasibility study dated January 15, 1996 for Canyon Mine
attributed a feasibility reserve of 3,094,000 pounds U(3)O(8) contained in
182,000 ore tons at 0.850% eU(3)O(8). S2MS supports only about 2/3 of this in
its current reserve assessment. However, in the S2MS Report, S2MS notes that a
portion of the Canyon Mine breccia pipe has not been evaluated/drilled from the
surface and underground drilling has not been conducted. S2MS also notes that
Energy Fuels stated that it is realistic to expect that "fracture/ring ore"
will be discovered and that the calculated reserve will be extended to the 3
million pound reserve used in the above cited Energy Fuels feasibility study.
Typically, the life cycle of an Arizona Strip mine is approximately eight
years. The permitting process takes approximately one to two years. The average
mine development and mining phase takes approximately five years, and the
average decommissioning reclamation period is less than one year.
HISTORIC MINING METHODS
The ore zones are quite irregular in shape and can vary from large areas
several hundreds of feet high and wide to small lenses and discontinuous pods.
As a consequence, combinations of mining methods are used to mine the breccia
pipe ore.
Blasthole or slot mining is used to mine the larger zones. The smaller
irregular pods are mined with conventional methods, which include random room
and pillar, shrinkage, and open stoping. Following mining, all the stopes are
left open with no backfilling.
To develop a mine, four or five shaft stations spaced 200 feet apart are
excavated and drifts driven from them to establish the main production levels.
Raises are driven between the levels for ventilation and ore/waste transfer. A
ventilation supply incline is driven around the ore body as a slusher ramp.
Sublevels are driven from the incline at vertical spacings to provide access
for initial stope/slot development and conventional mining.
BACKGROUND GEOLOGY
Breccia pipes are collapse features engendered by cavern dissolution in the
Redwall Limestone, some 3,000 feet below present day surface. Overlying
sediments fracture as the cavern size increases and ultimately collapse forming
a pipe-like structure, which is filled with the rubble of the sediments.
Uranium mineralization occurs in this brecciated rock, forming deposits 200 to
400 feet in diameter, some 600 feet thick at depths up to 1,800 feet.
Uranium ore is hosted by the breccia in a sand, silt, and clay matrix. The
principal uranium mineral, pitchblende, occurs primarily in the matrix, filling
voids between sand grains and replacing rock fragments. Pyrite is the principal
gangue mineral. Calcite and gypsum are common cementing minerals. Copper, lead
and zinc minerals may also be present.
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Nearly always, the pipe is haloed by alteration or a zone of bleaching
resulting from the partial removal of red iron minerals from formations
surrounding the pipe. "Ring fractures" are often seen at the pipe margins.
These fractures may also be an important host for associated mineralization and
ore reserves.
EXPLORATION POTENTIAL
Since 1980, Energy Fuels developed nine mine projects from which seven mines
produced a total of 19 million pounds of uranium, or approximately 2.7 million
pounds of uranium per mine.
Energy Fuels conducted an extensive exploration program in the Arizona Strip.
Since 1980, Energy Fuels identified in excess of 1,300 breccia pipe targets. Of
these, Energy Fuels drilled at least one hole on 140 breccia pipe targets, of
which 62 were verified to be breccia pipes, and identified mineralization in 42
of these. Subsequently all of these 42 breccia pipes were acquired by the
Registrant.
Energy Fuels targeted 32 mineralized breccia pipes for further exploration, and
based on past experience believed that these pipes could have a potential
reserve of 40 million pounds of uranium. S2MS concluded that several up-side
elements exist for the identification of additional reserves in the Arizona
Strip. They were:
1. Energy Fuels' observation that portions of the Canyon Mine pipe was not
explored by the surface drilling. These untested areas must be accorded
potential for hosting additional reserves. That potential could not be
quantified by S2MS.
2. The shaft into Arizona 1 was stopped 400 feet short of design depth.
Thus, planned underground delineation drilling stations designed to test
that lower portion of the pipe were not available. That portion of
Arizona 1 must also be accorded potential for hosting additional ore.
This potential could not be quantified by S2MS.
3. Energy Fuels' forecast that potentially in excess of 40 million pounds
U(3)O(8) could exist in several undeveloped deposits in the area. S2MS
did not review this potential.
S2MS concluded that no specific discernible downside elements were obvious
other than the risks that are a normal part of underground mining ventures.
ARIZONA 1 MINE
LOCATION AND ACCESS
The Arizona 1 Mine is located approximately 45 miles south of Fredonia,
Arizona. Access is by state highway connecting to a well-maintained gravel
road. The project area encompasses 14.7 acres.
MINEABLE RESERVES
The geological resources are 119,500 tons at a grade of 0.545% U(3)O(8). The
mineable reserves accepted by S2MS are lower in tons than the geological
resources, as certain zones below the incremental cutoff grade have been
excluded from the mining plan.
Estimated mineable diluted recoverable ore reserves for Arizona 1 are shown by
S2MS as 80,085 tons grading approximately 0.651% U(3)O(8) resulting in
1,043,149 pounds of U(3)O(8).
PERMITTING
The Arizona 1 Mine is fully permitted for mining.
EXISTING MINE FACILITIES
Site construction for the Arizona 1 Mine began in March 1990. Work was
suspended and the project put on standby status in March 1992. The site is
fully developed to support the resumption of production except for minor
repairs.
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The shaft has been sunk to a depth of 1,254 feet. The shaft was 400 feet from
the ultimate planned depth when sinking was curtailed.
PRODUCTION FORECAST
Based on 150 tons per day for a five-day week and 250 working days per year, an
annual production rate of 37,500 tons or 449,190 pounds of recoverable uranium
should be achieved.
MINING SCHEDULE
The Registrant has developed a preliminary schedule for development of the
Arizona 1 Mine. Under this schedule, production commences 8.5 months following
the commencement of mobilization. Production continues for 28 months followed
by 6 months of demobilization and reclamation.
CAPITAL COSTS
The total remaining pre-production capital costs for the Arizona 1 Mine have
been estimated by the Registrant to be approximately $2,100,000.
OPERATING COSTS
The Registrant estimates that its total mining and milling costs will be in the
range of $9.00 - $12.00 per lb. of U(3)O(8) produced.
CANYON MINE
LOCATION AND ACCESS
The Canyon Mine is located 13 miles south of the Grand Canyon, two miles off
highway 180.
MINEABLE RESERVES
The geological resources are 129,000 tons in the proven and probable category
at a grade of 0.801% U(3)O(8). All reserves are estimated from 24 near vertical
holes drilled from the surface.
Mineable, diluted, recoverable ore reserves were estimated by S2MS as 108,168
tons grading approximately 0.902% U(3)O(8) resulting in 1,950,948 pounds of
U(3)O(8).
PERMITTING
The Canyon Mine is permitted to commence mining activities, although an Aquifer
Protection Permit is in the process of being obtained. See "Permitting".
EXISTING MINE FACILITIES
The project site encompasses 17.4 acres with the perimeter impounded by an
earthen berm with riprap stone placed along potential erosion locations. The
site is fully developed with full surface facilities for shaft sinking and
mining.
The shaft was collared to a depth 53 feet. All the facilities required to
resume shaft sinking are in place. Completion of equipping of the headframe is
still required along with modifying or "debugging" the hoist electrics as they
are outdated. The hoist has to be tested and commissioned under load.
PRODUCTION FORECAST
Based on 275 tons per day for a five-day week and 250 working days per year, an
annual production rate of 68,750 tons or 1,190,000 pounds of recoverable
uranium should be achieved.
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MINING SCHEDULE
The Registrant has developed a preliminary schedule for development of the
Canyon Mine. Under this schedule, shaft sinking would resume after a three-
month mobilization and equipping period. Shaft sinking would continue for eight
months followed by another 10 months of underground development. Production
would then commence and continue for at least 19 months followed by six months
of demobilization and reclamation.
CAPITAL COSTS
The remaining pre-production costs estimated by the Registrant to bring the
mine into production are approximately $9,450,000
OPERATING COSTS
The Registrant estimates that its total mining and milling costs will be in the
range of $9.00-$12.00 per lb. Of U(3)O(8) produced.
PINENUT MINE
LOCATION AND ACCESS
The Pinenut Mine is located approximately 58 miles from Fredonia, Arizona and
approximately 13 road miles from the Arizona 1 Mine. Access is by state highway
and well-maintained gravel road. The mine is 317 miles from the White Mesa
Mill. The shaft is complete to 1,380 feet and 25,807 tons at 1.02% uranium have
already been mined and 526,350 pounds of uranium produced. Pinenut is
permitted. The current reserve according to the Registrant is:
PINENUT POTENTIAL RESOURCES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CATEGORY RESOURCE GRADE TOTAL LBS.
%U(3)O(8) U(3)O(8)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Low grade: 109,990 tons 0.416 913,900
- ------------------------------------------------------------------------------------------------------------
High grade: 58,700 tons 0.463 543,200
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Based on the high-grade scenario, the Registrant estimates that its total
mining and milling costs will be in the range of $15.00-$18.00 per lb. of
U(3)O(8) produced from this mine.
PERMITTING
The Pinenut Mine is permitted to commence mining activities, although an
Aquifer Protection Permit is in the process of being obtained. See
"Permitting".
BULLFROG PROPERTY
LOCATION
The Bullfrog property is located in eastern Garfield County, Utah, 20 miles
north of Bullfrog Basin Marina on Lake Powell, about 40 air miles south of
Hanksville, Utah, and 150 miles from the White Mesa Mill.
HISTORY OF THE PROPERTY
Exxon Minerals conducted reconnaissance in the area in 1974 and 1975 and staked
their first "Bullfrog" claims in 1975 and 1976. A first phase drilling program
in 1977 resulted in the discovery of what is now called the Southwest Deposit.
Additional claims were subsequently staked, and both Exxon's exploration and
pre-development groups continued drilling. Several ore pods were discovered in
the Southwest and Copper bench areas, and ore grade mineralization was also
discovered in the Indian Bench area. Because of declining uranium market
trends, Exxon decided not to proceed with development of the Bullfrog property.
The property was sold to Atlas in July 1982. Between July 1982 and July 1983,
Atlas completed 112 drill holes and delineated the Southwest and Copper Bench
deposits on approximately 100-foot centers. Between July 1983 and March 1984,
Atlas completed an additional 40 hole core drilling program on the Bullfrog
property as well as a 133 rotary drill hole program to delineate the Indian
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Bench deposit on approximately 200-foot centers. Atlas was unable to sell the
property, and in 1991 returned the claims to Exxon. Thereafter, Energy Fuels
purchased the claims in 1992.
More than 2,200 rotary drill holes have been completed on the Bullfrog
property. Based on this drilling, independent consultants have estimated a
mineral inventory of some 2.6 million tons at an average grade of 0.385%
U(3)O(8) containing 20.1 million pounds U(3)O(8) and 60 million pounds
V(2)O(5). Not the entire prospect has been thoroughly explored, and excellent
potential exists to identify additional reserves.
SUMMARY GEOLOGY AND MINERALIZATION
Geologically, the Bullfrog property is situated on the southeastern flank of
the Henry Basin syncline, which is surrounded by the Monument Uplift to the
southeast, Circle Cliffs Uplift to the southwest and the San Rafael Swell to
the north. Exposed rocks in the Bullfrog area are Jurassic and Cretaceous in
age. Host rocks for the Bullfrog uranium/vanadium deposits are Upper Jurassic
Sandstones of the Salt Wash Member of the Morrison formation. The host
sandstones range from 30 to 40 feet in thickness and are reasonably well
cemented.
The Bullfrog deposits, together with the smaller cluster of deposits discovered
by adjacent claim owners, comprise resources of over 30 million pounds U(3)O(8)
and represent the largest close-spaced cluster of Salt Wash uranium deposits
discovered on the Colorado Plateau.
RESOURCE MODELS
In 1993, Energy Fuels personnel calculated an in-place geological resource of
1,937,065 tons at a grade of 0.334% U(3)O(8) containing 12,923,468 pounds of
U(3)O(8). A higher-grade portion of the deposit contains 1,300,000 tons at a
grade of 0.417% U(3)O(8) or 11 million pounds of U(3)O(8).
UNITED STATES IN SITU LEACH PROPERTIES
GENERAL
The Reno Creek Property in Wyoming is amenable to the in-situ leaching ("ISL")
method of mining uranium. The Registrant believes that its Dewey Burdock
Property in South Dakota is also amenable to ISL, however, no pilot plant
testing has been conducted.
THE ISL MINING PROCESS
The ISL mining process, a form of solution mining, differs significantly from
conventional mining techniques.
The ISL process was first tested for the production of uranium in the
mid-1960's and was first applied to a commercial scale project in 1975 in South
Texas. The ISL process had become well established in the South Texas uranium
district by the late 1970's where it was employed in connection with
approximately twenty commercial projects. ISL production has expanded
considerably, and major production centers now exist in Wyoming and Nebraska,
as well as in Texas.
In the ISL process, groundwater fortified with oxygen and other solubilizing
agents is pumped into a permeable ore body causing the uranium contained in the
ore to dissolve. The resulting solution is pumped to the surface where the
uranium is removed from the solution and processed to a dried form of uranium,
which is shipped to conversion facilities for sale to public utilities.
The uranium recovery process consists of a lixiviant circuit, an
elution/precipitation circuit and a drying and packaging process. The lixiviant
circuit flows from the ore body, where the uranium is extracted from the
lixiviant by absorption onto ion exchange resin. The lixiviant is then
refortified and reinjected into the ore body. When the ion exchange column's
resin beads are loaded with uranium, the resin is removed and placed into the
elution circuit where the uranium is flushed with a salt-water solution, which
precipitates the uranium from the beads. This leaves the uranium in slurry,
which is then dried and packaged for shipment as yellowcake.
At the conclusion of mining, the mine site is decommissioned and decontaminated
and the wellfield is restored and reclaimed. Wellfield restoration involves
returning the aquifer to a condition consistent with its pre-mining use and
removing evidences of surface disturbance. The restoration of the wellfield can
be accomplished by flushing the ore zone for a time with native ground water
and/or using reverse osmosis to remove ions, minerals, and salts to provide
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clean water for reinjection to flush the ore zone. Decommissioning and
decontamination entail decontamination, dismantling, and removal for disposal
or reuse of the structures, equipment, and materials used at the site during
the mining or restoration activities.
COMPARISON OF RESERVES
Most ISL properties have relatively low grades of uranium. The ISL process was
designed to mine low-grade ores out of permeable sands in a cost-effective way.
Given the nature of these ores and of the ISL process, the thickness of the ore
deposits is very important in determining the value of the ore deposit. As a
result, the grade multiplied by the thickness, or "GT", is commonly used to
compare ore deposits that are amenable to the ISL process. Generally ISL
projects in the United States have average GT's of between 1 and 2 (ft %
U(3)O(8)).
RENO CREEK PROPERTY
DESCRIPTION, LOCATION AND ACCESS
The Reno Creek Property is a proposed uranium ISL mine project located in the
Powder River Basin of northeastern Wyoming, 47 miles south of Gillette. Access
to the property is by state highway, which cuts through the property.
A 3,613 acre mine permit area currently embraces 5 mining units, 4 of which
would be mined under current plans. The units to be mined are designated mine
units I-IV. Reno South, the fifth mining unit, is a uranium ore body 2 to 4
miles south of the permit area and is included in the ore reserve attributed to
the project but is not yet in the current permit application.
The permit area includes 4 mine units, together with the planned processing
facility and ancillary installations.
EXPLORATION HISTORY
Since the inception of definition drilling at Reno Creek in the 1960's, the
properties have seen a transition of ownership by Union Pacific Railroad
subsidiaries and a joint venture. The majority of drilling was in the 1970's
with little done in the 1980's. Energy Fuels acquired the property in 1992 and
performed development drilling and commercial permitting work.
REGIONAL GEOLOGIC SETTING
Structurally, Reno Creek is on the east flank, near the synclinal axis, of the
Powder River Basin. The Black Hills bound this structural basin on the east and
it is bounded to the south by the Laramie Range and Hartville uplift and the
west by the Big Horn Mountains and Casper Arch.
Stratigraphy of the Powder River Basin is a sedimentary sequence approaching
15,000 feet in thickness along the synclinal axis. Fluvial and lacustrine
Tertiary sandstones, siltstones and shale's with interbedded coal and lignite
seams, compose the upper portions of the column. Downward, Cenozoic, Mesozoic,
and Paleozoic sediments extend to Precambrian basement igneous and metamorphic
rocks.
RESERVES
Uranium at Reno Creek occurs in locally designated ore sand at depths from 300
to 420 feet below surface. The roll fronts in the area are typically low grade
(average less than 0.15% U(3)O(8)) and thick (average up to 17 feet). About
4,000 drill holes are completed and logged on the property. These holes are
generally on lines normal to the roll front, spaced approximately 200 feet
apart with hole spacing thereon 100 feet or greater.
The Registrant attributes a total reserve to the project of 5,100,000 pounds
U(3)O(8) with average thickness ranging from 14 to 17 feet. Average grades are
from 0.066 to 0.081% U(3)O(8). The Registrant applies a 75% recovery factor,
resulting in 3.8 million pounds recoverable. Average GT values at Reno Creek
range from 1.0 to 1.4.
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POTENTIAL FOR ADDITIONAL RESERVES
Reno Creek displays significant potential for definition of additional reserves
both within the project area and from properties adjacent or near the project.
Within the project area, potential reserve increases fall into two categories:
1. A 1988 study prepared by Union Pacific Resources quoted reserves
attributable to the project of 10.1 million pounds eU(3)O(8). This 1988
reserve utilized a minimum of 20 feet of hydrologic head above the ore.
The 10.1 million pound 1988 reserve quotation is 5 million pounds
eU(3)O(8) greater than the proven and probable reserve now assigned the
project.
2. Further reserve additions may come from delineation drilling about and
between identified reserve blocks. Also, wide spaced drilling has
identified ore grade intercepts in isolated holes. Additional drilling
is necessary to explore this potential.
Outside the project area, properties adjacent and nearby host drilled uranium
mineralization and, consequently, the potential for acquisition of additional
reserves also exists. For example, the Registrant attributes about 3.2 million
pounds eU(3)O(8) to a nearby property.
ISL PILOT PLANT
In the 1980's, a field pilot plant was operated on the property. Using
information from the pilot plant, a feasibility study for building and
operating a 4,000 gallon-per-minute ISL capable of producing about 900,000
pounds of yellowcake per year for about eleven years was completed in 1987. In
1995-96, the mine plan and costs were updated. The current plan is a 3,200
gallon-per-minute facility capable of producing 800,000 pounds of yellowcake
per year for about six years. This plan is for the extraction of only a
portion of the reserve used in the 1989 study. The recent study shows more
attractive economics by selectively mining the highest quality areas of the
deposit.
The pilot plant demonstrated that an ISL process could mine uranium and that
the ground water can be restored after mining. RENO CREEK YELLOWCAKE CALCINING
AND PACKING AT WHITE MESA
The Registrant proposes to transport yellowcake slurry by truck to the White
Mesa Mill, where it would be calcined and packaged, so long as it remains cost
effective.
OPERATING AND CAPITAL COSTS
S2MS prepared a prefeasibility cost estimate of $14.68 per pound based on a
recovery of 3,315,000 pounds of uranium with a 65% recovery factor. Capital
development and wellfield costs of $22.5 million are included in the cost
estimates. Management of the Registrant estimates that the costs would be in
the range of $11.00-$14.00 per pound based on a recovery factor of 75%,
resulting in the recovery of 3,825,000 lbs. of uranium.
The capital costs are estimated to be $7 million and include plant, buildings,
restoration equipment, mobile equipment, and permit and license costs. The
purchase of the restoration facilities can be delayed until restoration
activities begin. Total project wellfield and development costs are estimated
to be $15.5 million. However, only the first wellfield needs to be installed
for the project to begin, but replacement wellfields need to be installed
before the first well field is depleted.
Unless altered during the permit review process, a $3 million initial bond will
be required for the project. The amount of the bond increases annually as
mining progresses, then it begins to decrease later in the mine life as
restoration and reclamation are completed. This cost is not in the operating
cost estimates because the bond is returned at the end of the project when the
project site has been successfully reclaimed. The project operating cost
estimate includes reclamation and restoration following mining operations
PERMIT LICENSE STATUS
The Reno Creek Property is currently in the permitting process. See
"Permitting".
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DEWEY BURDOCK PROPERTY
LOCATION AND PHYSICAL FEATURES
The project area is located near the Edgemont Mining District in southwest
South Dakota near the Wyoming-South Dakota border. The nearest larger centers
with air connections are Rapid City, South Dakota about 100 miles by road and
Casper, Wyoming, about 175 miles by road. Access to the project area is by an
all-weather gravel road following the course of the railway from Edgemont for
about 30 miles to Burdock and another 10 miles to Dewey.
GEOLOGY
The uranium mineralization at Dewey/Burdock occurs in early Cretaceous
sediments of the Inyan Kara Group which dips to the southwest off the uplifted
Precambrian granitic dome of the Black Hills. The Inyan Kara Group consists of
sandstones, siltstones and mudstones and is divided into the Lakota Formation
and overlying Fall River Formation. The sediments were deposited in a coastal
plain environment with the sandstones following channels so that stratigraphic
levels of the sandstones often change with sands passing into clays.
The deposits are of the typical roll front type with uranium precipitated along
a redox front from solutions percolating through the sandstones. As a result,
the outline of the mineralization follows long, narrow, sinuous courses along
the fronts between the oxidizing and reducing environments.
MINING AND EXPLORATION HISTORY
Uranium mineralization was first discovered in the Edgemont Mining District in
1952, and small quantities of uranium ore were mined in the early 1950's and
shipped to Grand Junction, Colorado for processing. In 1956 a small mill was
established in Edgemont and produced uranium and vanadium from a number of
small operations in the district, mainly open pits, but some production came
from underground workings accessed by adits. When mining finally ceased in the
early 1970's a total of 2.4 million pounds of U(3)O(8) had been produced from
ores averaging 0.14% U(3)O(8).
There was considerable exploration activity for uranium in the district during
the 1970's with the major participants being Wyoming Mineral Corporation and
the Tennessee Valley Authority ("TVA"), though a number of other companies
including Union Carbide, Homestake Mining Company, Federal Resources and Kerr
McGee, were also involved. By 1983 TVA was the sole operator through its
contractor, Silver King Mines, and it continued its exploration efforts in the
Dewey and Burdock areas until 1986 when it relinquished all its land holdings.
In 1981, TVA completed a feasibility study on the Dewey and Burdock areas based
on an underground operation producing 750 tons per day from five shafts (three
at Burdock and two at Dewey). A total mining resource of five million pounds
U(3)O(8) at an average grade of 0.20% U(3)O(8) with a minimum six foot mining
width was estimated.
In 1991 R.B. Smith & Associates, Inc. of Austin, Texas undertook a review and
compilation of all data. This involved an independent resource computation in
addition to a hydrogeological study. This work identified the potential
favorability of these deposits for ISL. On the basis of this work Energy Fuels
secured property rights covering the Dewey and Burdock projects.
LAND CONTROL
Land control is in the form of a combination of leases with the ranchers in the
area, and unpatented mining claims held by the Registrant.
Any future production of uranium from most of the project area is subject to a
2% yellowcake royalty to the surface rights owner and a 3% yellowcake royalty
to the mineral rights owners.
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RESOURCE ESTIMATE
DATA BASE
The total project resource is 6.66 Million pounds U(3)O(8) with an average GT
grade-thickness of 1.28 (ft.% U(3)O(8)). Additional geologic potential in
excess of 1 million pounds of U(3)O(8) is projected on known trends within the
leased properties, but these trends have not been adequately evaluated by
drilling.
The Dewey/Burdock deposit is being considered as a candidate for ISL mining.
Although the resource computation has been confined to sands below the water
table, little is known concerning the permeability and flow rates of the host
sandstones. Comprehensive tests will have to be conducted before the resource
can be conclusively determined to be amenable to ISL. Test wells will need to
be drilled to depths of 300 to 550 feet in the Burdock area and 550 to 750 feet
in the Dewey area.
MONGOLIA PROPERTY
The Registrant owns a 70% interest and is the managing partner in the Gurvan-
Saihan Joint Venture, which holds significant uranium exploration and resource
properties in Mongolia. The following general information on Mongolia is
derived from publicly available materials, which the Registrant believes to be
accurate.
THE REPUBLIC OF MONGOLIA
The Republic of Mongolia, known from 1924 to 1991 as the Mongolian People's
Republic, is a nation in Central Asia, bounded on the north by Russia and on
the east, south, and west by China. The country has a total area of 1,565,000
square kilometers (604,250 square miles). The capital and largest city of
Mongolia is Ulaanbaatar.
TOPOGRAPHY, CLIMATE AND RESOURCES
The topography of Mongolia consists mainly of a plateau between about 914 and
1,524 meters (about 3,000 and 5,000 feet) in elevation broken by mountain
ranges in the north and west. The Altai Mountains in the southwest rise to
heights above 4,267 meters (14,000 feet). The Gobi Desert covers a wide arid
tract in the central and southeastern areas. The most important rivers are the
Selenge Moron and its tributary, the Orhon Gol, in the north.
Mongolia's climate is harsh, with temperatures ranging between -15degrees and
- -45degrees C (-5degrees and -50degrees F) in winter and 10degrees and 27degrees
C (50degrees and 80degrees F) in summer. Winters are dry, and summer rainfall
seldom exceeds 380 millimeters in the mountains and 125 millimeters in the
desert.
Mongolia contains forests of larch, pine, and cedar in the mountains, but these
are of little economic importance. Fur bearing animals, especially marmot and
squirrel, are abundant, and the country has a well-developed fur industry. Rich
prairie land in the northeast and northwest supports large herds of cattle,
sheep, and goats. Mineral resources such as coal, iron, copper, fluorspar,
gold, uranium, and silver have not been fully exploited.
POPULATION
The population of the Republic of Mongolia (1993 estimate) was 2.2 million,
yielding an overall population density of about 1.4 people per square
kilometer.
The ethnic composition of Mongolia is fairly homogeneous. Khalkha Mongols
constitute more than 75 percent of the population. Other groups are Buryat
Mongols and Kazakhs. The society is about 58 percent urban.
POLITICAL DIVISIONS AND PRINCIPAL CITIES
Mongolia is divided into 18 provinces and 3 independent cities. The independent
cities are Ulaanbaatar, the capital (population, 1992 estimate, 600,900);
Darhan (1991 estimate, 90,000); and Erdenet (1991 estimate, 58,200), a mining
center that developed rapidly in the 1970s.
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RELIGION AND LANGUAGE
The traditional faith in Mongolia was Buddhist Lamaism, which was suppressed
beginning in 1929. Only one small monastery remains, at Ulaanbaatar. Buddhism
is enjoying a revival since the end of communism in the late 1980's. The
Mongolian language is one of the Altaic languages.
EDUCATION
Education in Mongolia is compulsory between the ages of 6 and 16. In the late
1980s some 443,000 pupils annually attended about 710 elementary and secondary
schools staffed by approximately 18,400 teachers. Some 22,200 students were
enrolled in vocational and teacher-training schools. About 22,600 students
attended institutions of higher education; some 4,000 of these were enrolled in
the Mongolian State University (1942), in Ulaanbaatar. Other institutions of
higher learning included schools of medicine, agriculture, and military
affairs. While Soviet influence predominated in Mongolia, Russian was taught in
all schools, and several thousand students each year were sent to study in the
Union of Soviet Socialist Republics ("USSR") and eastern European countries.
ECONOMY
The basis of the economy of Mongolia is crop farming and livestock breeding.
Manufacturing is devoted largely to the processing of agricultural and
livestock products. After the collapse of the socialist system and
disintegration of the former Soviet Union, Mongolia endured a severe decline in
GDP from 1989 to 1993. The economy has rebounded since 1994 with GDP growth of
6.3% in 1995, 2.6% in 1996, and 3.3% in 1997. The slower economic growth
reflects a decline of world market prices for copper and cashmere, Mongolia's
two largest exports.
The freeing of fuel and energy prices pushed inflation in 1996 to 59% and
dampened overall consumption. In 1997, a relatively stable exchange rate was
realized, and inflation was held below 18%. Economic trends point toward a
sustainable economic growth rate of 5-6% per annum, with inflation falling into
single digits by 1999.
Total foreign trade turnover in 1997 was $861.4 million; exports equaled $418
million, and imports totaled $443.4 million. Copper and molybdenum
concentrates, fluorspor, goat wool, and cashmere accounted for 66% of exports.
AGRICULTURE
Agricultural production in Mongolia is focused on animal husbandry and crop
farming (wheat, barley, oats, and vegetables). The national livestock herd is
31.3 million animals, comprised of 14.2 million sheep, 10.3 million goats, 3.6
million cattle, 2.9 million horses, and over 355,000 camels. Mongolia accounts
for more than 25% of world cashmere output and also exports skins, hides, wool,
meat and other animal products.
Crop farming is relatively new in the country and was developed through large
state farms. The most important crop is wheat, and the maximum arable area is
1,332,000 hectares. The government has drafted plans to privatize all state
farms and croplands by the end of 1998.
MINERAL RESOURCES
Mongolia has substantial deposits of copper, molybdenum, gold, uranium, lead,
zinc, zeolites, rare earths, ferrous metals, fluorspor, phosphate, and precious
and semi-precious stones. Several mining operations were developed before 1989
with assistance of the Soviet Union and Eastern European countries, and in
recent years a number of private mining operations have begun. Due to
isolation from international trading systems and lack of infrastructure, many
mining prospects remain undeveloped. In recent years, gold production has
emerged as one of the most dynamic sectors of the Mongolian economy. Gold
production has grown seven-fold since 1990 and reached 8 metric tons (257,000
oz.) in 1997.
The Mongolian and Russian joint venture Erdenet has been operating since 1981
with an annual capacity of 20 million tons of copper ore; this capacity is
being expanded to 24 million tons of ore per year. Recoverable metal is
estimated to be 7,556,000 tons of copper and 43,600 tons of molybdenum in ore
averaging 0.53% copper and 0.018% molybdenum.
Mongolia has substantial proven reserves of coal. Coal is the major source of
energy production and is likely to remain so. Mongolia's coal reserves are
estimated at about 100 billion tons, 20% in hard coal deposits, and 80% in
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lignite deposits. In 1997, domestic coal production totaled about 5 million
metric tons, the majority of which was consumed for domestic needs.
Mongolia has one operable oil field in the Gobi region, and initial results of
petroleum exploration in eastern and western Mongolia, carried out by companies
from the U.S., Europe, China, and Russia, appear to be promising.
ENERGY
The Central Energy System of Mongolia has four coal-fired power plants (two in
Ulaanbaatar, one in Darkhan, one in Erdenet) with a total capacity of 690MW.
At peak demand times, additional power is imported from Russia. Power for
small towns in outlying areas is provided primarily by diesel generators or
small coal-fired plants.
CURRENCY AND FOREIGN TRADE
The currency of Mongolia is the tughrik (togrog), which consists of 100 mongo
(820 tughriks equal US$1.00; 1998).
Most of Mongolia's trade is with the countries that made up the former USSR and
other former Soviet-bloc countries. Since the early 1990s, Mongolia has made
efforts to expand trade with other countries. Principal exports in the late
1980s were minerals, cattle, meat products, wool, and consumer items. Imports
consisted mainly of machinery and transport equipment, consumer goods, and
industrial raw materials.
TRANSPORTATION AND COMMUNICATIONS
Mongolia is served by the Trans-Mongolian Railway, which connects Ulaanbaatar
with Russia and China. Truck services operate throughout the country. Steamer
services operate on the Selenge River and a tug and barge service on Lake
Hovsgol. Air service connects Ulaanbaatar with Moscow, Beijing, Seoul, and
cities in Central Asia. Domestic services are provided by Mongolian Civil Air
Transport.
In the late 1980s, Mongolia was served by about 55,000 telephones, 212,000
radio receivers, and 111,000 television sets. The country has nine national
newspapers. Unen, a daily newspaper published in Ulaanbaatar, is the most
widely read, with a daily circulation of about 170,000.
GOVERNMENT AND JUDICIARY
Under Mongolia's 1960 constitution, the supreme organ of state power was the
People's Great Hural ("Khural"), a 430-member assembly that usually met twice a
year. The Mongolian People's Revolutionary (Communist) party ("MPRP") was the
sole legal party until 1990, when the constitution was amended to allow
opposition parties, to institute a presidential system of government, and to
add a 53-member standing legislature, the Small Hural. In January 1992, a new
constitution was adopted. By this constitution, the legislative power of the
republic resides in the 76-member Great Hural; the delegates of the Great Hural
are chosen for 4-year terms through free elections. The president is head of
state, and is also elected to a four-year term.
Mongolia is divided into 18 provinces, or aimags, which are subdivided into
districts, or somons. Local centers of power are hurals, or assemblies, of
working people's deputies. Ulaanbaatar, Darhan, and Erdenet are separate
administrative units, governed by city hurals.
In Mongolia, the Supreme Court, the city court of Ulaanbaatar, 18 provincial
courts, and local district courts administer justice. The assemblies at each
political level elect members of the courts.
HISTORY
Modern history of Mongolia begins with the rise of the great Mongol Empire at
the beginning of the 13th Century under Genghis (Chinggis) Khan. By 1280 the
Mongol's ruled from Peking to the Adriatic and from Siberia to Persia and the
northern border of India. Kublai Khan, grandson of Genghis, founded the Yuan
dynasty in China in 1271. The Manchu Empire subjugated Mongolia in 1691. The
period of Manchur colonialism, which lasted for 220 years, was a grim time in
Mongolian history.
After the Chinese revolution of 1911, Mongolia declared its independence from
China, but the Living Buddha continued to rule. In 1920 a military force
supplied and financed by Japan and led by a Russian anti-Bolshevik general,
Baron Roman Nikolaus von Ungern-Sternberg, took the capital, Urga, and set up a
puppet government. In
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<PAGE> 38
1921 the Mongolian People's Revolutionary party, formed by Soviet-trained
Mongols, established an independent Provisional People's Government and, with
aid from the USSR, defeated Ungern-Sternberg and his supporters. The theocratic
monarchy, its powers limited, was retained by the provisional government until
1924, when the last Living Buddha died. At that time, the Mongolian People's
Republic, modeled on Soviet lines, was founded, but China did not recognize its
independence until 1946. After the Communists won power in China in 1949, trade
and cultural relations were established between the two nations, but the
Sino-Soviet split in the late 1950s curtailed these relations. A Sino-Mongolian
border treaty was signed in 1962, but Mongolia maintained its closest ties with
the USSR, which in 1961 sponsored its membership in the United Nations. The two
countries signed a treaty of friendship, trade, and mutual assistance in 1966,
renewed in 1986. In the 1980s, the USSR was Mongolia's leading trade partner
and aid donor; about 65,000 Soviet troops were stationed in Mongolia.
In March 1990, Punsalmaagiyn Ochirbat, former foreign trade minister, became
president, inaugurating a period of political and economic liberalization.
After the new constitution was adopted in January 1992, the reconstituted
Mongolian People's Revolutionary party swept the parliamentary elections in
June of that year. In January 1993, President Ochirbat and the Russian
President Boris Yeltsin signed another treaty of friendship and cooperation, to
replace the treaty of 1986. In June 1993, President Ochirbat was re-elected.
In 1996, the Social Democratic Party won a majority of seats in the Mongolian
Parliament. In 1997, N. Bagabondi defeated President Ochirbat.
MONGOLIA PROPERTY
OWNERSHIP
The joint venture company, Gurvan-Saihan BBHK, was formed in Mongolia in
January 1994 by Energy Fuels, Geologorazvedka ("GRZ"), a unit of the Russian
Ministry of Geology, and URAN, a state enterprise under the Ministry of Energy,
Geology and Mining of Mongolia. Energy Fuels was required to spend $4 million
to become fully vested, at which time it held 70% of the joint venture company,
with GRZ and URAN each holding 15%. The $4 million expenditure requirement was
fulfilled in April 1997; The Registrant continues to fund 100% of Venture
activities. The disproportionate funding is recoupable out of the carried
partners' shares of proceeds from future uranium production. A royalty in the
amount of 4% is payable to the Mongolian government.
LOCATION AND PHYSICAL FEATURES
The Mongolian joint venture is comprised of five separate concession blocks, in
the original grant by the Mongolian government that cover a total area of
12,100 square kilometers in central eastern Mongolia. Based on encouraging
exploration results in the 1996 and 1997 field seasons, the joint venture added
4365 square kilometers in eight additional parcels in early 1998.
The East Gobi region of Mongolia is a plateau at 3,000 to 3,500 feet above sea
level characterized by low hills and gently rolling topography. The climate is
harsh with typical extremes of an intercontinental climate similar to the
southern prairies of Canada and northern plains of the United States. The
region is semi-arid with numerous dry lake beds and salt marshes and no
permanent rivers.
The Choir concession, where most of the work has been undertaken prior to 1997,
is on the Trans-Mongolian Railway about 250 kilometers southeast of Ulaanbaatar
and about 1,100 kilometers from Beijing. A network of numerous unpaved trails
connects most centers, and truck or 4x4 vehicles following tracks or driving
cross-country can reach the various concession areas. In 1997, the Joint
venture focused the majority of its effort's on the Hairhan area as the result
of encouraging initial exploration in 1996.
EXPLORATION HISTORY
Uranium prospecting was started by the Russians in 1955 and resulted in the
discovery of several showings in the Choir Depression. Detailed work, which
began in 1970 with an airborne gamma-ray spectrometer survey and ground follow
up, resulted in the identification of the Haraat deposit in the Choir
Depression.
In 1988 and 1989 a major drilling program was undertaken in the Choir
Depression with a series of drill hole fences across the full 10 to 20
kilometers width of the depression. Fence spacings ranged from 8 to 12
kilometers with hole spacings at 100 to 800 meters. A total of 47,000 meters of
drilling was completed in over 1,000 holes ranging in depth from 20 to 400
meters. The vast majority of the drilling was shallow down to 40 metres,
testing the shallow
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<PAGE> 39
mineralization in the Upper Cretaceous with efforts concentrated on defining
the mineralization at Haraat. A few deeper holes were drilled to test the
potential of the basin at depth.
Extensive drilling resumed in 1994 with the formation of the Gurvan-Saihan
Joint Venture, and delineation drilling was undertaken at Haraat on a 200
metres x 100 metres grid with some closer spacing at 100 metres x 50 metres.
Preliminary field ISL studies were also conducted at Haraat in 1994.
In 1995 modern probing equipment using digital recording was sent to Mongolia
from the United States and has been used on probing of all holes since then.
This allows for a more efficient use of data, and also allows for
discrimination of individual lithologic units.
In 1996 the Joint Venture focused its efforts on the Choir Depression and in
the Haraat area in particular. An ISL Pilot test using acid solution was run
on ore horizons both above and below the water table (leaching above the water
table is a promising technology that requires further refinement). The 1996
pilot testing demonstrated that the deposits at Haraat, both above and below
the water table, are suitable for ISL. Additional testing and research is
needed to refine the leach chemistry.
The total exploration-drilling program in 1996 was in excess of 33,000 meters,
with the majority of the work in the Choir Depression. Based on detailed
radiometric surveys, initial reconnaissance drilling was conducted in 1996 in
both the Hairhan and the Gurvan Saihan Depressions. Ore-grade discoveries were
made in both basins, and the discovery hole at Hairhan was the thickest,
highest-grade hole drilled to date in the Mongolia venture.
The 1996 results led to a major expansion of exploration drilling in 1997,
directed primarily to the discovery area at Hairhan. Over 34,000 meters were
drilled at Hairhan in 1997, and resources in excess of 10-million lbs. uranium
have been identified. The remainder of the 1997 drilling was conducted in the
Choir Depression to expand the resources below the water table in the region of
the Haraat deposit. Initial reconnaissance drilling was also conducted in the
Ulziit Depression in 1997, and this area also appears to be highly prospective
for uranium deposits.
GEOLOGY
Uranium exploration is focused on large depression areas filled with Cretaceous
sediments and flanked by Proterozoic schists, gneisses and limestones as well
as Permian acid volcanics, Palaeozoic granites and Mesozoic leucogranites and
volcanics. The Lower Cretaceous, which is up to 1,500 metres thick, is
comprised of two facies: (1) low-sorted gravels, conglomerates and sandstones,
and (2) lake sediments (clays, argillaceous sandstones) and brown coals. The
Upper Cretaceous is five to 40 metres thick, consists largely of sand and
gravel formations cemented by limonite-goethite, and is confined to small areas
near the centres and margins of the major depressions. The dips are flat, but
may steepen to 5degrees to 10degrees near margins. There is some block
faulting, and dips may increase to 70degrees to 80degrees against faults, but
there is generally little structural disturbance.
The uranium mineralization is found in paleo channels and alluvial/fluvial
systems and is thought to have been deposited from solutions percolating
through the porous sandstones and precipitating uranium at reducing interfaces
with organic detritus. The Russian geologists consider the granites as the most
likely sources, and consequently rate the areas of the depressions flanked by
granitic rocks as the most prospective. The main uranium minerals in the
reducing environment below the water table are uraninite and coffinite. Above
the water table, a number of different secondary minerals have been identified
and include autunite, torbernite, bergenite and phosphuranylite. Geochemical
studies show that small amounts of RE, rhenium and selenium accompany the
uranium mineralization.
THE HARAAT DEPOSIT
Two concentrations of mineralization have been identified at Haraat, referred
to as the N1 and N2 ore bodies.
Geological resource estimates were prepared by the Russian geological team for
the areas of expanded drilling in 1997 in the Haraat area. The estimation
methodology, utilizing a 0.01% U cutoff, is basically a block or polygonal
technique wherein ore-being coefficient and average thickness and grade values
are determined for each mineralized area. The geological resources in the most
heavily investigated areas, the N-1 and N-2 deposits, were calculated by a
joint American-Russian team in early 1997; the combined current proven,
probable and possible geological resource total for the Haraat area deposits is
presented in the following table:
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BELOW WATER TABLE
<TABLE>
<CAPTION>
AREA GRADE (%U(3)O(8)) POUNDS U(3)O(8) THICKNESS(ft)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Haraat N-1 & N-2 0.046 2,786,700 26.7
Shar Oortsog 0.018 2,146,000 9.9
Haraat West 0.025 1,089,700 9.2
Haraat East 0.030 374,900 4.7
----- ---------- -----
Subtotal 0.027 6,397,300
ABOVE WATER TABLE
- -----------------
Haraat N-1 & N-2 0.025 16,084,100 19.8
Shar Oortsog 0.025 6,983,100 7.1
Haraat West 0.018 1,640,600 10.2
Haraat East 0.026 9,600,200 10.6
----- ---------- -----
Subtotal 0.024 34,308,000
Total Proven, Probable and Possible Geological Resources = 40,705,300 Pounds U(3)O(8)
</TABLE>
THE HAIRHAN DEPOSIT
By the end of 1996 exploration season, a 23km anomalous trend, based on
radiometric surveys, was delineated in the Hairhan depression. A major
exploration and delineation program in 1997 followed the initial reconnaissance
drilling which led to the Hairhan uranium discovery. A 6.5km mineralized trend
was discovered with drilling on sections 800 and 1600 meters apart. The
richest portion of the deposit is an area about 1600m by 1500m and has not yet
been fully investigated by drilling.
A total of 495 holes and test wells have been drilled at Hairhan through the
end of the 1997 field season. The majority of the holes are in the main block
(1000m by 1500m); which has been drilled on 100mx50m spacing to support
calculation of probable geological resources.
The Hairhan deposit is hosted in sandy sediments deposited in a fault graben,
which focused the deposition of a sequence of alternating sands, siltstones,
clays, and carbonaceous layers. The graben aligns with a structural valley in
the nearby granitic highlands. Erosion, weathering, and leaching of the
granites and the derived sediments formed uranium deposits in multiple layers.
The ore deposition is related to reduction-oxidation interfaces. The ore
ranges from 10m to at least 100 m deep, with as many as four stacked horizons
in some locations.
In addition to resource delineation drilling in 1997, core holes were drilled
to obtain rock samples for testing, and hydrogeological test wells were
installed to evaluate aquifer properties. The water table is shallow at
Hairhan, and all mineralization of interest is below the water table. The
Hairhan deposit exhibits favorable characteristics for ISL.
Proven and probable geological resources have been calculated at 0.024%
U(3)O(8) cutoff for the area of detail drilling at Hairhan.
<TABLE>
<CAPTION>
Average GT
ZONE THICKNESS (ft) Grade(%U(3)O(8)) Test - % POUNDS U(3)O(8)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
f2 16.1 0.073 1.17 1,077,000
f5 24.2 0.076 1.85 3,523,000
f7.5 25.9 0.081 2.10 3,512,000
f8.5 13.9 0.111 1.53 830,000
f12 32.7 0.061 2.01 1,388,000
f18 14.9 0.199 2.97 493,000
--- ---- ----- ---- ----------
Total 23.7 0.079 1.87 10,823,000
TOTAL = 10,823,000 Pounds U(3)O(8)
AVG THICKNESS 23.7 Feet
AVG. GRADE = .079 %U(3)O(8)
</TABLE>
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GURVAN-SAIHAN JOINT VENTURE PROJECT -- IN-SITU MINING CONSIDERATIONS
In Situ Leach is viewed as the most viable technique for exploitation of the
uranium deposits in Mongolia. Not only does ISL enjoy the benefits of lower
capital and front-end development expenditures than conventional open pit or
underground operations, it also often has more attractive operating costs.
Another major appeal of ISL is the minimal surface and related environmental
impacts incurred in comparison with conventional mining and milling operations.
The deposits at Haraat and at Hairhan are suitable for ISL. Pilot tests have
been run at Haraat, and testing is planned to begin in 1998 at Hairhan.
Preliminary field data from core samples and hydrogeological tests indicate
that the ore is amenable to acid leach and that the hydrology is acceptable.
The substantially richer deposit at Hairhan, coupled with the fact that the ore
is below the water table, has elevated Hairhan ahead of Haraat as a potential
commercial project. Although laboratory and field data are encouraging for
ISL, full scale testing must be successfully conducted to confirm the operating
parameters and costs for an ISL mine in Mongolia.
Other Areas
Work in other concession areas at the present stage has only been of a
reconnaissance nature involving prospecting and some car-borne scintillometer
surveys, with initial exploratory drilling at Gurvan-Saihan and Hairhan in 1996
and in the Ulziit Depression in 1997. A total of seven widely spaced fences
over an 18 km long trend were drilled at Gurvan-Saihan with mineralization
intersected in six of the seven fences. The best results was 0.102% U over 1.3
meters. Examples of other intersections are 0.062% U over 1.2 meters, 0.06% U
over 1.6 meters, 0.04% U over 1.9 meters, 0.036% U over 4.8 meters, 0.024% U
over 1.1 meters, and 0.018% U over 4.0 meters.
In the Ulziit Depression, reconnaissance work between 1958 to 1963 located five
uranium occurrences and 10 radiometric anomalies. The Russian geologists
consider that this depression is similar to the Choir Depression and has
excellent potential. Initial exploration drilling was conducted in 1997 in the
Ulziit area; based on encouraging geologic results, an expanded exploration
drilling program is planned for 1998.
OTHER ASSETS OF REGISTRANT
EMPLOYEES
The Registrant currently employs a total of 156 people, of which 19 are located
at the head office in Denver, 96 are located at the White Mesa Mill, 37 are
located at the Colorado Plateau offices and the Sunday Mine, 2 are located at
the Fredonia, Arizona field office for the Arizona Strip, and 2 are located at
the field office in Gillette, Wyoming.
ADMINISTRATIVE OFFICES
The Registrant has a head office in Denver, Colorado, as well as field offices
in Fredonia, Arizona, Dove Creek, Colorado and Gillette, Wyoming.
EQUIPMENT
The Registrant has extensive mining and milling equipment capable of sustaining
operations at the four mines that the Registrant has included in its business
plan, with only a few additions.
SUPPLY CONTRACTS
The Registrant currently has entered into uranium supply contracts with certain
U.S. and foreign customers under which the Registrant has the obligation to
supply to those utilities a total of approximately 2,870,000 pounds of uranium
during the next 5 years at prices in excess of the Registrants current
estimated mining costs.
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TOLL MILLING AND PURCHASED ORE
The White Mesa Mill is a fully permitted uranium Mill in the United States with
a vanadium and other co-products recovery circuit that is strategically located
in southeast Utah near the Colorado Plateau District and the Arizona Strip.
It is unlikely that new Mills will be constructed at current prices of uranium.
The White Mesa Mill cost $40 million to construct in 1980. With inflation,
more stringent permitting requirements, and the lack of suitable sites, the
cost of constructing a facility such as the White Mesa Mill, if possible, would
be considerably more than that amount.
Historically, Energy Fuels had toll milled ore from other uranium and
uranium/vanadium mines and had purchased ore from independent mines which it
then processed through the White Mesa Mill.
Commencing in 1978, in anticipation of the construction of the White Mesa Mill,
Energy Fuels instituted a buying program throughout the Colorado Plateau
District which procured approximately 1.8 million tons of ore from 177
different "independent" mine operators and five large scale mines. Energy
fuels constructed two ore buying/sample facilities and orchestrated a $50
million yearly ore purchase program which enabled them to accumulate a two year
Mill-feed inventory before the White Mesa Mill was completed. This was at a
time when Energy Fuels did not have any operating mines that could feed the
Mill.
The Registrant has instituted a Purchase Ore Program to supplement the feed to
the White Mesa Mill from its mines in the Colorado Plateau District and Arizona
Strip. The Registrant had been contacted by a number of large corporate holders
of mines and reserves in the Colorado Plateau and Arizona Strip areas to
discuss arrangements for tolling their ore through the White Mesa Mill. The
Registrant intends to pursue these negotiations and seek out additional toll
milling opportunities in the area. In addition, the Registrant believes that
significant tons of ore could be purchased at a profit from independent mines
in the Colorado Plateau area. The amount of tolled and purchased ore that will
be available will vary with the prices of uranium and vanadium.
ALTERNATE FEEDS
In addition to processing conventional ores as explained above, the Mill also
has the capability to process Alternate Feeds and recover uranium at costs
below the costs of producing uranium by either conventional or in situ methods.
These Alternate Feeds can generally be thought of as ores or residues from
other processing facilities that contain uranium in quantities that are either
uneconomic to recover or cannot be recovered at these other facilities. As
such, they become a costly disposal issue for the owner, not to mention a
wasted resource. However, the Registrant has demonstrated the capability to
"recycle" these Alternate Feeds through the Mill, recover whatever uranium is
present, and dispose of the remaining waste in the Registrant's tailings cells.
The mill's co-product recovery circuit also allows the Registrant to recover
other valuable materials such as tantalum, niobium, scandium, and zirconium
that might be present in these alternate feeds.
The Registrant has entered into and processed material under four separate
alternate feed agreements to date and is currently negotiating other alternate
feed arrangements at this time.
ENVIRONMENTAL
An environmental overview of Energy Fuels' mine sites in Colorado, Utah and
Arizona and the White Mesa Mill was initially conducted by Simons Environmental
Group ("Simons") of Vancouver, BC Canada, in March 1996.
Based on this review, Simons concluded that overall Energy Fuels appeared
environmentally well managed. Energy Fuels was named as a Potentially
Responsible Party ("PRP") on a CERCLA (Superfund) Site for approximately
$187,000. This was a result of an environmental incident at the Colorado
School of Mines in 1990, involving ore which originated from Energy Fuels in
1979 for a processing trial, and is unrelated to the Registrant or any of the
Registrant's properties or operations.
Simons concluded that the mine sites are unlikely to represent a major
immediate environmental liability. The Colorado Plateau mines sites may
require some minor erosion control, housekeeping, and storm water management.
The Arizona Strip mine sites appear environmentally well managed. A tailings
cell liner at the White Mesa Mill will require repair or replacement prior to
commencement of its use. See "White Mesa Mill".
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<PAGE> 43
In January 1997, the Registrant engaged Simons to update its prior
environmental review of the Energy Fuels Assets, and in particular to complete
Phase I Environmental Site Assessments, according to ASTM standards, on the
Sunday Mine Complex, the Deer Creek Mine Complex, the White Mesa Mill, the
Arizona 1 Mine, the Pinenut Mine, the Kanab North Mine, the Canyon Mine and the
Reno Creek Property. These assessments involved a review of Federal and State
records, interviews with site personnel, a review of relevant files, site
reconnaissance, and interviews with local regulators. In its Phase I
Environmental Site Assessments on these properties, Simons concluded that no
recognized environmental conditions existed on any of those properties.
PERMITTING
The permitting status of the various mines is set out below.
ARIZONA 1 MINE
The Arizona 1 Mine is fully permitted for mining.
SUNDAY MINE COMPLEX
The Sunday Mine Complex is fully permitted for its mining activities. Recent
changes in the laws of Colorado could give rise to additional future permitting
requirements.
In recent years, the State of Colorado passed a law that provides that the
Colorado Division of Minerals and Geology ("DMG") can determine that a mine is
a Designated Mining Operation (a "DMO") if it is a mining operation at which
"toxic or acidic chemicals used in extractive metallurgical processing are
present on site or acid- or toxic- forming materials will be exposed or
disturbed as a result of mining operations". If a mine is determined to be a
DMO, the most significant result is the requirement that it submit an
Environmental Protection Plan (an "EPP"). The EPP must identify the methods the
operator will utilize for the protection of human health, wildlife, property
and the environment from the potential toxic- or acid-forming material or acid
mine drainage associated with the operations. The EPP must be submitted to the
DMG for review, and after a public hearing, a decision must be made within 120
days of the submission of a complete application, unless the application is
considered to be complicated, which would extend the deadline to 180 days.
In 1995, DMG notified Energy Fuels that they believed that the Sunday Mine
Complex was a DMO, because of the potential that storm water could come in
contact with the low grade waste rock on site. Energy Fuels disputed this
assertion. Testing was performed on the waste rock. In November 1996, the DMG
advised Energy Fuels that the test results of the average uranium content of
the waste dumps at the mine sites satisfied the DMG that the Sunday Mine
Complex is not a DMO. However, the DMG also advised that its determination
could change if site conditions or circumstances change. Therefore, if mining
activities are re-initiated at these mines, the DMG reserved the right to
submit a new notice of determination, which may require additional
environmental review. As of this filing date, the Registrant has not been
notified of any additional permitting requirements relating to its current
mining activities at the Sunday Mine Complex.
CANYON MINE
The Canyon Mine is the first mine to be permitted in the portion of the Arizona
Strip that is south of the Grand Canyon. The Canyon Mine is located on federal
lands administered by the United States Forest Service and is near the southern
rim of the Grand Canyon. The plan of operations submitted by Energy Fuels in
1984 for development and operation of the mine generated significant public
comment resulting in the invitation of an environmental impact statement
process by the United States Forest Service. The United States Forest Service
for the State of Arizona approved the plan of Energy Fuels and issued all
necessary federal and state permits and approvals. The Havasupai Indian Tribe
and others filed appeals. The United States Forest Service for the State of
Arizona and Energy Fuels prevailed on all appeals. During the permitting
process, Energy Fuels constructed all the necessary service facilities at the
mine site. Energy Fuels agreed with the United States Forest Service not to
implement underground development during the environmental impact statement
process. Energy Fuels did not resume underground development at the mine site
when the appeals were determined due to the decrease in uranium prices at that
time.
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In 1992, the State of Arizona updated its laws relating to groundwater issues,
requiring that an Aquifer Protection Permit be obtained. It is not expected
that there will be any problems of any significance in obtaining this permit,
and the Registrant is currently permitted to commence mining at the Canyon Mine
during submittal, review and update to the Aquifer Protection Permit.
PINENUT AND KANAB NORTH MINES
As with the Canyon Mine, these mines both require that an Aquifer Protection
Permit be obtained. Energy Fuels did not expect that there will be any problems
of any significance in obtaining this permit and is currently permitted to
commence mining at each of these mines during submittal, review and update to
these Aquifer Protection Permits.
RENO CREEK PROPERTY
Energy Fuels filed applications for commercial operating licenses and permits
to mine the Reno Creek by ISL methods. In January 1995, the Wyoming Department
of Environmental Quality declared the Reno Creek Mine Permit application
complete, and the applications are now in the technical review phase.
The Registrant re-initiated commercial permitting late in 1997. Applications
are under review for a Mine Permit, Class I Waste Disposal Well, Wastewater
Disposal System, NPDES Discharge Permit, and related subsidiary permits from
the State of Wyoming. In additional the U.S. Nuclear Regulatory Commission is
processing the Registrant's application for a Source Material License.
RECLAMATION
The Registrant is responsible for the environmental and reclamation obligations
relating to all of its existing mines and assets, as well as for all
reclamation and environmental obligations associated with all mined out,
inactive, reclaimed or partially reclaimed mines and properties acquired from
Energy Fuels on the Acquisition.
The total amount of the estimated reclamation liability is approximately
$13,265,000 with cash of approximately $8 million securing the liability. All
of the Registrant's mines and the White Mesa Mill were permitted through either
state or federal authorities. As a part of permit requirements, reclamation and
decommissioning bonds are in place to cover the estimated cost of final project
closures. The major cost is for closure of the White Mesa Mill and tailings
cells which is estimated at $11.5 million. The Registrant has posted a
reclamation's bond to the NRC for this amount.
SWISS ROYALTY INTEREST
As consideration for funding a large part of the cost of construction of the
White Mesa Mill, the Swiss Utilities acquired a 40% limited partnership
interest in all of Energy Fuels' properties in the United States. This limited
partnership interest did not apply to the Mongolia Property.
In 1995, after commencement of the bankruptcy proceedings against Energy Fuels,
the Swiss Utilities agreed to fund the milling of approximately 200,000 tons of
stockpiled ore, the proceeds of which were used to repay this funding provided
by the Swiss Utilities, and to provide working capital to the bankrupt estates.
As part of this financing and Mill run, Energy Fuels and the Swiss Utilities
agreed to convert the Swiss Utilities' 40% limited partnership interest in the
United States properties, into a royalty (the "Swiss Royalty") of 9% of all
uranium and 5% of vanadium and all other minerals produced from the United
States properties owned by Energy Fuels at the time that the royalty was
granted. The Swiss Royalty will apply to all production from the Colorado
Plateau District properties and Arizona Strip properties acquired on the
Acquisition, as well as the Reno Creek Property, a portion of the Dewey Burdock
Property and the Bull Frog Property. The Swiss Royalty Interest does not apply
to the Mongolia Property, nor to any tolled ore, or purchased ore from third
parties, or Alternate Feeds that are processed in the White Mesa Mill, nor to
any properties acquired by Energy Fuels after the date that the Swiss Royalty
Interest was granted.
Subsequent to the Acquisition, the Registrant has amended the Swiss Royalty
amount to 4.5% of all uranium and 2.5% of vanadium for the period from January
1, 1998 to December 31, 2000. The Registrant will make an advance royalty
payment of $250,000 per year, which is fully recoupable annually against any
royalties for the applicable calendar year. Subsequent to December 31, 2000,
the royalty reverts to its original terms.
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<PAGE> 45
INTERCOMPANY ROYALTY INTEREST
The Registrant has purchased production royalties from International Uranium
Holdings Corporation and its 100% owned subsidiaries for a total purchase price
of approximately $25 million. This amount will be repaid from future
production.
THE URANIUM INDUSTRY
OVERVIEW
The only significant commercial use for uranium is to fuel nuclear power plants
for the generation of electricity. According to the Energy Information
Administration of the United States Department of Energy (the "EIA"), nuclear
plants generated approximately 17% of the world's electricity beginning 1997.
According to the EIA, nuclear electric generating capacity is expected to grow
modestly between now and the year 2000, at a rate somewhat below that for the
total market for electricity, primarily as a result of new reactor construction
outside the United States.
The major stages in the production of nuclear fuel are exploration, mining and
milling, including in situ leach, conversion, enrichment for light water
reactors, and fuel fabrication. Once a uranium deposit is discovered and
reserves delineated, uranium ore is mined and partially refined at a nearby
Mill to produce uranium concentrates. These uranium concentrates are generally
in the form of U(3)O(8), or "Yellowcake" as it is referred to in the industry.
Mining companies usually sell uranium to utilities around the world in the form
of U(3)O(8) contained in uranium concentrates. Market participants, such as
utilities, then contract with converters, enrichers, and fuel fabricators to
produce the required reactor fuel.
URANIUM SUPPLY AND DEMAND
The installed Western World nuclear electric generating capacity is projected
to increase from 351.0 net GWe in 1997 to 390.5 GWe by 2010 representing an 11%
increase. The forecasts for installed Western World electric generating
capacity for 2000 and 2010 are based on many factors, including the utilities'
announced plans for nuclear capacity up to the year 2010 as well as government
announcements from countries operating, building or contemplating building
nuclear generators. In addition, the EIA made many country specific assumptions
about whether the utilities in each country would follow current schedules for
start-ups or shut-downs of generators and whether government pronouncements
were credible and would be carried through to fruition. No assurances can be
given that such assumptions are correct or that the schedules for expected
start-ups and shut-downs of nuclear generators will not be changed at any time
by utilities. As a result, the EIA's forecasts are subject to many risks and
uncertainties and, therefore, no assurances can be given that actual results
will not differ materially from such forecasts.
At the end of 1996, the United States led the world in nuclear capacity (100.7
GWe), followed by France (59.9 GWe), Japan (42.4 GWe), Germany (22.3 GWe),
Russia (19.8 GWe), Canada (14.9 GWe), Ukraine (13.8 GWe), and the United
Kingdom (12.9 GWe). Combined, these eight countries accounted for 82 percent
of the world's capacity for generating electricity. The Far East, with 33
scheduled units totaling more than 30.9 Gwe, lead world nuclear construction
programs. A total of 18 countries have been identified as having nuclear units
in the construction pipeline.
The demand for U(3)O(8) is directly linked to the level of electricity
generated by nuclear power plants. According to the Uranium Institute ("UI"),
annual Western World uranium fuel consumption has increased from approximately
56 million pounds U(3)O(8) in 1980 to about 144 million pounds U(3)O(8) in
1997. The UI estimates that annual uranium fuel consumption in the Western
World will reach 153 million pounds U(3)O(8) in 2001. Demand could be increased
by trends toward increased plant operating capacities or reduced by premature
closing of nuclear power plants.
Because of historically high prices for uranium concentrates and overly
optimistic expectations for new nuclear reactor construction, Western World
uranium production exceeded consumption in the late 1970s and early 1980s. This
led to a large build-up in inventories, which was exacerbated by new reactor
construction delays or cancellations. The resulting large inventory surplus
acted to depress the market and prices; and resulted in a dramatic
restructuring of the uranium production industry. There have been significant
reductions in mine production levels as higher cost producers have closed
operations on completion of high-priced sales contracts. For example, mine
production in the United States was reported by the UI to have declined from
43.7 million pounds U(3)O(8) in 1980 to about 5.6 million pounds in 1997.
45
<PAGE> 46
Consequently, Western World uranium consumption has exceeded Western World
uranium production since 1985. For example, at the start of 1997, the Uranium
Institute estimated that consumption exceeded production by approximately 63
million pounds U(3)O(8) or 81% of Western World production of 77 million pounds
U(3)O(8). The Registrant believes that for the last several years this
production shortfall has been filled by, in order of magnitude, (i) the
drawdown of excess inventories held by utilities and governments (ii) supplies
from certain CIS republics primarily Russia, Uzbekistan and Kazakhstan , and
(iii) to a lesser extent, supplies from Eastern Europe and mainland China.
NUEXCO TRADING CORPORATION BANKRUPTCY
On February 23, 1995 Nuexco, an affiliate of Energy Fuels, and Energy Fuels
filed for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code. See "Energy Fuels -- Bankruptcy of Oren Benton and Nuexco".
The total liabilities owed creditors of Nuexco are reported to be in excess of
$500 million. Although Nuexco continued to operate after its bankruptcy filing,
short-term defaults on some deliveries occurred, and several utilities entered
the spot market in 1995 to cover these defaults. The Registrant believes that
the resulting shortfall contributed to the increases in spot prices during 1995
and 1996.
CIS URANIUM SUPPLY
During the period 1991 to 1994, the CIS republics aggressively sold substantial
quantities of uranium into the Western World market. United States and European
government responses to these sales have limited the access of CIS producers to
these markets. In the United States, an ad hoc group of the Uranium Producers
of America ("UPA") and others filed an anti-dumping suit ("CIS Anti-dumping
Suit") against some republics of the former Soviet Union. The resulting
settlement was effected by suspension agreements (each, a "Suspension
Agreement") signed with six CIS republics (Russia, Kazakhstan, Uzbekistan,
Kyrgyzstan Ukraine and Tajikistan) in October 1992, which applied price related
quotas to CIS uranium permitted to be imported into the United States. If the
United States market price for U(3)O(8), as determined by the United States
Department of Commerce (the "DOC") was below $13.00 per pound, CIS uranium
deliveries into the United States were to be limited to those existing under
certain long term contracts entered into before March 5, 1992. At a price
between $13.00 and $21.00 per pound, the amount that could be imported into the
United States was based upon a sliding scale and at $21.00 per pound and above,
there were no limits on the amount that could be sold into the United States.
The fact that the DOC price failed to reach $13.00 in 1993 caused the DOC and
the Russian Ministry of Atomic Energy to sign an amendment to the Russian
Suspension Agreement in March 1994. The amendment allows for up to 43 million
pounds of Russian U(3)O(8) to be imported into the United States over the 10
years beginning March 1994, but only if it is matched with an equal volume of
new United States production. In total, the matched volumes could, based on
current consumption rates, account for up to 20% of the supply to the United
States market.
In March and October of 1995, the DOC and the Republics of Kazakhstan and
Uzbekistan concluded negotiations resulting in amendments to their respective
Suspension Agreements. Both amendments are effective for 10 years and provide
that uranium mined in those republics and enriched in another country (known as
"by-pass" arrangements) will no longer be considered to have undergone
substantial transformation, and will therefore count against their import
quotas. However, the initial price range under the Kazakhstan Suspension
Agreement has been reduced to $12.00 -- $12.99 from $13.00 -- $13.99. The
publishing of the DOC semi-annual price of $12.06 allowed up to 500,000 pounds
U(3)O(8) to be imported into the United States from Kazakhstan during the
period between April and September 1995. More recently, the publication of the
DOC semi-annual price of $15.78 on October 1, 1996, allowed Kazakhstan to
export up to 700,000 pounds of U(3)O(8) into the United States between October
1996 and March 31, 1997. The latest determination resulted in a price of
$11.76 which is below the floor precluding deliveries from Kazakhstan between
April and October 31, 1998. Uzbekistan would have been entitled to a sales
quota of 940,000 pounds U(3)O(8) in each of the next two years provided the DOC
calculated price would have remained at or above $12.00 per pound. For the
remaining eight years the sales quota is tied to United States production
levels: 600,000 pounds U(3)O(8) when United States production is between 3 and
3.5 million pounds U(3)O(8), rising to 1 million pounds when United States
production is between 8.5 and 9 million pounds and unlimited when United States
production exceeds 9 million pounds.
These amendments to the Suspension Agreements may increase the supply of
uranium to the United States market and provide increased predictability
concerning CIS imports into the United States. Due to declining production
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<PAGE> 47
levels in the CIS republics, uranium from these sources has recently been
difficult to obtain. Consequently, the Registrant believes that the market
impact of CIS supplies is diminishing.
In Europe, the Euratom Supply Agency, which has approval authority over all
uranium-related contracts entered into in the European Community ("EC"), has an
informal policy limiting CIS sales into the EC to about 20% of annual
individual utility requirements. The United States and EC restrictions have no
effect on the sales of CIS uranium to other countries although, due to
political disputes between Russia and Japan, there has been a general
reluctance by Japanese utilities to purchase Russian sourced uranium.
HIGHLY ENRICHED URANIUM SUPPLY
In January 1994, the United States and Russia entered into an agreement (the
"Russian HEU Agreement") to convert highly enriched uranium ("HEU"), derived
from dismantling nuclear weapons, into low enriched uranium ("LEU") suitable
for use in nuclear power plants. The first shipment of Russian HEU to the
United States took place in the June 1995 with total deliveries in 1995 of
about 5 million pounds eU(3)O(8). None of this was sold in the United States
market due to a prohibition contained in the Russian Suspension Agreement. To
overcome this impediment and concerns of United States producers, the United
States Enrichment Corporation ("USEC") and others in the industry, the United
States government provided a vehicle, via the USEC Privatization Act, for the
sale of Russian uranium acquired pursuant to the Russian HEU Agreement in the
United States commercial uranium market.
In November 1996, USEC and Techsnabexport, the Russian Executive Agent, amended
the original Russian HEU Agreement to provide for prices and quantities over a
5-year period. As a result, the Russians would blend down (i) 18 metric tons
in 1997, (ii) 24 metric tons in 1998, and (iii) 30 metric tons in 1999 through
2001.
Through December 31, 1996, the quantity of LEU purchased from the Russian
Executive Agent was less than 18 metric tons of blended HEU (14 million pounds
U(3)O(8)), rather than the 30 metric tons that had been specified in the
original HEU Agreement. The 14 million pounds of uranium purchased by USEC was
subsequently transferred to DOE to be sold by the following means: (1) at any
time for end use outside the United States, (2) to the Russian Executive Agent
for use in matched sales pursuant to the Russian Suspension Agreement, or (3)
in calendar year 2001 for consumption by end users in the United States not
prior to January 1, 2002 in volumes not to exceed 3 million pounds eU(3)O(8)
per year.
The USEC Privatization Act authorizes the DOE to transfer to USEC up to 7,000
metric tons of surplus natural uranium and LEU, equivalent to about 18 million
pounds U(3)O(8) and 50 metric tons of HEU from United States stockpiles. In
addition to these transfers, the DOE was also authorized by the USEC
Privatization Act to sell its remaining surplus natural uranium and LEU. The
Secretary of Energy, however, must determine that the sales of surplus uranium,
which is about 21 million pounds eU(3)O(8), will not have an adverse material
impact on the domestic mining, conversion, and enrichment industries, and that
the price paid for the uranium is not less than fair market value.
URANIUM PRICES
Most of the countries that use nuclear-generated electricity do not have a
sufficient domestic uranium supply to fuel their nuclear power reactors, and
their electric utilities secure a substantial part of their required uranium
supply by entering into medium-term and long-term contracts with foreign
uranium producers. These contracts usually provide for deliveries to begin one
to three years after they are signed and to continue for several years
thereafter. In awarding medium-term and long-term contracts, electric utilities
consider, in addition to the commercial terms offered, the producer's uranium
reserves, record of performance and cost competitiveness, all of which are
important to the producer's ability to fulfill long-term supply commitments.
Under medium-term and long-term contracts, prices are established by a number
of methods, including base prices adjusted by inflation indices, reference
prices (generally spot price indicators but also long-term reference prices)
and annual price negotiations. Many contracts also contain floor prices,
ceiling prices, and other negotiated provisions which affect the amount paid by
the buyer to the seller. Prices under these contracts are usually confidential.
Electric utilities procure their remaining requirements through spot and
near-term purchases from uranium producers and traders. Traders source their
uranium from organizations holding excess inventory, including utilities,
producers and governments. With the bankruptcy of Nuexco, and the closure of
by-pass arrangements resulting from the amendments to the Suspension Agreements
with the respective CIS republics, spot market activity increased to
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<PAGE> 48
42 million pounds U(3)O(8) in 1997, a volume estimated by the UI to be
equivalent to about 30% of Western World reactor requirements.
Spot prices reflect the price at which uranium may be purchased for delivery
within one year. Historically, spot prices have been more volatile than
long-term contract prices, increasing from $6.00 per pound U(3)O(8) in 1973 to
$43.00 in 1978, then declining from $40.00 in 1980 to a low of $7.25 in October
of 1991. More recently, prices have receded from a 1997 year-end spike of
$12.75 to a relative market low just below $11.00.
Trade restrictions limiting the free flow of uranium from the CIS republics
into the Western World markets, including the negotiation by the DOC of
amendments to the Suspension Agreements with Kazakhstan and Uzbekistan
resulting in the elimination of European enrichment for uranium from these
republics as a vehicle to by-pass United States import restrictions, the Nuexco
bankruptcy under Chapter 11 of the United States Bankruptcy Code and related
defaults on deliveries (see "Bankruptcy of Oren Benton and Nuexco") and the
reluctance of uranium producers and inventory holders to sell at low spot price
levels, contributed to the increase in spot prices between 1995 and 1997.
Since that time, these factors have had a diminishing impact on the uranium
market causing prices to over correct in a downward trend. Particularly, in
the case of NUEXCO bankruptcy.
Future uranium prices will depend largely on the amount of incremental supply
made available to the spot market from the remaining excess inventories,
primary production in Russia and other CIS republics, as well as supplies from
Russian HEU and its other stockpiles, from excess United States HEU and
increased production from unutilized capacity of other uranium producers.
Analysts believe, however, that prices will continue to stabilize throughout
1998 and begin to push higher over the next couple of years.
COMPETITION
The Registrant markets uranium to utilities in direct competition with supplies
available from various sources worldwide. The Registrant competes primarily on
the basis of price. Although the Registrant expects to be a significant United
States producer of uranium, its total production will be a small percentage of
total Western World production.
The uranium production according to the industry international in scope and is
characterized by a relatively small number of companies operating in only a few
nations. In 1996, six companies, Cameco, Compagnie Generales des Matieres
Nucleaires ("Cogema"), Energy Resources of Australia Ltd. ("ERA"), The RTZ
Corporation PLC ("RTZ"), Uranerzbergbau-GmbH ("Uranerz") and WMC Limited,
produced over 60% of total world output. Most of Western World production was
from only eight nations: Canada, Niger, Australia, Namibia, South Africa,
United States, France, and Gabon. In 1988, the former Soviet Union, now known
as the CIS, and Mainland China began to supply significant quantities of
uranium annually into Western World markets.
The Canadian uranium industry has in recent years been the leading world
supplier, producing 29.5 million pounds U(3)O(8) in 1996, or about 48% of total
Western World production.
THE VANADIUM MARKET
As a co-product of the production of uranium from the Colorado Plateau District
ores, the Registrant will produce and sell vanadium. These deposits have been
mined for over 100 years, and significant reserves remain.
Vanadium is an essential alloying element for steels and titanium, and its
chemical compounds are indispensable for many industrial and domestic products
and processes. The principal uses for vanadium are: (i) carbon steels used for
reinforcing bars; (ii) high strength, low alloy steels used in construction and
pipelines; (iii) full alloy steels used in castings; (iv) tool steels used for
high speed tools and wear resistant parts; (v) titanium alloys used for jet
engine parts and air frames; and (vi) various chemicals used as catalysts.
Principal sources of vanadium are (i) titaniferous magnetites found in Russia,
China and South Africa; (ii) sludges and fly ash from the refining and burning
of the U.S., Caribbean and Middle Eastern oils; and (iii) uranium co-product
production from the Colorado Plateau. While produced and sold in a variety of
ways, vanadium production figures and prices are typically reported in pounds
of an intermediate product, vanadium pentoxide, or V(2)O(5). The White Mesa
Mill is capable of producing two products, ammonium metavanadate ("AMV"), an
intermediate product, and vanadium pentoxide ("flake", "black flake", "tech
flake" or "V(2)O(5)"). The majority of sales are as V(2)O(5), with AMV being
produced and sold on a request basis only.
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Vanadium is generally produced as a by- or co-product of other metal
production. In the United States, the most significant source of production has
been as a by-product of uranium production from ores in the Colorado Plateau
District, accounting for over half of historic U.S. production. Vanadium in
these deposits occurs at an average ratio of seven pounds of vanadium for every
pound of uranium, and the financial benefit derived from the by-product sales
have helped to make the mines in this area profitable. However, low prices for
both uranium and vanadium in recent years have forced all producers in the
Colorado Plateau District to place their facilities on standby.
The market for vanadium has fluctuated greatly over the last 15 years. Over
capacity in the mid 1970's was caused by reduced demand for vanadium during the
recession that plagued the steel industry. By the end of the decade, steel
production had climbed to record levels and prices for V(2)O(5) firmed at
around $2.75 per pound. During the early 1980's, quoted prices were in the
range of $3.00 per pound, but increased exports from China and Australia,
coupled with the continued economic recession of the 1980's drove prices to as
low as $1.30 per pound. Prices stabilized in the $2.00 - $2.45 per pound range
until perceived supply problems in 1988 caused by cancellation of contracts by
China and rumors of South African production problems resulted in a price
run-up of unprecedented magnitude, culminating in an all time high of nearly
$12.00 per pound in February of 1989. This enticed new producers to construct
additional capacity and over-supply problems again depressed the price in the
early 1990's to $2.00 per pound and below. Late in 1994, a reduction in
supplies from Russia and China, coupled with concerns about the political
climate in South Africa and a stronger steel market caused the price to climb
to $4.50 per pound early in 1995. In the beginning of 1998, prices had climbed
to a nine-year high of $7.00 caused by a supply deficit unable to keep pace
with record demand from steel and aerospace industries. Increased market
demand and consumption, is expected to remain strong sustaining prices at these
near record highs for the next two years.
Vanadium supply and demand estimates for the near future show yearly
consumption to increase at a rate of 5% from its current level of 130 million
pounds V(2)O(5). World wide production capacity is expected to increase from
its current level of 120 million pounds beginning in the year 2000,
notwithstanding the Registrant's anticipated start up in 1998. Recent
comments in trade journals have indicated that the major South African
producers have augmented their production by the integration of their
ferro-vanadium production. The net effect of reduction in the flow of V(2)O(5)
from South Africa to converters in Europe and Japan, and lagging increases in
production have caused consumers to scramble for feedstocks. This, coupled with
projected worldwide yearly steel consumption of over 100 million tons in 1997
and 1998, and the apparent inability of Russia and China to produce enough
vanadium for even their internal needs, point to sustained prices in the range
of $5.00 - $6.00 per pound.
Historically, vanadium has been largely producer priced, but during the 1980's,
this came under pressure due to the emergence of new sources. As a result,
merchant or trader activity gained more and more importance. While a very large
portion of the supply continues to come from a few major producers in South
Africa, the prices for the products that will be produced by the Registrant
will be based on weekly quotations of the LME. Historically, vanadium
production from the White Mesa Mill has been sold into the world-wide market
both through traders, who take a 2% to 3% commission for their efforts and, to
a lesser extent, through direct contacts with domestic converters and
consumers. While priced in U.S. dollars per pound of V(2)O(5), the product is
typically sold by the container, which contains nominally 40,000 pounds of
product packed in 55 gallon drums, each containing 550 pounds of product.
Typical contracts will call for the delivery of one to two containers per month
over a year or two to a customer with several contracts in place at the same
time. Pricing is usually based on the LME price and may include floor and
ceiling price protection for both the producer and seller. Spot sales are also
made based on the current LME quote.
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ITEM 3 - LEGAL PROCEEDINGS
The Registrant is not currently involved in any material pending legal
proceedings.
ITEM 4 - CONTROL OF THE REGISTRANT
(a) As far as it is known to the Registrant, the Registrant is not directly
or indirectly owned or controlled by another corporation(s) or any
foreign government.
(b) Information is set forth below with respect to persons known to the
Registrant to be the owner of more than ten percent of the Registrant's
voting securities as at March 31, 1998, and the total amount of these
securities owned by the officers and directors as a group.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
IDENTITY OF PERSON OR GROUP NUMBER OF COMMON SHARES OWNED PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Adolf H. Lundin 22,500,000(1) 34.2%
- ---------------------------------------------------------------------------------------------------
Directors and Officers as a group (7 persons) 24,550,926 37.3%
- ---------------------------------------------------------------------------------------------------
GEE & CO - CIBC 9,763,600 14.9%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) These shares are held in escrow pursuant to the terms of an Escrow
Agreement among the Registrant, Adolf H. Lundin, Lukas H. Lundin and The
Montreal Trust Company of Canada. Pursuant to the terms of the
agreement, one-fifth of the shares have been released from escrow one
year following the date of listing of the Registrant's common shares on
The Toronto Stock Exchange, i.e. on May 16, 1998. The balance of the
shares will be released as to one-fifth on each of the following
anniversary dates so that all of the shares will be released by May 16,
2002.
ITEM 5 - NATURE OF THE TRADING MARKET
The Ontario Business Corporations Act, the Securities Act of the Province of
Ontario and the rules and policies of the Toronto Stock Exchange govern
issuance and trading of the Registrant's common stock.
As at March 31, 1998, approximately 6,031,200 of the Registrant's outstanding
common stock were registered in the names of residents of the United States.
The Registrant's common stock is issued in registered form and the percentage
of shares reported to be held by U.S. shareholders of record is taken from the
records of The Montreal Trust Company of Canada, the registrar and transfer
agent for the Common Stock.
The common shares of the Registrant are currently listed on The Toronto Stock
Exchange in Canada. The Registrant's common shares commenced trading on The
Toronto Stock Exchange on May 16, 1997. The following table sets forth the
high and low market prices and the volume of the common shares traded on The
Toronto Stock Exchange during the periods indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
THE TORONTO STOCK EXCHANGE HIGH LOW VOLUME
-------------------------- ---- --- ------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
May-June 1997 1.50 1.00 16,785,754
- ---------------------------------------------------------------------------------
October-December 1997 1.45 0.84 7,910,042
- ---------------------------------------------------------------------------------
1.40 0.92 4,192,792
- ---------------------------------------------------------------------------------
</TABLE>
The closing price of the common shares on The Toronto Stock Exchange on May 15,
1998, was Cdn$.92.
50
<PAGE> 51
ITEM 6 - EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Canada has no system of exchange controls. There are no foreign exchange
restrictions on the export or import of capital or on the remittance of
dividends, interest, or other payments to non-resident holders of the Company's
securities.
Under the Investment Canada Act, the acquisition of "control" of certain
"businesses" by "non-Canadians" is subject to either notification or review
requirements by Investment Canada , a governmental agency, and will not be
allowed unless they are found likely to be of net benefit to Canada. The term
"control" is defined as any one or more non-Canadian persons acquiring all or
substantially all of the assets used in the Canadian business, or acquisition
of the voting shares of a Canadian corporation carrying on the Canadian
business or the acquisition of the voting interests of an entity controlling
the Canadian corporation. The acquisition of the majority of the outstanding
shares or the acquisition of less than a majority but 1/3 or more of the voting
shares unless it can be shown in fact that the purchaser will not control the
Canadian company shall be deemed to be "control".
An acquisition will be reviewable by Investment Canada only if the value of the
assets of the Canadian business being acquired is Cdn$5 million or more in the
case of a "direct" acquisition (or where the Canadian asset acquired constitute
more that 50% of the value of all entities acquired), or Cdn$50 million or more
in the case of an "indirect" acquisition.
These thresholds have been increased for the purpose of acquisition of Canadian
businesses by investors from members of the World Trade Organization ("WTO"),
including Americans, or WTO member-controlled companies. A direct acquisition
by a WTO investor is reviewable only if it involves the direct acquisition of a
Canadian business with assets of Cdn$179 million or more (this figure is
adjusted annually to reflect inflation). Indirect acquisitions by WTO
investors are not reviewable, regardless of the size of the Canadian business
acquired, unless the Canadian, assets acquired constitute more than 50% of the
value of all entities acquired, in which case the Cdn$179 million threshold
applies.
These increased thresholds do not apply to acquisitions of Canadian businesses
engaged in certain sensitive areas such as uranium production, financial
services, transportation or cultural heritage or national identity. If the
forgoing thresholds are not met, the acquisition of a Canadian business will
not be subject to review unless it relates to Canada's cultural heritage or
national identity.
If an investment is reviewable, an application for review in the form
prescribed by regulation is normally required to be filed with the Agency
(established by the Act) prior to the investment taking place and the
investment may not be consummated until the review has been completed. There
are, however, certain exceptions. Applications concerning indirect
acquisitions may be filed up to 30 days after the investment is consummated;
applications concerning reviewable investments in culture-sensitive sectors are
required upon receipt of a notice for review.
There is, moreover, provision for the Minister (a person designated as such
under the Act) to permit an investment to be consummated prior to completion of
review if he is satisfied that delay would cause undue hardship to the acquirer
or jeopardize the operation of the Canadian business that is being acquired.
The Agency will submit the application to the Minister, together with any other
information or written undertakings given by the acquirer and any
representation submitted to the Agency by a province that is likely to be
significantly affected by the investment.
The Minister will then determine whether the investment is likely to be of net
benefit to Canada, taking into account the information provided and having
regard to factors of assessment where they are relevant. Some of the factors
to be considered are the effect of the investment on the level and nature of
economic activity in Canada, including the effect on employment, on resource
processing on the utilization of parts, components and services produced in
Canada, and on exports from Canada. Additional factors of assessment include
(i) the degree and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part; (ii) the
effect of the investment on productivity, industrial efficiency, technological
development, product innovation and product variety in Canada; (iii) the effect
of the investment on competition within any industry or industries in Canada;
(iv) the compatibility of the investment with national industrial, economic and
cultural policies taking into consideration industrial, economic and cultural
policy objectives enunciated by the government or legislature of any province
likely to be significantly affected by the investment; and (v) the contribution
of the investment to Canada's ability to compete in world markets.
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If an acquisition of control of a Canadian business by a non-Canadian is not
reviewable, the non-Canadian must still give notice to Investment Canada of the
acquisition of a Canadian business within 30 days after its completion.
There are no limitations under Canadian law on the right of nonresident or
foreign owners to hold or vote the common stock of the Registrant.
ITEM 7 - TAXATION
The following paragraphs set forth certain United States and Canadian income
tax considerations about the ownership of common shares of the Registrant.
These tax considerations are stated in general terms. There may be relevant
state, provincial or local income tax considerations, which are not discussed.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain possible United states federal
income tax consequences, under current law, generally applicable to a U.S.
Holder (as defined below) of common shares of the Registrant. This discussion
does not address all potentially relevant federal income tax matters and it
does not address consequences peculiar to persons subject to special provisions
of 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 "Taxation - Certain Canadian
Federal Tax Considerations" below.)
The following discussion is based upon the sections of the Internal Revenue
Code of 1986, as amended (the "Code"), 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. This discussion does
not consider the potential effects, both adverse and beneficial, of any
recently proposed legislation which, if enacted, could be applied, possibly on
a retroactive basis, at any time. This 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 of the
Registrant and no opinion or representation with respect to the United States
federal income tax consequences to any such holder or prospective holder is
made. Accordingly, holders and prospective holders of common shares of the
Registrant should consult their own tax advisors about the federal, state,
local, and foreign tax consequences of purchasing, owning and disposing of
common shares of the Registrant.
U.S. HOLDERS
As used herein, a "U.S. Holder means a holder of common shares of the
Registrant who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof or a trust whose income
is taxable in the United States irrespective of source. This summary does not
address the tax consequences to, and U.S. Holder does not include persons
subject to specific provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, individual retirement accounts and
other tax-deferred accounts, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers, non-
resident alien individuals, persons or entities that have a "functional
currency" other than the U.S. dollar, shareholders who hold common shares as
part of a straddle, hedging or a conversion transaction, and shareholders who
acquired their stock through the exercise of employee stock options or
otherwise as compensation for services. This summary is limited to U.S. Holders
who own common shares as capital assets. This summary does not address the
consequences to a person or entity holding an interest in a shareholder or the
consequences to a person of the ownership exercise or disposition of any
options, warrants or other rights to acquire common shares.
DISTRIBUTIONS ON COMMON SHARES OF THE REGISTRANT
U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to common shares of the Registrant are required to
include in gross income for United States federal income tax purposes the gross
amount of such distributions equal to the U.S. dollar value of such dividends
on the date of receipt (based on the exchange rate on such date) to the extent
that the Registrant 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 discussion that is more detailed
at "Foreign Tax Credit" below.) To the extent that
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<PAGE> 53
distributions exceed current or accumulated earnings and profits of the
Registrant, they will be treated first as a return of capital up to the US.
Holders' adjusted basis in the common shares and thereafter as gain from the
sale or exchange of the common shares. Preferential tax rates for long-term
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.
In the case of foreign currency received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have
a tax basis in the foreign currency equal to its U.S. dollar value on the date
of receipt. Any gain or loss recognized upon a subsequent sale or other
disposition of the foreign currency, including an exchange for U.S. dollars,
will be ordinary income or loss.
Dividends paid on the common shares of the Registrant will not generally be
eligible for the dividends received deduction provided to corporations
receiving dividends from certain United States corporations. A U.S. Holder
which is a corporation may, under certain circumstances, be entitled to a 70%
deduction of the United States source portion of dividends received from the
Registrant (unless the Registrant qualifies as a "foreign personal holding
Registrant" or a "passive foreign investment company," as defined below) if
such U.S. Holder owns shares representing at least 10% of the voting power and
value of the Registrant. The availability of this deduction is subject to
several complex limitations, which are beyond the scope of this discussion.
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 of the Registrant 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) 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 its 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. In
addition, this limitation is calculated separately with respect to specific
classes of income such as "passive income", "high withholding tax interest",
"financial services income", "shipping income", and certain other
classifications of income. Dividends distributed by the Registrant will
generally constitute "passive income" or, in the case of certain U.S. Holders,
"financial services income" for these purposes. 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 of the
Registrant should consult their own tax advisors regarding their individual
circumstances.
DISPOSITION OF COMMON SHARES OF THE REGISTRANT
A U.S. Holder will recognize gain or loss upon the sale of common shares of the
Registrant equal to the difference, if any, between (i) the amount of cash plus
the fair market value of any property received, and (ii) the shareholder's tax
basis in the common shares of the Registrant. This gain or loss will be capital
gain or loss if the common shares are a capital asset in the hands of the U.S.
Holder, which 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.
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:
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FOREIGN PERSONAL HOLDING REGISTRANT
If at any time during a taxable year more than 50% of the total combined voting
power or the total value of the Registrant'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 Registrant's gross income
for such year was derived from certain passive sources (e.g., from dividends
received from its subsidiaries), the Registrant may be treated as a "foreign
personal holding Registrant". 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 Registrant does not
actually distribute such income.
FOREIGN INVESTMENT REGISTRANT
If 50% or more of the combined voting power or total value of the Registrant'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 Registrant 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 Registrant may 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 capital gain.
PASSIVE FOREIGN INVESTMENT REGISTRANT
As a foreign corporation with U.S. Holders, the Registrant 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 Registrant's income
which is passive, or the percentage of the Registrant's assets which is
producing passive income. U.S. Holders owning common shares of a PFIC are
subject to an additional tax and to an interest charge based on the value of
deferral of tax for the period during which the common shares of the PFIC are
owned, in addition to treatment of gain realized on the disposition of common
shares of the PFIC as ordinary income rather than 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 shareholders 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.
The Registrant believes that it was not a PFIC for its fiscal year ended
September 30, 1997, and quarters ended December 31, 1997 and March 31, 1998.
If in a subsequent year the Registrant concludes that it is a PFIC, it intends
to make information available to enable an U.S. Holder to make a QEF election
in that year. There can be no assurance that the Registrant's determination
concerning its PFIC status will not be challenged by the IRS, or that it will
be able to satisfy record keeping requirements which will be imposed on QEF's.
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 Registrant 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 own 10% or more of the total combined voting power of all classes of stock
of the Registrant ("United States shareholder"), the Registrant could be
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 Registrant. In
addition, under Section 1248 of the Code, gain from the sale or exchange of
stock by a holder of common shares of the Registrant 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 Registrant attributable to the stock sold or exchanged.
Because of the complexity of subpart F and because it is not clear that Subpart
F would apply to the holders of common shares of the Registrant, a more
detailed review of these rules is outside of the scope of this discussion.
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CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The summary below is restricted to the case of a holder (a "Holder") of one or
more common shares who for the purposes of the Income Tax Act (Canada) (the
"Act") is a non-resident of Canada, holds his common shares as capital property
and deals at arm's length with the Registrant.
DIVIDENDS
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to
25%, or such lower rate as may be available under an applicable tax treaty, of
the gross amount of any dividend paid or deemed to be paid on his common
shares. Under the 1995 Protocol amending the Canada-U.S. Income Tax Convention
(1980) (the "Treaty") the rate of Part XIII Tax applicable to a dividend on
common shares paid to a Holder who is a resident of the United States is, if
the Holder is a company that beneficially owns at least 10% of the voting stock
of the Registrant, 6% (1996) and 5% (after 1996) in any other case, 15% of the
gross amount of the dividend. The Registrant will be required to withhold the
applicable amount of Part XIII Tax from each dividend so paid and remit the
withheld amount directly to the Receiver General for Canada for the account of
the Holder.
DISPOSITION OF COMMON SHARES
A Holder who disposes of a common share, including by deemed disposition on
death, will not be subject to Canadian tax on any capital gain (or capital
loss) thereby realized unless the common share constituted "taxable Canadian
property" as defined by the Act. Generally, a common share will not constitute
taxable Canadian property of a Holder unless he held the common share as
capital property used by him carrying on a business (other than an insurance
business) in Canada, or he or persons with whom he did not deal at arm's length
alone or together held or held options to acquire, at any time within the five
years preceding the disposition, 25% or more of the shares of any class of the
capital stock of the Registrant.
A Holder who is a resident of the United States and realizes a capital gain on
disposition of a common share that was taxable Canadian property will
nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax
thereon unless (a) more than 50% of the value of the common share is derived
from, or for an interest in, Canadian real estate, including Canadian mineral
resource properties, (b) the common share formed part of the business property
of a permanent establishment that the Holder has or had in Canada within the 12
months preceding disposition, or (c) the Holder (i) was a resident of Canada at
any time within the ten years immediately, and for a total of 120 months during
the 20 years, preceding the disposition, and (ii) owned the common share when
he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized
on disposition of a common share must include three quarters of the capital
gain (taxable capital gain) in computing his taxable income earned in Canada.
The Holder may, subject to certain limitations, deduct three quarters of any
capital loss (allowable capital loss) arising on disposition of taxable
Canadian property from taxable capital gains realized in the year of
disposition in respect to taxable Canadian property and, to the extent not so
deductible, from such taxable capital gains of any of the three preceding years
or any subsequent year.
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ITEM 8 - SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Registrant for the year ended September 30, 1997, and was prepared in
accordance with Canadian generally accepted accounting principles ("Canadian
GAAP"). The table also summarizes certain corresponding information prepared
in accordance with United States generally accepted accounting principles
("U.S. GAAP"). This selected consolidated financial data include the accounts
of the Registrant and its subsidiaries. All amounts stated are in United
States dollars.
<TABLE>
<CAPTION>
-----------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30TH 1997
-----------------------------------------
<S> <C>
Revenues $ 1,305,812
Net Income (loss)
- Canadian GAAP $ 18,694
- US GAAP $ 31,421
-----------------------------------------
Net Income (loss) per
equity share
- Canadian GAAP $ --
- US GAAP $ --
-----------------------------------------
Total assets
- Canadian GAAP $57,200,339
- US GAAP $56,597,096
-----------------------------------------
Total long-term debt,
Including reclamation
obligations $13,285,662
-----------------------------------------
Cash Dividends $ --
-----------------------------------------
</TABLE>
ITEM 9 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of
the Registrant for the fiscal year September 30, 1997, and the six month period
ending, March 31, 1998, should be read in conjunction with the consolidated
financial statements of the Registrant and related notes therein. The
Registrant's consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles. Historical Financial
Statements for Energy Fuels have not been included in this Registration
Statement. See Item 17 for a further discussion of this matter.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 1997.
RESULTS OF OPERATIONS
For the period from inception through May 9, 1997, the Registrant's activities
were focused on the acquisition and financing of the Energy Fuels assets;
therefore, costs and expenses relating to these activities were either
capitalized and included in the costs of the assets acquired or applied against
the financing proceeds received, as appropriate, in accordance with generally
accepted accounting principles in Canada.
For the period from May 10, 1997 through September 30, 1997 (year-end), the
Registrant received $523,000 of processing fees from alternate feed contracts
and received interest income of $782,000 on available cash balances and
interest related to collections of notes receivable. Total expenses were
$1,287,000, of which $238,000 was attributed to direct costs of operations and
$1,008,000 to selling, general and administrative costs. Depreciation and
amortization for the period totalled $41,000 resulting in net income from
operations for the period of $18,000.
Direct operating costs relating to uranium produced from the Registrant's
alternate feed contracts were included in inventory costs. Uranium production
totalled 185,840 pounds as of September 30, 1997, which were produced for a
cost of $1,275,000 ($6.86 per pound).
Costs relating to the restoration and start-up development of the Sunday Mine
totaling $463,000 were also capitalized and included in mining properties at
year-end. These costs will be depleted as ore is produced from the property.
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FINANCIAL POSITION
The two most significant events which affected the Registrant's financial
position were the completion of a special warrant financing and the acquisition
of the Energy Fuels assets.
The Registrant has placed $7,945,000 on deposit in short-term marketable
investments in favor of its bonding company to secure certain reclamation
bonds. Investment income will be released from these investments, and
additional deposits will be reserved, in accordance with the Registrant's
bonding requirements, as its estimated reclamation obligations are revised over
time.
The Registrant increased its capital investment in machinery and equipment by
approximately $1,949,000 in order to improve its milling, mining and
exploration activities. Additionally, approximately $729,000 was expended on
mine development and property costs during the period. This was in addition to
the approximate $1,192,000 increase in exploration cost for the period from May
through September relating to the Mongolian Joint Venture. In total,
approximately $3,870,000 of funds were expended for mining properties, plant,
equipment and exploration. Plant and equipment costs will be depreciated over
their estimated useful lives, while mine development and exploration costs will
be amortized using the units-of-production method. If an exploration project
is unsuccessful, all remaining capitalized expenditures will be written off.
CAPITAL RESOURCES AND LIQUIDITY
The Registrant's working capital at September 30, 1997 was $24,283,000 of which
$13,953,000 consisted of cash. The Registrant expects its revenues from
uranium and vanadium sales, and from alternate feed processing to provide net
income and additional working capital in the coming fiscal year.
The Registrant is also budgeting capital improvements for the Mill and other
operations of approximately $1,625,000 in fiscal year 1998. Exploration, mine
development and property holding expenditures are anticipated to be
approximately $6,700,000, of which approximately $3,950,000 will be expended
for exploration in Mongolia.
The Registrant is anticipating funding these outlays from current operations
and working capital (which is sufficient to cover these planned expenditures).
Nonetheless, the Company is considering the possibility of negotiating and
having available a short-term revolving credit facility during the coming
fiscal year to assist and supplement inventory and project financing, in
addition to providing short-term cash flexibility if necessary.
1998 FISCAL YEAR OUTLOOK
The following are forward looking statements - see "Special Note Regarding
Forward Looking Statements."
The Registrant anticipates achieving full production at its Sunday Mine Complex
during the year along with the commencement of production at its Rim Mine.
This ore will be stockpiled at the Mill and is expected to be supplemented with
ore purchased from other independent mines in the Colorado Plateau District.
It is anticipated that the Mill will commence processing these conventional
ores in the fourth quarter of the calendar year 1998. In addition to uranium,
these ores contain significant grades of vanadium, which will also be processed
at the Mill and sold to customers. Prior to the conventional ore run, the
Registrant will continue and, if possible, expand upon its current alternate
feed processing program. Based on the Registrant achieving its forecasted
mining and milling activities, production from conventional and alternate feeds
should exceed 250,000 pounds of uranium concentrates and 1,200,000 pounds of
vanadium concentrates for the calendar year ending 1998. To supplement its own
production, the Registrant is under contract to purchase uranium concentrates
during the next year at prices approximating the market value at the time of
delivery.
The Registrant anticipates that it will continue to be active in the spot and
long-term uranium sales market, based on production and inventory levels as
discussed above and additionally due to the Registrant's forecasted production
costs being below current market prices. The Registrant will also be an active
participant in the vanadium market as such material is produced from the
Colorado Plateau District ores.
The Registrant, while producing from its Sunday and Rim Mines, will be
expanding its exploration and development work in the United States and
Mongolia, and evaluating the feasibility of bringing additional mining
properties into production.
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RISKS AND UNCERTAINTIES
Risk factors that affect the Registrant's results include volatility and
sensitivity to market prices for uranium and vanadium, competition,
environmental regulations, the impact of changes in foreign currencies'
exchange rates, political risk arising from operating in Mongolia, changes in
government regulation and policies including trade laws and policies, demand
for nuclear power, dependence on a limited number of customers, replacement of
reserves and production, receipt of permits and approvals from governmental
authorities and other operating and development risks.
As a result of the foregoing and other factors, no assurance can be given as to
the future results, levels of activity and achievement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1998
The Registrant's net income for the first six months of fiscal 1998 was
$1,555,003, or approximately $0.02 per share. Details on the Registrant's
financial performance are discussed below.
During the period, the Registrant continued mining uranium and vanadium bearing
ores from its mines in the Colorado Plateau District of western Colorado and
eastern Utah. Stable uranium prices coupled with a strong vanadium market have
encouraged increased mining operations in this district. In that respect, the
Registrant continues to be pleased with mining operations at its Sunday Mine
Complex. Additionally, the Registrant commenced mining operations at its Rim
Mine this past February and continued through the quarter. Production from the
Registrant's mines increased from 1659 tons in the first quarter to over 11,000
tons in the second quarter, with unit production costs below budget. The
Registrant anticipates that these two mines will ultimately reach a combined
production rate of approximately 8000 tons per month sometime this summer.
This equates to approximately 35,000 pounds of uranium and 265,000 pounds of
vanadium mined per month. To supplement its own production, the Registrant
continued its ore purchase program, buying ore from other independent miners in
the district. Ore from the Registrant's mines and purchased ore is being
delivered and stockpiled at the Registrant's White Mesa Mill where it will be
processed upon completion of the current Alternate Feed run. In light of the
prospects for an improving uranium market combined with a strong vanadium
market, the Registrant continues to evaluate initiating mining operations at
other Registrant mines currently on standby.
The White Mesa Mill remained fully staffed as the Registrant continued
processing alternate feed containing uranium, tantalum, and niobium. This run
of alternate feed required modifying the process circuit at the Mill. While the
modifications were not overly complex, due to unforeseen variability in the
characteristics of the ore, the process for recovering the tantalum and niobium
is requiring more design and engineering work than was originally contemplated.
As such, operations at the Mill were suspended in late April while the
Registrant and its partners in this deal continue with development work. These
changes will also require modifications in the commercial terms between the
parties in this transaction. At the present time, the Registrant believes that
the development work and commercial negotiations will be successful and
anticipates resuming operations during the latter half of June. This extended
alternate feed run will result in delaying the processing of the Registrant's
conventional ore until late this year.
The Registrant also continued negotiating with several other companies and
government agencies for the processing of additional uranium bearing alternate
feeds. Despite the delay in the tantalum processing run, the Registrant
remains convinced that production of uranium from materials that are
essentially a waste product will continue to be a growing and profitable
business for the future.
The Gurvan Saihan Joint Venture, the Registrant's Mongolian exploration
enterprise, completed the planning and preparation for the 1998 drilling and
leach test program. Actual drilling operations began in April and will
continue through the fall of this year. The Joint Venture will also complete a
field test to establish leach amenability parameters in anticipation of a full-
scale pilot production operation, which is scheduled for the 1999 season.
During the quarter, the Registrant also submitted its license application to
the U.S. Nuclear Regulatory Commission for a Source Materials License for its
Reno Creek in-situ project, located in the Powder River Basin of Wyoming. The
Registrant is anticipating completion of the license review process by the end
of this year or early 1999. Based on this schedule, the Registrant could be in
production at Reno Creek by 2000 at a rate of 750,000 pounds per year,
depending upon market conditions at that time.
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The uranium market was extremely quiet during the past six months. As
anticipated, spot uranium prices remained soft, dipping during the second
quarter from $12.00 to $10.75 per pound on very little demand. Analysts are
expecting this situation to continue until at least the fall of this year.
Taking advantage of this market lull, the Registrant did purchase some uranium
during the second quarter at prices under $11.00 per pound in anticipation of
deliveries scheduled for later this year under contracts at significantly
higher prices. The Registrant had no scheduled sales deliveries of uranium
during the quarter. Sales deliveries are expected to resume next quarter
based on contracts currently in place.
FINANCIAL REVIEW
As noted, there were no deliveries of uranium during the quarter and
consequently there were no sales revenues. Due to the delay in the tantalum
alternate feed run, gross revenues from alternate feed processing were less
than anticipated, totaling $4,976,240, while corresponding processing costs
were higher at $3,917,192, resulting in gross operating profits for the quarter
of $1,059,048. Net interest and other income were $354,311, while office and
administrative expenses were $989,301. This resulted in net income before
taxes of $424,058, which was less than anticipated. The provision for income
taxes was $101,714, resulting in net income after taxes for the second fiscal
quarter of $322,344. For the first six months period ending March 31, 1998,
the Registrant had net income of $1,555,003. This was derived from total
U(3)O(8) sales revenue of $14,542,800 and process milling fees of $8,613,961
resulting in year to date total revenue of $23,156,761. U(3)O(8) costs of
sales were $13,663,566 while process milling expenditures were $6,421,768
including depreciation of $111,814. This resulted in year to date gross
profits from U(3)O(8) sales of $879,234 and from process milling of $2,192,193
for a total gross profit of $3,071,427.
Selling, general and administrative expenses were $1,712,358 for the six-month
period (including depreciation and amortization of $71,204). Net interest and
other income total $686,990. Therefore, net income for the period before the
provision for income taxes was $2,046,059. The year to date income tax
provision totaled $491,056, therefore resulting in net income for the six
months ending March 31, 1998 of $1,555,003.
Year-to-date, the Registrant has invested $2,040,100 in its properties, plant
and equipment, and $1,157,311 in its exploration properties in Mongolia. As of
March 31, 1998, the Registrant had net working capital of $23,407,669, of which
$13,212,684 was made up of cash and cash equivalents.
NORMAL COURSE ISSUER BID
On June 11, 1998, the Registrant announced that the Toronto Stock Exchange
accepted the Registrant's notice of intention to make a normal course issuer bid
for its common shares through the facilities of the Toronto Stock Exchange. On
and after June 15, 1998, the Registrant may commence making purchases of up to
10% of the public float of its issued and outstanding common shares
(representing approximately 4,118,214 million shares out of 65,743,066 shares
outstanding as at June 9, 1998) on the open market through the facilities of the
Toronto Stock Exchange. Any shares acquired will be purchased at the market
price for the shares at the time of acquisition and will be canceled. The bid
will terminate on the earlier of the Registrant providing notice of termination
or June 14, 1999. Proceeding with the normal course issuer bid will give the
Registrant the flexibility to purchase its shares if it determines that, as a
result of the difference between the Registrant's view of the fundamental value
of the shares and the market price, it is in the best interest of the Registrant
to do so.
59
<PAGE> 60
ITEM 10 - DIRECTORS AND OFFICERS OF THE REGISTRANT
The names, municipalities of residence, positions with the Registrant, and
principal occupations of the directors and executive officers of the Registrant
as at May 15, 1998, are as follows:
<TABLE>
<CAPTION>
========================================================================================================================
NAME AND MUNICIPALITY OFFICE HELD PRINCIPAL OCCUPATION
OF RESIDENCE
========================================================================================================================
<S> <C> <C>
LUNDIN, LUKAS H. Chairman of the Board and President, International Curator Resources
Vancouver, Canada Director Ltd.; Director of a number of publicly
traded resource based companies
- ------------------------------------------------------------------------------------------------------------------------
HOELLEN, EARL E. President, Chief Executive President of the Registrant
Denver, USA Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
FRYDENLUND, DAVID C. Vice President, General Counsel, Vice President, General Counsel and
Denver, USA Corporate Secretary and Director Corporate Secretary of the Registrant
- ------------------------------------------------------------------------------------------------------------------------
CRAIG, JOHN H. Director Lawyer, partner, Cassels Brock & Blackwell,
Toronto, Canada Barristers and Solicitors
- ------------------------------------------------------------------------------------------------------------------------
HARROP, CHRISTOPHER J. F. Director Chairman of Northern Securities, Inc.
Toronto, Canada
- ------------------------------------------------------------------------------------------------------------------------
RAND, WILLIAM A. Director Self-employed business executive
Vancouver, Canada
- ------------------------------------------------------------------------------------------------------------------------
ROBERTS, HAROLD R. Vice President Vice President of the Registrant
Denver, USA
- ------------------------------------------------------------------------------------------------------------------------
MEYER, THAD L. Vice President, Treasurer and Vice President, Chief Financial Officer of
Denver, USA Chief Financial Officer the Registrant
========================================================================================================================
</TABLE>
Before the formation of the Registrant the principal occupations of the
officers and directors were as follows:
o Earl E. Hoellen - President, Chief Executive Officer
Prior to August 1995, Mr. Hoellen was President of Nuexco Trading Corporation.
From August 1995 to May 1997, Mr. Hoellen was a consultant to the Nuclear Fuel
Industry, including directing the formation of International Uranium
Corporation from December 1995 until May 1997 at which time he assumed his
current position.
o Harold R. Roberts -- Executive Vice President
Mr. Roberts was the President of Energy Fuels, which position he held since
1994. From 1986 through 1993, Mr. Roberts was President of Landmark
Reclamation, Inc., a subsidiary of Energy Fuels.
o David C. Frydenlund - Vice President, General Counsel
Before July 1996, Mr. Frydenlund was a lawyer and partner with the firm Ladner
Downs. Thereafter, Mr. Frydenlund was Vice President of Namdo Management
Services, LTD., a firm which provides management services to publicly traded
resource companies.
o Thad L. Meyer - Vice President, Chief Financial Officer
Mr. Meyer is a CPA who prior to October 1997 was a financial consultant. Prior
to August 1995, Mr. Meyer was Vice President of NUEXCO Trading Corporation and
manager of Trading Operations.
o Lukas H. Lundin - Director
For the five years prior to formation of the Registrant, Mr. Lundin's
occupation has been as shown above.
o Adolf H. Lundin - Director
For the five years prior to formation of the Registrant, Mr. Lundin's
occupation has been as shown above.
o William A. Rand - Director
Before October 1992, Mr. Rand was a lawyer and partner with the firm Rand Edgar
& Sedun.
60
<PAGE> 61
o John H. Craig - Director
Before August 1994, Mr. Craig was a lawyer and partner with the firm Holden Day
Wilson.
o Christopher J. F. Harrop - Chairman
Prior to June 1995, Mr. Harrop was Senior Vice President and Director,
Canaccord Capital Corporation. Prior to November 1994, Mr. Harrop was a
financial analyst with Sprott Securities Ltd.
ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS
DIRECTOR COMPENSATION
No remuneration has been paid to directors of the Registrant in their
capacities as directors since the date of incorporation. The directors are
reimbursed for their expenses incurred to attend meetings of the Registrant.
AGGREGATE COMPENSATION FOR ALL OFFICERS AND DIRECTORS
An aggregate amount of $283,628 as compensation, was paid by the Registrant
during its fiscal year ended September 30, 1997, to all directors and officers
as a group.
SUMMARY COMPENSATION (1)
The following table summarizes the compensation of each of the named executive
officers of the Registrant for the period from May 9, 1997, the date of the
Amalgamation with Thornbury Capital, to September 30, 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------------
Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------
Securities Restricted LTIP
Name and Period Ended Under Shares or Payouts
Principal Position September 30, Salary Bonus Other Annual Options/ Restricted (US$) All Other
1997 (2) (US$) (US$) Compensation SAR's Share Compensation
(US$) Granted Units (US$)
(#)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earl E. Hoellen (6)
President & CFO 1997 71,014 NIL NIL 1,000,000 NIL NIL NIL
- -----------------------------------------------------------------------------------------------------------------------
David C. Frydenlund
Vice President, (6)
General Counsel and 1997 37,397 NIL 78,559(5) 500,000 NIL NIL NIL
Corporate Secretary
- -----------------------------------------------------------------------------------------------------------------------
Harold R. Roberts,
Vice President, 1997 55,233 NIL NIL 250,000 NIL NIL NIL
Operations
- -----------------------------------------------------------------------------------------------------------------------
Rick L. Townley,
Controller of
International 1997 41,425 NIL NIL 100,000 NIL NIL NIL
Uranium (USA)
Corporation (4)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO SUMMARY COMPENSATION TABLE
(1) The Registrant's currency for disclosure purposes is US dollars, which is
the functional currency of the Registrant's operations.
(2) Unless indicated otherwise, compensation figures represent the amounts
earned for the period commencing on May 9, 1997, the date of amalgamation of
the Registrant, and ending on September 30, 1997.
(3) Mr. Frydenlund commenced employment with the Registrant on July 1, 1997.
Compensation figures for Mr. Frydenlund represent the amounts earned in the
months of July, August, and September 1997.
(4) International Uranium (USA) Corporation is the Registrant's operating
subsidiary in the United States.
61
<PAGE> 62
(5) Other annual compensation consists of $78,559, comprised of $14,013, being
the dollar value of imputed interest benefits from loans provided to the named
executive officer by the Registrant, $20,400, being amounts reimbursed for the
payment of taxes incurred by the named executive office in connection with
relocation expenses, and the remainder being relocation expenses paid by the
Registrant on behalf of the named executive officer.
(6) Each of Mr. Hoellen and Mr. Frydenlund has contracts of employment with
the Registrant's subsidiary, International Uranium (USA) Corporation. There is
no compensatory plan or arrangement provided in such contracts in respect of
resignation, retirement, termination, change in control of the Corporation or
responsibilities. The expiry date of the employment contracts is January 31,
2000 for Mr. Hoellen and June 30, 1999 for Mr. Frydenlund.
PENSION PLANS
The Registrant has a 401(k) plan for its employees. For the calendar year
ending December 31, 1998, the Registrant matches 25% of an employee's
contribution to the plan. The Registrant has no other pension or retirement
benefit plans and none are proposed at this time.
EMPLOYEE STOCK PURCHASE PLAN
The Registrant has an Employee Stock Purchase Plan for its employees that
enables qualified employees to purchase shares of the Registrant's stock via
payroll deduction without incurring broker commissions and/or at a discount
from current market values. The Registrant intends that this plan qualify as
an "employee stock purchase plan" under Section 423 of the U.S. Internal
Revenue Code.
ITEM 12 - OPTIONS TO PURCHASE SECURITIES FROM THE REGISTRANT
STOCK OPTION PLAN
The shareholders of the Registrant adopted an employee stock option plan (the
"Stock Option Plan"), under which the board of directors, or a committee
appointed for such purposes, may from time to time grant to directors,
officers, eligible employees of, or consultants to, the Registrant or its
subsidiaries, or to employees of management companies providing services to the
Registrant (collectively, the "Eligible Personnel") options to acquire Common
Shares in such numbers, for such terms and at such exercise prices as may be
determined by the board or such committee. The purpose of the Stock Option Plan
is to advance the interests of the Registrant by providing Eligible Personnel
with a financial incentive for the continued improvement of the Registrant's
performance and encouragement to stay with the Registrant.
The maximum number of Common Shares that may be reserved for issuance for all
purposes under the Stock Option Plan is 6,700,000 Common Shares and the maximum
number of Common Shares which may be reserved for issuance to any one insider
pursuant to share options and under any other share compensation arrangement
may not exceed 5% of the Common Shares outstanding at the time of grant (on a
non-diluted basis). Any Common Shares subject to a share option which for any
reason is cancelled or terminated without having been exercised will again be
available for grant under the Stock Option Plan.
The maximum number of Common Shares that may be reserved for issuance to
insiders of the Registrant under the Stock Option Plan and under any other
share compensation arrangement is limited to 10% of the Common Shares
outstanding at the time of grant (on a non-diluted basis).
The board of directors of the Registrant has the authority under the Stock
Option Plan to establish the option price at the time each share option is
granted. The option price may not be lower than the market price of the Common
Shares at the time of grant.
Options granted under the Stock Option Plan must be exercised no later than 10
years after the date of grant and options are not transferable other than by
will or the laws of dissent and distribution. If an optionee ceases to be an
Eligible Person for any reason whatsoever other than death, each option held by
such optionee will cease to be exercisable 30 days following the termination
date (being the date on which such optionee ceases to be an Eligible Person).
If an optionee dies, the legal representative of the optionee may exercise the
optionee's options within one year after the date of the optionee's death but
only up to and including the original option expiry date.
62
<PAGE> 63
All options granted under the Plan to-date, are exercisable at a price of
Cdn$1.25 and will expire three years from the date of grant. Options granted to
executive officers of the Registrant and its subsidiaries and to certain high
level employees vest as to one-third on the date of grant, as to another
one-third one year after the date of grant and as to the remainder two years
after the date of grant. All other options vest as to one-half on the date of
grant and as to the remainder one year after the date of grant.
The following table sets out information with respect to the options to
purchase common shares of the Registrant outstanding as at September 30, 1997:
<TABLE>
<CAPTION>
====================================================================================================================
CLASS OF NUMBER OF DATE OF GRANT OPTION PRICE OPTION
OPTIONEES COMMON SHARES ($CDN) EXPIRY DATE
UNDER OPTION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Executive officers and 1,725,000 May 9, 1997 1.25 May 8, 2000
directors as a group 250,000 July 1, 1997 1.25 June 30, 2000
- --------------------------------------------------------------------------------------------------------------------
All option holders as
a group (including 2,389,000 May 9, 1997 1.25 May 8, 2000
executive officers and 250,000 July 1, 1997 1.25 May 8, 2000
directors)
====================================================================================================================
</TABLE>
The following table summarizes individual grants of options to purchase or
acquire securities of the Registrant or any of its subsidiaries (whether or not
in tandem with SAR's) and freestanding SAR's made during the most recently
completed financial year, September 30, 1997, to each of the named executive
officers:
OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Market Value
% of Total Exercise Of Securities
Securities Options/SAR's Or Underlying
Name Under Granted to Base Price Options'SAR's Expiration Date
Options/SAR's Employees in (Cdn$/ On the Date of
Granted Financial Year Security) Grant (Cdn$/
(#) Security
(a) (b) (c) (d) (e) (f)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earl E. Hoellen 1,000,000 (1) 38% 1.25 1.25 May 8/2000
- ----------------------------------------------------------------------------------------------------------------
David C. Frydenlund 250,000 (1) 19% 1.25 1.25 May 8/2000
250,000 (1) 1.25 1.25 June 30/2000
- ----------------------------------------------------------------------------------------------------------------
Harold R. Roberts 250,000 (1) 9.5% 1.25 1.25 May 8/2000
- ----------------------------------------------------------------------------------------------------------------
Rick L. Townley 100,000 (1) 3.8% 1.25 1.25 May 8/2000
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 64
(1) These options contain vesting provisions which provide that the options
shall vest as to one-third of the optioned shares on the date of grant, as to a
further one-third of the optioned shares one year following the date of grant,
and as to the remaining one-third of the optioned shares, two years after the
date of grant.
Aggregated Options/SAR Exercises during the most recently completed Financial
Year and financial year-end Option/SAR Values:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Unexercised Value of
Securities Acquired Aggregate Value Options/SARs at Unexercised-
Name On Exercise Realized (Cdn$) Fiscal Year End In the-money
(#) Options/SARs at
Exercisable/ Fiscal Year End (1)
Unexercisable Exercisable/
Unexercisable
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earl E. Hoellen NIL NIL 333,333/ 20,000/
666,667 40,000
- ------------------------------------------------------------------------------------------------------------------
David C. Frydenlund NIL NIL 166,666/ 10,000/
333,334 20,000
- ------------------------------------------------------------------------------------------------------------------
Harold R. Roberts NIL NIL 83,333/ 5,000/
166,667 10,000
- ------------------------------------------------------------------------------------------------------------------
Rick L. Townley NIL NIL 33,333/ 2,000/
66,667 4000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the closing price of the Common Shares of the Registrant on The
Toronto Stock Exchange on September 30, 1997 of Cdn$1.31.
There were no Options/SAR's exercised during the most recently completed
financial year nor were there any Options or SAR's re-priced during the year.
SPECIAL WARRANT FINANCING
Pursuant to an agency agreement dated as of March 14, 1997 (the "Agency
Agreement") entered into between the Registrant and Salman Partners Inc., CIBC
Wood Gundy Securities Inc., Griffiths McBurney & Partners, Newcrest Capital
Inc. and First Marathon Securities Limited (collectively, the "Agents"), the
Agents sold an aggregate of 37,800,00 Special Warrants on behalf of the
Registrant at a price of Cdn.$1.25 per Special Warrant for net proceeds of
$31,784,288. The transaction closed on March 26, 1997. Each Special Warrant
entitled the holder thereof to acquire one common share of the Registrant
without further payment. All of the Special Warrants were exercised
immediately prior to the completion of the Amalgamation.
The Registrant used approximately $21,300,000 of the net proceeds from the
Special Warrant placement to complete the acquisition of the Energy Fuels
Assets. The remainder of the proceeds, approximately $10,490,000 were added to
working capital and will be used by the Registrant to carry out mine
development, Mill refurbishment, mining and additional exploration activities
on its properties and for general corporate purposes.
ITEM 13 - INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Certain of the directors and officers of the Registrant are also directors and
officers of other natural resource companies and, consequently, there exists
the possibility for such directors and officers to be in a position of
conflict. Any decision made by any of such directors and officers involving
the Registrant are made in accordance with their duties and obligations to deal
fairly and in good faith with the Registrant and such other companies. In
addition, each of the directors of the Registrant, discloses and refrains from
voting on, any matter in which such director may have a conflict of interest.
None of the present directors, senior officers or principal shareholders of the
Registrant and no associate or affiliate of any of them has any material
interest in any transaction of the Registrant or in any proposed transaction
which has materially affected or will materially affect the Registrant except
as described herein.
During the period ended September 30, 1997 the Registrant incurred legal fees
of $188,692 with a law firm of which a partner is a director of the Registrant.
64
<PAGE> 65
For all periods through September 30, 1997, the Registrant paid management and
administrative service fees of $343,641 to a company owned by the Chairman of
the Registrant which provides office premises, secretarial and other services
in Vancouver. These fees include costs incurred throughout 1996 in pursuing the
acquisition of the Energy Fuels Assets. The Registrant continues to pay monthly
fees of Cdn.$12,840 to this service company.
During the period ended September 30, 1997 the Registrant incurred interest of
$147,315 on a letter of credit and other loan facilities provided by a director
of the Registrant as part of the acquisition of the Energy Fuels assets. This
amount has subsequently been paid and the underlying facilities have been paid
off and terminated.
The aggregate indebtedness to the Registrant or any of its subsidiaries of all
officers, directors, employees and former officers, directors and employees of
the Registrant and its subsidiaries as of May 15, 1998 is $200,000.
TABLE OF INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Largest Amount Amount Outstanding
Outstanding As at May 15,
Name and Principal Involvement of During Fiscal Year 1998
Position Registrant or Ended (US$)
Subsidiary September 30, 1997
(US$)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
David C. Frydenlund, Relocation loan
Vice President, General Made by the
Counsel and Corporate Registrant's 850,000 (1) 200,000 (2)
Secretary Subsidiary,
International Uranium
(USA) Corporation
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unsecured, non interested bearing, full recourse loan granted in
connection with the named executive officer's relocation made on June 24,
1997, $650,000 of which was payable in full on or before September 30,
1997, and was repaid to the registrant in full on September 30, 1997,
leaving $200,000 outstanding.
(2) Unsecured, non interest bearing, full recourse loan granted in connection
with the named executive's relocation made on June 24, 1997, and repayable
in full on or before June 30, 1999.
PART II
ITEM 14 - DESCRIPTION OF SECURITIES TO BE REGISTERED
The common shares of the Registrant are being registered pursuant to this
Registration Statement.
The authorized capital of the Registrant consists of an unlimited number of
Common Shares of which 65,743,066 common shares are issued and outstanding as
at September 30, 1997.
The following is a summary of the principal attributes of the Common Shares of
the Registrant:
VOTING RIGHTS
The holders of the Common Shares are entitled to receive notice of, attend, and
vote at any meeting of the shareholders of the Corporation. The Common Shares
carry one vote per share.
DIVIDENDS
The holders of Common Shares are entitled to receive on a pro-rata basis such
dividends as may be declared by the board of directors of the Registrant, out
of funds legally available therefor.
RIGHTS ON DISSOLUTION
In the event of the liquidation, dissolution or winding up of the Registrant,
the holders of the Common Shares will be entitled to receive on a pro-rata
basis all of the assets of the Registrant remaining after payment of all the
Registrant's liabilities.
65
<PAGE> 66
PRE-EMPTIVE AND CONVERSION RIGHTS
No pre-emptive or conversion rights are attached to the Common Shares and the
Common Shares, when fully paid, will not be liable to further call or
assessment. No other class of voting shares may be created without the approval
of the holders of the Common Shares.
PART III
ITEM 15 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 16 - CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES
Not applicable.
PART IV
ITEM 17 - FINANCIAL STATEMENTS
See Financial Statements attached.
The Registrant has not included historical financial statements of Energy Fuels
in this Registration Statement because the Acquisition involved the purchase of
idle assets rather than a ongoing business. Energy Fuels effectively had no
significant operations for the two years while it was in bankruptcy. In
addition, Energy Fuels' operations during a significant period prior to the
bankruptcy filing were limited to maintaining its properties and Mill on a stand
by basis and certain uranium sales on behalf of its affiliate, Nuexco Trading
Corporation. Shortly after the Acquisition, the Registrant began its own trading
activities and started actively mining its properties and operating the Mill to
process uranium bearing ores from third parties. Any financial information, if
available, for the period of the bankruptcy would only reflect costs relating to
maintaining and converting assets to cash and two small milling operations at
the Mill during late 1995 and early 1996 to process uranium ores on behalf of
secured creditors of the bankruptcy. For the year prior to the bankruptcy,
Energy Fuels' operations were limited to maintaining its properties and the Mill
on a stand by basis and limited sales activity on behalf of Nuexco. This
information would not reflect the active operation of the Mill and certain mines
and the trading business that the Registrant currently conducts.
ITEM 18 - FINANCIAL STATEMENTS
Not applicable.
ITEM 19 - FINANCIAL STATEMENTS AND EXHIBITS
(a) The following documents are filed as a part of this Report:
1. Audited Financial Statements:
Consolidated Balance Sheet as at September 30, 1997.
Consolidated Statement of Earnings and Retained Earnings for period
from incorporation on October 2, 1996 to September 30, 1997.
Consolidated Statements of Cash Flows for the period from
Incorporation on October 2, 1996 to September 30, 1997.
Notes to Consolidated Financial Statements.
2. Unaudited Interim Financial Statements:
Consolidated Balance Sheet as at March 31, 1998 and September 30, 1997
Consolidated Statements of Operations for 6 months ended March 31,
1998, and 1997
Consolidated Statements of Cash Flows for 6 months ended March 31,
1998 and 1997.
3. Financial Statement Schedules:
All schedules have been omitted since they are either not required, are not
applicable, or the required information is shown in the financial statements or
related notes.
(b) Exhibits
1(a) Articles of Amalgamation certified by the Director, Ontario
Corporations Act, dated May 9, 1997;
1(b) By-Law No. 1
3(a) Amalgamation Agreement dated May 5, 1997 between the Registrant and
Thornbury Capital Corporation;
66
<PAGE> 67
3(b) Agency Agreement dated March 14, 1997 among Salman Partners Inc., CIBC
Wood Gundy Securities Inc., Griffiths McBurney & Partners, Newcrest
Capital Inc. and First Marathon Securities Limited and the Registrant
3(c) Special Warrant Indenture dated March 14, 1997 between the Registrant
and Montreal Trust Company of Canada under which the Special Warrants
were created and issued.
3(d) Escrow Agreement dated May 1997, among the Registrant, Adolf H.
Lundin, Lukas H. Lundin, and The Montreal Trust Company of Canada
3(e) Incentive Stock Option Plan as adopted by the Registrant on May 9,
1997.
3(f) Form of Incentive Stock Option Agreement entered into between the
Registrant and individuals granted options under the Plan - 2-year
plan.
3(g) Form of Incentive Stock Option Agreement entered into between the
Registrant and individuals granted options under the Plan - 3-year
plan.
3(h) Acquisition Agreement dated as of December 19, 1996 among
International Uranium Holdings Corporation, ("IUH"), a subsidiary of
the Registrant, Energy Fuels Exploration Company, Energy Fuels
Nuclear, Inc. and Energy Fuels Ltd., pursuant to which IUH agreed to
acquire the Energy Fuels Assets.
3(i) 1998 Employee Stock Purchase Plan
23 Consent of Saskatoon Mining and Minerals Service Ltd.
67
<PAGE> 68
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 this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL URANIUM CORPORATION
By: /s/ EARL E. HOELLEN
--------------------------------
Earl E. Hoellen, President and
Chief Executive Officer
Dated: June 5, 1998
----------------------------
68
<PAGE> 69
ATTACHMENT - ITEM 19(a)1 - AUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
AUDITORS' REPORT
To the Directors of International Uranium Corporation
We have audited the consolidated balance sheet of International Uranium
Corporation as at September 30, 1997 and the consolidated statements of earnings
and retained earnings and cash flows for the period from incorporation through
September 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at September 30,
1997, and the results of its operations and the changes in its financial
position for the period then ended in accordance with generally accepted
accounting principles in Canada.
Price Waterhouse
Chartered Accountants
Vancouver, Canada
December 22, 1997
1
<PAGE> 70
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEET
(UNITED STATES DOLLARS)
SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,953,355
Marketable securities 39,978
Accounts receivable 63,198
Inventories (Note 4) 10,113,853
Notes receivable (Note 5) 4,791,513
Favourable uranium sales contracts (Note 6) 1,270,270
Other 433,497
-----------
30,665,664
Properties, plant and equipment, net (Note 7) 10,858,679
Exploration properties (Note 8) 6,191,525
Notes receivable (Note 13) 206,142
Restricted short term investments (Note 9) 7,945,356
Favourable uranium sales contracts, net of current portion (Note 6) 729,730
Goodwill 603,243
-----------
$57,200,339
===========
LIABILITIES
Current liabilities:
Inventory purchases $ 5,050,000
Other accounts payable and accrued liabilities 961,865
Due to related parties (Note 13) 150,399
Notes payable 9,537
Deferred revenue 210,185
-----------
6,381,986
Long term liabilities:
Notes payable, net of current portion 19,962
Reclamation obligations (Note 11) 13,265,700
-----------
19,667,648
SHAREHOLDERS' EQUITY
Share capital (Note 12)
Issued and outstanding 37,513,997
Retained earnings 18,694
-----------
37,532,691
-----------
$57,200,339
===========
</TABLE>
2
<PAGE> 71
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNITED STATES DOLLARS)
PERIOD FROM INCORPORATION ON OCTOBER 3, 1996 THROUGH SEPTEMBER 30, 1997
<TABLE>
<S> <C>
Revenue:
Process milling fees $ 523,865
Interest 781,947
----------
1,305,812
Expenses:
Operations 237,719
Depreciation, depletion and amortization 41,387
Selling, general and administration 1,007,832
Foreign exchange 180
----------
1,287,118
----------
Net earnings for the period and retained earnings at end of period $ 18,694
==========
Net earnings per share $ --
==========
</TABLE>
3
<PAGE> 72
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNITED STATES DOLLARS)
PERIOD FROM INCORPORATION ON OCTOBER 3, 1996 THROUGH SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C>
CASH PROVIDED BY (USED IN):
Operating activities:
Net earnings for the period $ 18,694
Items not affecting cash
Depreciation, depletion and amortization 41,387
Gain on sale of equipment (2,500)
------------
57,581
Changes in non-cash working capital items
Decrease in marketable securities 17,334
Increase in accounts receivable (63,198)
Increase in inventories (9,113,859)
Increase in other current assets (433,497)
Increase in liability for inventory purchased 5,050,000
Increase in other accounts payable and accrued liabilities 961,865
Increase in due to related parties 150,399
Increase in deferred revenue 210,185
------------
NET CASH USED BY OPERATIONS ($ 3,163,190)
Financing activities:
Common shares issued for cash, net 36,690,454
Common shares issued on acquisition 823,543
Payment of notes payable (1,057)
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 37,512,940
Investing activities:
Acquisition of Energy Fuels, net of cash received (10,081,071)
Acquisition of Thornbury Capital Corp, net of cash received (673,282)
Restricted short term investments (7,945,356)
Properties, plant and equipment (2,679,149)
Proceeds from sale of equipment 2,500
Exploration properties (1,191,525)
Notes receivable (856,892)
Collection of notes receivable 3,028,380
------------
NET CASH USED IN INVESTING ACTIVITIES (20,396,395)
------------
Increase in cash and cash equivalents 13,953,355
Cash and cash equivalents, beginning of period --
------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,953,355
============
</TABLE>
4
<PAGE> 73
INTERNATIONAL URANIUM CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNITED STATES DOLLARS)
1. ORGANIZATION AND NATURE OF OPERATIONS
International Uranium Corporation (the "Company") was originally
incorporated as a private company on October 3, 1996 under the laws of the
province of Ontario. Headquartered in Denver, Colorado, the Company is
engaged in the business of producing uranium concentrates and the selling
and trading of these concentrates in the international nuclear fuel market.
In addition, the Company also produces and sells vanadium, as well as other
minerals that can be produced as a co-product with uranium.
The Company has commenced ore production at its Sunday Mine Complex in
Colorado. The Company also has several partially developed mines and
numerous targeted mines and exploration properties within the states of
Colorado, Utah, Arizona, Wyoming and South Dakota, as well as a 70%
interest in an exploration project in central eastern Mongolia.
Additionally, the Company owns the 2,000 ton per day White Mesa Mill (the
"Mill") near Blanding, Utah. The Mill is used to process the Company's
mined ore along with ore purchased or toll milled from other independent
mines. The Mill is also used to process alternate feeds, which generally
are ores or residues from other processing facilities that contain uranium
in quantities or forms that are either uneconomic to recover or cannot be
recovered at these other facilities, but can be economically recovered in
conjunction with other co-products at the Mill.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada. Differences with
respect to accounting principles generally accepted in the United States
are disclosed in Note 16.
a) Use of estimates
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and notes thereto. Actual
results could differ from those estimated.
b) Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, International Uranium
Holdings Corporation, International Uranium U.S. Finance LLC,
International Uranium (Bermuda) Ltd., Energy Fuels Exploration Company
Ltd., and International Uranium (USA) Corporation.
c) Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid
short-term interest bearing securities with maturities at the date of
purchase of three months or less.
5
<PAGE> 74
d) Marketable securities and restricted short-term investments
Marketable securities and restricted short term investments are valued
at the lower of cost or market value.
e) Inventories
Inventories of ore stockpiles, uranium concentrates and refined and
converted products are valued at the lower of cost or net realizable
value. Consumable supplies and spares are valued at the lower of
weighted average cost or replacement value.
f) Properties, plant and equipment
Mine property, plant and equipment are recorded at cost. Mine property
is depleted by the units-of- production method based on ore reserves.
Plant and equipment are depreciated on a straight line basis over
their estimated useful lives from three to fifteen years.
g) Exploration properties
The Company defers the property acquisition costs and ongoing
exploration expenditures on properties still in the exploration stage
and carries these as assets until the results of the exploration
projects are known. If a project is successful, the cost of the
property and the related exploration and development expenditures will
be amortized over the life of the property utilizing the units-of-
production method. If a project is unsuccessful, the mining property
and the related exploration expenditure are written off.
h) Environmental protection and reclamation costs
Expenditures relating to ongoing environmental and reclamation
programs are charged against earnings as incurred or capitalized and
depreciated depending on their relationship to future earnings. The
estimated costs for decommissioning and reclaiming producing resource
properties are fully accrued on an undiscounted basis. Changes in
these cost estimates from time to time are capitalized and amortized
to earnings on the units-of-production basis in the case of mine costs
and on a straight line basis over 15 years in the case of mill costs.
Actual costs of decommissioning and reclamation are deducted against
this accrual.
i) Foreign currency translation
These consolidated financial statements are denominated in United
States dollars, the Company's functional currency. Substantially all
of the Company's assets and operations are located in the United
States, with the exception of the Mongolian Gurvan-Saihan Joint
Venture (Note 8). The majority of its costs are denominated in United
States dollars and all of its products for sale are priced in United
States dollars.
Amounts denominated in foreign currencies are translated into United
States dollars as follows:
a) Monetary assets and liabilities at the rates of exchange in
effect at balance sheet dates;
b) Non-monetary assets at historical rates;
c) Revenue and expense items at the average rates for the period.
The net effect of the foreign currency translation is included in the
statement of earnings subsequent to the acquisition.
6
<PAGE> 75
j) Net earnings per share
Net earnings per common share is determined using the weighted average
number of shares outstanding during the year, which for the period
ending September 30, 1997 was 42,067,497 shares.
k) Goodwill
Goodwill is amortized on a straight-line basis over twenty years.
3. ACQUISITION OF ENERGY FUELS ASSETS AND THE AMALGAMATION
In May 1997, the Company completed the acquisition of substantially all of
the uranium producing assets and assumed certain obligations of Energy
Fuels Ltd., Energy Fuels Exploration Company and Energy Fuels Nuclear, Inc.
(collectively "Energy Fuels") for an approximate total consideration of $35
million. Energy Fuels was in Chapter 11 Bankruptcy proceedings in the
United States. The acquisition price was settled as follows:
<TABLE>
<S> <C>
Cash payment to vendors $19,354,336
Direct acquisition costs 1,937,631
Reclamation obligations assumed 13,265,700
Notes payable assumed 30,556
-----------
$34,588,223
===========
</TABLE>
The acquisition was accounted for by the purchase method. The allocation of
the purchase price is summarized as follows:
<TABLE>
<S> <C>
Cash and certificates of deposit $11,210,896
Favorable uranium sales contracts 2,000,000
Notes receivable 7,169,143
Parts and supplies inventory 999,994
Properties, plant and equipment 8,208,190
Exploration properties 5,000,000
-----------
$34,588,223
===========
</TABLE>
The Energy Fuels assets included several developed mines on standby,
several partially developed mines, as well as numerous targeted mines and
exploration properties, within the states of Colorado, Utah, Arizona,
Wyoming and South Dakota, as well as a 70% interest in a joint venture with
the government of Mongolia and a Russian geological concern to develop and
produce uranium reserves in Mongolia.
Assets purchased also included the 2,000 ton per day White Mesa Mill near
Blanding, Utah. The Mill also has a vanadium recovery circuit.
Concurrent with the acquisition of Energy Fuels, in May 1997, the Company
completed an amalgamation with Thornbury Capital Corporation ("Thornbury").
Each of the shareholders of Thornbury received one common share in the
amalgamated company for every five common shares held prior to the
amalgamation and the shareholders of the Company received one common share
for every one common share held prior to the amalgamation. As a result of
this transaction, the shareholders of the Company acquired control of
Thornbury, and accordingly, the transaction has been accounted for as an
acquisition by the Company of Thornbury.
7
<PAGE> 76
The acquisition is summarized as follows:
<TABLE>
<S> <C>
Purchase consideration
1,443,066 common shares issued $ 823,543
Net assets acquired at book value (150,261)
---------
Excess purchase consideration $ 673,282
=========
Attributed to
Marketable securities $ 57,312
Goodwill 615,970
---------
$ 673,282
=========
</TABLE>
The purpose of the amalgamation was to facilitate the financing of the
Energy Fuels purchase and to achieve public company status.
4. INVENTORIES
<TABLE>
<S> <C>
Uranium
Concentrates $ 8,935,544
In process 181,797
Parts and supplies 996,512
-----------
$10,113,853
===========
</TABLE>
5. NOTES RECEIVABLE
As at September 30, 1997, Union Carbide Corporation has an outstanding
promissory note to the company in the amount of $4,791,513 which bears
interest at the U.S. prime rate. The note plus accrued interest is payable
in monthly installments with the balance due and payable in May 1998.
6. FAVORABLE URANIUM SALES CONTRACTS
As part of the Energy Fuels assets, the Company acquired uranium supply
contracts with certain utilities. At the time of the Energy Fuels purchase,
the value of these contracts was determined to be $2,000,000 based on the
excess of the sales price over the market value of the uranium to be
delivered. Of this value, $1,270,270 relates to the deliveries to be made
in the first quarter of the year ending September 30, 1998, and $729,730
relates to the deliveries in the subsequent year.
7. PROPERTIES, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated September 30, 1997
Cost Depreciation/Depletion Net
----------- ---------------------- ------------------
<S> <C> <C> <C>
Mill $ 2,765,728 $ 58,330 2,707,398
Machinery & equipment 2,824,675 144,783 2,679,892
Vehicles 68,195 6,083 62,112
Computer equipment 93,071 11,767 81,304
Furniture & fixtures 187,879 15,934 171,945
Mining properties 5,156,028 -- 5,156,028
----------- ----------- -----------
$11,095,576 $ 236,897 $10,858,679
=========== =========== ===========
</TABLE>
8
<PAGE> 77
Depreciation and depletion totaled $236,897 for the period ending September
30, 1997 of which $208,237 is included in inventory and mining properties
at year-end.
8. MONGOLIAN GURVAN-SAIHAN JOINT VENTURE
The Company owns a 70% interest in the Gurvan-Saihan Joint Venture (the
"Venture") which holds five uranium exploration blocks covering 12,100
square kilometers in central eastern Mongolia. The other parties are the
Mongolian government as to 15% and Geologorazvedka a Russian geological
concern as to 15%. A royalty in the amount of 4% is payable to the
Mongolian government. The Company has proportionately consolidated its 70%
interest in the Venture, which is substantially represented by exploration
properties. To date the Company has funded all expenditures and expects to
do so for the foreseeable future.
9. RESTRICTED SHORT-TERM INVESTMENTS
As at September 30, 1997, the Company has placed $7,945,356 on deposit in
favor of a bonding company to secure the reclamation bond (Note 11).
10. SEGMENTED INFORMATION
Geographic segments
<TABLE>
<CAPTION>
Canada United States Mongolia Total
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ (13,310) $ 47,534 $ (15,530) $ 18,694
----------- ------------- ----------- -----------
Identifiable assets $ 999,979 $49,380,108 $ 6,820,252 $57,200,339
----------- ------------- ----------- -----------
</TABLE>
11. PROVISION FOR RECLAMATION
As part of the acquisition of Energy Fuels, the Company is responsible for
the environmental and reclamation obligations of Energy Fuels relating to
all existing mines, the Mill, and other assets, as well as for all
reclamation and environmental obligations associated with all mined out,
inactive, reclaimed or partially reclaimed mines and properties, that were
so acquired.
The total amount of the reclamation liability has been estimated by the
Company at $13,265,700. The Company has posted bonds in favor of the United
States Nuclear Regulatory Commission and the applicable state regulatory
agencies securing these liabilities and has placed $7,945,356 on account of
the obligation (Note 9).
Elements of uncertainty in estimating reclamation and decommissioning costs
include potential changes in regulatory requirements, decommissioning and
reclamation alternatives. Actual costs will differ from those estimated and
this may be material.
12. SHARE CAPITAL
a) Authorized B unlimited number of common shares.
b) Issued and outstanding:
<TABLE>
<CAPTION>
Shares Amount
----------- -----------
<S> <C> <C>
Issued :
For cash (CDN $0.25 per share) 26,500,000 $ 4,906,166
On conversion of special warrants 37,800,000 31,784,288
Amalgamation 1,443,066 823,543
----------- -----------
Balance, September 30, 1997 65,743,066 $37,513,997
=========== ===========
</TABLE>
9
<PAGE> 78
In May 1997, the Company completed a private placement financing of
37,800,000 common shares pursuant to the exercise of special warrants that
had been issued in March 1997 at a price of Cdn$1.25 ($0.90) per special
warrant for net proceeds of Cdn$44,217,190 ($31,784,288), after deducting
share issue costs and agents fees of Cdn$3,032,802 ($2,186,137).
c) Stock options
The Company has adopted an Employee Stock Option Plan under which the Board
of Directors may from time to time grant to directors, officers, eligible
employees of, or consultants to, the Company or its subsidiaries, or to
employees of management companies providing services to the Company,
options to acquire common shares in such numbers for such terms and at such
exercise prices as may be determined by the Board. The purpose of the Stock
Option Plan is to advance the interests of the Company by providing
eligible personnel with a financial incentive for the continued improvement
of the Company's performance and encouragement to stay with the Company.
Options granted to executive officers and certain employees of the Company
vest as to one-third on the date of grant, as to another one-third one year
after the date of grant and the remainder two years after the date of
grant. All other options vest as to one-half on the date of grant and as to
the remainder one year after the date of grant.
As at September 30, 1997, options were outstanding to directors, officers
and employees to purchase 2,639,000 common shares at a price of CDN $1.25
per share with 2,389,000 expiring May 8, 2000 and 250,000 expiring on June
30, 2000.
13. RELATED PARTY TRANSACTIONS
During the period ended September 30, 1997 the Company:
a) incurred legal fees of $188,692 with a law firm of which a partner is
a director of the Company. Amounts due to this firm were $3,084 as at
September 30, 1997.
b) incurred management and administrative service fees of $343,641 with a
company owned by the Chairman of the Company which provides office
premises, secretarial and other services in Vancouver. These fees
include costs incurred throughout 1996 in pursuing the acquisition of
Energy Fuels assets.
c) loaned $850,000 to an officer of the Company in order to facilitate
relocation to the Company headquarters. Of this amount, $650,000 was
repaid prior to year end leaving $200,000 outstanding at September 30,
1997. This loan is non-interest bearing and is payable on the earlier
of termination of employment or June 30, 1999.
d) incurred interest of $147,315 on a letter of credit and other loan
facilities provided by a director of the Company as part of the
acquisition of Energy Fuels. This amount was paid subsequent to year
end. The underlying facilities were paid off and terminated prior to
year end.
14. COMMITMENTS
Certain Swiss utilities hold a royalty (the "Swiss Royalty") of 9% of all
uranium and 5% of vanadium and all other minerals produced from certain of
the United States properties. The Swiss Royalty does not apply to the
Mongolia properties, nor to any tolled or purchased ore of or from third
parties that is processed in the Mill, nor to any properties acquired after
the date that the Swiss royalty was granted.
The Company has entered into negotiations with the Swiss utilities toward
amending certain terms of the royalty agreement.
10
<PAGE> 79
15. FINANCIAL INSTRUMENTS
As at September 30, 1997, the fair value of the Company's financial
instruments approximates their carrying values because of the short-term
nature of these instruments and, where applicable, because interest rates
approximate market rates.
16. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES AND
PRACTICES
The consolidated financial statements have been prepared in accordance with
accounting principles and practices generally accepted in Canada (Canadian
basis) which differ in certain 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 United States.
o Under Canadian GAAP, the amalgamation of the Company with Thornbury
has been accounted for as an acquisition of Thornbury resulting in the
recording of goodwill. Under U.S. GAAP, the transaction has been
accounted for as a recapitalization whereby the net monetary assets of
Thornbury would be recorded at fair value, except that no goodwill or
other intangibles would be recorded. The goodwill recorded under
Canadian GAAP has been applied to reduce the share capital of the
Company under U.S. GAAP.
o Under Canadian GAAP, certain non-cash transactions are included in
the consolidated statement of cash flows. Under U.S. GAAP, non-cash
transactions are excluded from the consolidated statement of cash
flows.
These would have been reported in the consolidated balance sheet,
consolidated statement of earnings an retained earnings, and the
consolidated statement of cash flows as follows:
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
CANADIAN U.S.
BASIS BASIS
------------ ------------
<S> <C> <C>
Share Capital $ 37,513,997 $ 36,898,027
============ ============
Goodwill $ 603,243 $ --
============ ============
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
Net earnings and retained earnings under Canadian GAAP $ 18,694
Amortization of goodwill 12,727
------------
Net earnings and retained earnings under U.S. GAAP 31,421
============
Basic/diluted earnings per share, U.S. GAAP $ --
============
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash provided by financing activities under Canadian GAAP $ 37,512,940
Common shares issued on acquisition of Thornbury (823,543)
------------
Cash provided by financing activities under U.S. GAAP $36,689,397
============
Cash used in investing activities under Canadian GAAP $(20,396,395)
Acquisition of Thornbury 823,543
------------
Cash used in investing activities under U.S. GAAP $(19,572,852)
============
</TABLE>
11
<PAGE> 80
ATTACHMENT - ITEM 19(a)2 - UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
FINANCIAL STATEMENT FOR THE PERIOD ENDED MARCH 31, 1996
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNITED STATES DOLLARS) (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 SEPTEMBER 30
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,212,684 $13,953,355
Marketable securities 32,402 39,978
Trade receivables 1,160,032 63,198
Inventories 8,797,716 10,113,853
Notes receivable 1,184,952 4,791,513
Favourable uranium sales contracts 729,730 1,270,270
Other 630,271 433,497
----------- -----------
25,747,787 30,665,664
Properties, plant and equipment, net 12,596,195 10,858,679
Exploration properties 7,413,419 6,191,525
Notes receivable 204,588 206,142
Restricted short-term cash investments 8,157,409 7,945,356
Favorable uranium sales contracts, net of current portion -- 729,730
Goodwill 587,841 603,243
----------- -----------
$54,707,239 $57,200,339
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities $ 2,331,578 $ 961,865
Inventory purchases -- 5,050,000
Notes payable 8,540 9,537
Due to related parties -- 150,399
Deferred revenue -- 210,185
----------- -----------
2,340,118 6,381,986
Notes payable, net of current portion 13,727 19,962
Reclamation obligations 13,265,700 13,265,700
----------- -----------
15,619,545 19,667,648
----------- -----------
SHAREHOLDERS' EQUITY
Share capital 37,513,997 37,513,997
Retained earnings 1,573,697 18,694
----------- -----------
39,087,694 37,532,691
----------- -----------
$54,707,239 $57,200,339
=========== ===========
</TABLE>
<PAGE> 81
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(UNITED STATES DOLLARS) (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS INCORPORATION
ENDED ON OCTOBER 3
MARCH 31 1996 TO MARCH 31
1998 1997
----------- ----------------
<S> <C> <C>
Revenues
U3O8 sales revenue $14,542,800 $ --
Process milling fees 8,613,961 --
----------- -----------
Total revenue 23,156,761 --
----------- -----------
Cost of sales
U3O8 cost of sales 13,663,566 --
Process milling expenditures 6,309,954 --
Depreciation 111,814 --
----------- -----------
Total cost of sales 20,085,334 --
----------- -----------
Gross profit 3,071,427 --
----------- -----------
Operating and administrative expenses
Selling, general and administrative 1,641,154 18,552
Depreciation and amortization 71,204 --
----------- -----------
1,712,358 18,552
----------- -----------
Operating income 1,359,069 (18,552)
Net interest and other income 686,990 --
----------- -----------
Net income before taxes 2,046,059 (18,552)
Provision for income taxes 491,056 --
----------- -----------
NET INCOME FOR THE PERIOD 1,555,003 (18,552)
Retained earnings, beginning of period 18,694 --
----------- -----------
RETAINED EARNINGS, END OF PERIOD $ 1,573,697 $ (18,552)
=========== ===========
Net income per common share 0.02 0.00
=========== ===========
</TABLE>
<PAGE> 82
INTERNATIONAL URANIUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNITED STATES DOLLARS) (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS INCORPORATION
ENDED ON OCTOBER 3
MARCH 31 1996 TO MARCH 31
1998 1997
------------- ----------------
<S> <C> <C>
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income for the period $ 1,555,003 $ (18,552)
Items not affecting cash
Depreciation and amortization 183,018 --
Amortization of uranium sales contract purchase cost 1,270,270 --
------------ ------------
3,008,291 (18,552)
Changes in non-cash working capital items
Decrease in marketable securities 7,576 --
Increase in trade receivables (1,096,834) (41,843)
Decrease (Increase) in inventories 1,386,522 (2,610,000)
Increase in other current assets (196,774) (10,221)
Decrease in liability for inventory purchase (5,050,000) --
Increase in other accounts payable and accrued liabilities 1,369,713 198,668
Decrease in due to related parties (150,399) --
Decrease in deferred revenue (210,185) --
------------ ------------
NET CASH USED BY OPERATIONS (932,090) (2,481,948)
------------ ------------
EXPLORATION, DEVELOPMENT
AND INVESTMENT ACTIVITIES
Properties, plant and equipment (2,040,100) (1,279,478)
Exploration properties (1,157,311) --
Collection of notes receivable 3,608,115 --
Increase in restricted cash investments (212,053) --
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES 198,651 (1,279,478)
------------ ------------
FINANCING ACTIVITIES
Issuance of common stock -- 4,906,166
Stock issue costs -- (195,115)
Payment of notes payable (7,232) --
------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (7,232) 4,711,051
------------ ------------
(Decrease) Increase in cash and cash equivalents (740,671) 949,625
Cash and cash equivalents, beginning of period 13,953,355 --
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,212,684 $ 949,625
============ ============
</TABLE>
<PAGE> 83
ATTACHMENT - ITEM 19(a)3 - FINANCIAL STATEMENT SCHEDULES
- -------------------------------------------------------------------------------
All schedules have been omitted since they are either not required, are not
applicable, or the required information is shown in the financial
statements or related notes.
<PAGE> 84
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1(a) Articles of Amalgamation certified by the Director, Ontario
Corporations Act, dated May 9, 1997;
1(b) By-Law No. 1
3(a) Amalgamation Agreement dated May 5, 1997 between the Registrant and
Thornbury Capital Corporation;
3(b) Agency Agreement dated March 14, 1997 among Salman Partners Inc., CIBC
Wood Gundy Securities Inc., Griffiths McBurney & Partners, Newcrest
Capital Inc. and First Marathon Securities Limited and the Registrant
3(c) Special Warrant Indenture dated March 14, 1997 between the Registrant
and Montreal Trust Company of Canada under which the Special Warrants
were created and issued.
3(d) Escrow Agreement dated May 1997, among the Registrant, Adolf H.
Lundin, Lukas H. Lundin, and The Montreal Trust Company of Canada
3(e) Incentive Stock Option Plan as adopted by the Registrant on May 9,
1997.
3(f) Form of Incentive Stock Option Agreement entered into between the
Registrant and individuals granted options under the Plan - 2-year
plan.
3(g) Form of Incentive Stock Option Agreement entered into between the
Registrant and individuals granted options under the Plan - 3-year
plan.
3(h) Acquisition Agreement dated as of December 19, 1996 among
International Uranium Holdings Corporation, ("IUH"), a subsidiary of
the Registrant, Energy Fuels Exploration Company, Energy Fuels
Nuclear, Inc. and Energy Fuels Ltd., pursuant to which IUH agreed to
acquire the Energy Fuels Assets.
3(i) 1998 Employee Stock Purchase Plan
23 Consent of Saskatoon Mining and Minerals Service Ltd.
</TABLE>
<PAGE> 1
ATTACHMENT - ITEM 19(b)1(a) - ARTICLES OF AMALGMATION
- -------------------------------------------------------------------------------
NOTE: The Articles of Amalgamation were prepared on a pre-printed form and
re-created in an electronic format as near as possible to the original
form.
The Articles of Amalgamation begin on the following page.
<PAGE> 2
1
<TABLE>
<S> <C>
(STAMPED BY THE MINISTRY:) Ontario Corporation Number
Numero de la compagnie en Ontario
1236943
Ministry of Consumer Ministere de la ---------------------------------
and Commercial Consommation el du
Relations Ontario Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceei certifc que les presents
articles are effective on statue entrent on viguerur le
MAY 09 MAI, 1997 Trans Line Comp Method
Code No Stat/ Type Incorp. Share
-------- ----- ----- ------ ------ -----
A 0 0 A 3 S
-------- ----- ----- ------ ------ -----
( signature ) 18 20 28 29 30 31
Director/Directeur
Business Corporations Act/ Loi de sur les compagnies Notice
Req'd Jurisdiction
-------- ----------------------- -----
N ONTARIO A
-------- ----------------------- -----
32 33 47 57
- --------------------------------------------------------------------------------------------------------------------------------
ARTICLES OF AMALGAMATION
STATUTS DE FUSION
1. The name of the amalgamated corporation is: Denomination sociale de la compagnie issue de la
fusion:
Form 4
Business
Corporations I N T E R N A T I O N A L U R A N I U M C O R P O R A T I O N
Act
Formule
numero 4
Loi 2. The address of the registered office is: Addresse du siege social:
sur les
compagnies
40 King Street West, Suite 2100
--------------------------------------------------------------------------------------------------------------
(Street & Number or R.R. Number & if Multi-Office Building give Room No.)
(Rue et numero ou numero de la R.R. et, s'il s'agit d'un edifice a bureau, numero du bureau)
--------------------------
Toronto, Ontario M 5 H 3 C 2
--------------------------------------------------------------------------------------------------------------
(Name of Municipality or Post Office) (Postal Code)
(Nom de la municipalite ou du bureau de poste) (Code postal)
Municipality of Metropolitan Toronto
----------------------------------------------- ------------------------------------------------------
(Name of Municipality, Geographic Township) in (County, District or Regional Municipality)
(Nom de la municipalite, du canton) dans le/la (Comte, district, municipalite regionale)
3. Number (or minimum and maximum number) of Nombre (ou nombres minimal et maximal)
directors is: d'administrateurs:
A minimum of three (3) directors
and a maximum of ten (10) directors
4. The director(s) is/are: Administrateur(s): Resident
Canadian
Residence address, giving Street & No. or R.R. No., State
Municipality and Postal Code Yes or No
Adresse personnelle, y compris la rue et le numero, le Resident
First name, initials and last name Numero de la R.R., le nom de la municipalite et le code Canadien
Prenom, initiales et nom de famille Postal Oui/Non
--------------------------------------- ------------------------------------------------------- ---------
</TABLE>
See 1A which follows
<PAGE> 3
1A
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4. The directors are:
Resident
Name Address Canadian
---------------------------------------------------------------------------------------
David C. Frydenlund 885 West Georgia Street Yes
Vancouver, B.C.
V6C 3E8
Earl E. Hoellen 3 Vista Road No
Englewood, Colorado 80110
USA
Christopher J.F. Harrop 320 Bay Street Yes
Suite 1210
Toronto, Ontario
M5H 4A6
Adolf H. Lundin 6 rue de Rive No
Geneva 3
Switzerland
Lukas H. Lundin 885 West Georgia Street Yes
Vancouver, B.C.
V6C 3E8
John H. Craig 8 Saunders Street Yes
Toronto, Ontario
M5M 3S4
William A. Rand 885 West Georgia Street Yes
Vancouver, B.C.
V6C 3E8
</TABLE>
<PAGE> 4
2
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5 A) The amalgamation agreement has been duly A) Les actionnaires de chaque compagnie qui
adopted by the shareholders of each of the fusionne ont dument adopte la convention de
amalgamating corporations as required by ------ fusion conformement au paragraphe 176(4) de
subsection 176(4) of the Business X la Loi sur les compagnies a la date mentionnee
Corporations Act on the date set out below. ------ ci-dessous.
--------------------------
Check Cocher
A or B A ou B
--------------------------
B) The amalgamation has been approved by B) Les administrateurs de chaque compagnie qui
the directors of each amalgamating corporation fusionne ont approuve la fusion par voie de
by a resolution as required by section 177 ------ resolution conformement a l'article 177 de las
of the Business Corporations Act on the date Loi sur les compagnies a la date mentionnee
set out below. ------ ci-dessous. Les statuts de fusion reprennent
The articles of amalgamation in substance essentiellement les dispositions des statuts
contain the provisions of the articles of constitutifs de
incorporation of
--------------------------------------------------------------------------------------------------------------
And are more particularly set out in these et sont enonces textuellement aux presents
articles. statuts.
</TABLE>
<TABLE>
<CAPTION>
Names of amalgamating
corporations Ontario Corporation Number Date of Adoption/Approval
Denomination sociale des Numero de la compagnie en Date d'adoption ou d'approbation
Compagnies qui fusionnent Ontario
-------------------------------------------------------------------------------------------------------------
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International
Uranium Corporation 1202352 April 15, 1997
Thornbury Capital
Corporation 62713 March 20, 1997
</TABLE>
<PAGE> 5
3
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6. Restrictions, if any, on business corporation Limites, s'il y a lieu, imposees aux activites
may carry on or on powers the corporation commerciales ou aux pouvoirs de la compagnies.
exercise.
None.
7. The classes and any maximum number of Categories et nombre maximal, s'il y a lieu,
shares that the corporation is authorized d'actions que la compagnie est autorisee a
to issue: emettre:
An unlimited number of common shares.
</TABLE>
<PAGE> 6
4
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8. Rights, privileges, restrictions and conditions (if Droits, privileges, restrictions et conditions,
any) attaching to each class of shares and directors s'il y a lieu, rattaches a chaque categorie
authority with respect to any class of shares which d'actions et pouvoirs des administrateurs
may be issued in series: relatifs a chaque categorie d'actions qui peut
etre emise en serie:
Not Applicable.
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<PAGE> 7
5
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9. The issue, transfer or ownership of shares is/is not L'emission, le transfert ou la propriete d'actions
restricted and the restrictions (if any) are as est/n'est pas restreinte. Les restrictions, s'il
follows: y a lieu, sont les suivantes:
No restrictions on transfer.
10. Other provisions (if any): Autres dispositions, s'il y a lieu:
</TABLE>
Without in any way restricting the powers conferred upon the Corporation or
its board of directors by the Business Corporations Act, as now enacted or
as the same may from time to time be amended, re-enacted or replaced, the
board of directors may from time to time, without authorization of the
shareholders, in such amounts and on such terms as it deems expedient:
(a) borrow money upon the credit of the Corporation;
(b) issue, re-issue, sell or pledge debt obligations of the Corporation;
(c) subject to the provisions of the Business Corporations Act, as now
enacted or as the same may from time to time be amended, re-enacted or
replaced, give a guarantee on behalf of the Corporation to secure
performance of an obligation of any person; and
(d) 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.
Continued on Page 5A
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11. The statements required by subsection 178(2) of the Les declarations exigees aux termes du paragraphe
Business Corporations Act are attached as Schedule 178(2) de la Loi sur les compagnies constituent l'annexe
"A". "A".
12. A copy of the amalgamation agreement or directors Une copie de la convention de fusion ou les resolutions
resolutions (as the case may be) is/are attached as des administrateurs (selon le cas) constitute(nt) l'annexe
Schedule "B". "B".
</TABLE>
<PAGE> 8
5A
10. Other Provisions (continued)
The board of directors may from time to time delegate to a director, a
committee of directors or an officer of the Corporation any or all of the
powers conferred on the board as set out above, to such extent and in such
manner as the board shall determine at the time of such delegation.
<PAGE> 9
6
<TABLE>
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These article are signed in duplicate Les presents statuts sont signes en double exemplaire.
- -----------------------------------------------------------------------------------------------------------------------
Names of the amalgamating corporations and Denomination sociale des compagnies qui fusionnent,
signatures and descriptions of office of their signature et fonction de leurs dirigeants regulierement
proper officers designes.
INTERNATIONAL URANIUM THORNBURY CAPITAL
CORPORATION CORPORATION
Per: Per:
----------------------------- -----------------------------
John H. Craig, Director Christopher J.F. Harrop,
President
</TABLE>
<PAGE> 10
SCHEDULE "A"
STATEMENT OF DIRECTOR OR OFFICER OF
INTERNATIONAL URANIUM CORPORATION (THE "CORPORATION")
PURSUANT TO SUBSECTION 178(2) OF
THE BUSINESS CORPORATIONS ACT (ONTARIO) (THE "ACT")
WHEREAS the Corporation and Thornbury Capital Corporation wish to
amalgamate and continue as one corporation (the "Amalgamated Corporation");
AND WHEREAS the undersigned is required to make the following
statements in connection with the said amalgamation:
1. The undersigned is a director of the Corporation;
2. There are reasonable grounds for believing that
(a) the Corporation is, and the Amalgamated Corporation will be, able to
pay its liabilities as they become due; and
(b) the realizable value of the Amalgamated Corporation's assets will not
be less than the aggregate of its liabilities and stated capital of
all classes.
3. There are reasonable grounds for believing that no creditor will be
prejudiced by the amalgamation.
4. With respect to paragraph 178(2) of the Act, no creditors have
notified the Corporation that they object to the amalgamation.
5. As no creditor of the Corporation has notified the Corporation of its
objection to the amalgamation, the Corporation has not given any notice pursuant
to 178(2)(d) of the Act.
DATED as of the day of May, 1997.
----------------------------------
John H. Craig, Director
<PAGE> 11
SCHEDULE "A"
STATEMENT OF DIRECTOR OR OFFICER OF
THORNBURY CAPITAL CORPORATION (THE "CORPORATION")
PURSUANT TO SUBSECTION 178(2) OF
THE BUSINESS CORPORATIONS ACT (ONTARIO) (THE "ACT")
WHEREAS the Corporation and International Uranium Corporation wish to
amalgamate and continue as one corporation (the "Amalgamated Corporation");
AND WHEREAS the undersigned is required to make the following
statements in connection with the said amalgamation:
1. The undersigned is the President and a director of the Corporation;
2. There are reasonable grounds for believing that
(a) the Corporation is, and the Amalgamated Corporation will be, able to
pay its liabilities as they become due; and
(b) the realizable value of the Amalgamated Corporation's assets will not
be less than the aggregate of its liabilities and stated capital of
all classes.
3. There are reasonable grounds for believing that no creditor will be
prejudiced by the amalgamation.
4. With respect to paragraph 178(2) of the Act, no creditors have
notified the Corporation that they object to the amalgamation.
5. As no creditor of the Corporation has notified the Corporation of its
objection to the amalgamation, the Corporation has not given any notice pursuant
to 178(2)(d) of the Act.
DATED as of the day of May, 1997.
----------------------------------
Christopher J.F. Harrop,
President and Director
<PAGE> 12
SCHEDULE "B"
(Amalgamation Agreement)
(see Attachment - Item 19(b)3(a))
<PAGE> 1
ATTACHMENT - ITEM 19(b)1(b) - BY-LAW NO. 1
- -------------------------------------------------------------------------------
BY-LAW NO. 1
A by-law relating generally to
the conduct of the affairs of
INTERNATIONAL URANIUM CORPORATION
CONTENTS
1. Interpretation
2. Business of the Corporation
3. Directors
4. Committees
5. Officers
6. Protection of Directors, Officers and Others
7. Shares
8. Dividends and Rights
9. Meetings of Shareholders
10. Information Available to Shareholders
11. Divisions and Departments
12. Notices
13. Effective Date
BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of
INTERNATIONAL URANIUM CORPORATION (hereinafter called the "Corporation") as
follows:
<PAGE> 2
-2-
SECTION ONE
INTERPRETATION
1.01 Definitions
In the by-laws of the Corporation, unless the context
otherwise requires:
(1) "Act" means the Business Corporations Act, R.S.0. 1990 c. B.16
and the regulations made pursuant thereto, as from time to
time amended, and every statute that may be substituted
therefor and, in the case of such substitution, any reference
in the by-laws of the Corporation to provisions of the Act
shall be read as references to the substituted provisions
therefor in the new statute or statutes;
(2) "appoint" includes "elect" and vice versa;
(3) "board" means the board of directors of the Corporation;
(4) "by-laws" means this by-law and all other by-laws of the
Corporation from time to time in force and effect;
(5) "meeting of shareholders" includes an annual meeting of
shareholders and a special meeting of shareholders; "special
meeting of shareholders" includes a meeting of any class or
classes of shareholders and a special meeting of all
shareholders entitled to vote at an annual meeting of
shareholders;
(6) "non-business day" means Saturday, Sunday and any other day
that is a holiday as defined in the Interpretation Act
(Ontario);
(7) "recorded address" means in the case of a shareholder his
address as recorded in the securities register; and in the
case of joint shareholders the address appearing in the
securities register in respect of such joint holding or the
first address so appearing if there is more than one; and in
the case of a director, officer, auditor or member of a
committee of the board his latest address as recorded in the
records of the Corporation;
<PAGE> 3
-3-
(8) "signing officer" means, in relation to any instrument, any
person authorized to sign the same on behalf of the
Corporation by paragraph 2.03 or by a resolution passed
pursuant thereto;
(9) all terms contained in the by-laws and which are defined in
the Act shall have the meanings given to such terms in the
Act; and
(10) the singular shall include the plural and the plural shall
include the singular; the masculine shall include the feminine
and neuter genders; and the word "person" shall include
individuals, bodies corporate, corporations, companies,
partnerships, syndicates, trusts, unincorporated organizations
and any number or aggregate of persons.
SECTION TWO
BUSINESS OF THE CORPORATION
2.01 Corporate Seal
The Corporation may have a corporate seal which shall be
adopted and may be changed by resolution of the board.
2.02 Financial Year
The financial year of the Corporation shall be as determined
by the board from time to time.
2.03 Execution of Instruments
Contracts, documents or instruments in writing requiring the
signature of the Corporation may be signed on behalf of the Corporation by any
two officers or directors and instruments in writing so signed shall be binding
upon the Corporation without any further authorization or formality. The board
shall have power from time to time by resolution to appoint any officer or
officers or any person or persons on behalf of the Corporation either to sign
contracts, documents and instruments in writing generally or to sign specific
contracts, documents or instruments in writing.
<PAGE> 4
-4-
The seal of the Corporation may when required be affixed to
contracts, documents and instruments in writing signed as aforesaid or by any
officer or officers, person or persons, appointed as aforesaid by resolution of
the board.
The term "contracts, documents or instruments in writing" as
used in this by-law shall include deeds, mortgages, hypothecs, charges,
conveyances, transfers and assignments of property, real or personal, movable or
immovable, agreements, releases, receipts and discharges for the payment of
money or other obligations, conveyances, transfers and assignments of shares,
share warrants, stocks, bonds, debentures, notes or other securities and all
paper writings.
The signature or signatures of the Chairman of the Board (if
any), the Vice-Chairman of the Board, the President, any Executive
Vice-President, or any Vice-President together with any one of the Secretary,
the Treasurer, an Assistant Secretary, an Assistant Treasurer or any one of the
foregoing officers together with any one director of the Corporation and/or any
other officer or officers, person or persons, appointed as aforesaid by
resolution of the board may, if specifically authorized by resolution of the
directors, be printed, engraved, lithographed or otherwise mechanically
reproduced upon any contracts, documents or instruments in writing or bonds,
debentures, notes or other securities of the Corporation executed or issued by
or on behalf of the Corporation and all contracts, documents or instruments in
writing or bonds, debentures, notes or other securities of the Corporation on
which the signature or signatures of any of the foregoing officers or directors
or persons authorized as aforesaid shall be so reproduced pursuant to special
authorization by resolution of the board, shall be deemed to have been manually
signed by such officers or directors or persons whose signature or signatures is
or are so reproduced and shall be as valid to all intents and purposes as if
they had been signed manually and notwithstanding that the officers or directors
or persons whose signature or signatures is or are so reproduced may have ceased
to hold office at the date of the delivery or issue of such contracts, documents
or instruments in writing or bonds, debentures, notes or other securities of the
Corporation.
2.04 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
<PAGE> 5
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business or any part thereof shall be transacted under such agreements,
instructions and delegations of powers as the board may from time to time by
resolution prescribe or authorize.
2.05 Custody of Securities
All shares and securities owned by the Corporation shall be
lodged (in the name of the Corporation) with a chartered bank or a trust company
or in a safety deposit box or, if so authorized by resolution of the board, with
such other depositaries or in such other manner as may be determined from time
to time by resolution of the board.
All share certificates, bonds, debentures, notes or other
obligations or securities belonging to the Corporation may be issued or held in
the name of a nominee or nominees of the Corporation (and if issued or held in
the names of more than one nominee shall be held in the names of the nominees
jointly with the right of survivorship) and shall be endorsed in blank with
endorsement guaranteed in order to enable transfer to be completed and
registration to be effected.
2.06 Voting Shares and Securities in other Companies
All of the shares or other securities carrying voting rights
of any other body corporate held from time to time by the Corporation may be
voted at any and all meetings of shareholders, bondholders, debenture holders or
holders of other securities (as the case may be) of such other body corporate
and in such manner and by such person or persons as the board shall from time to
time by resolution determine. The proper signing officers of the Corporation may
also from time to time execute and deliver for and on behalf of the Corporation
proxies and/or arrange for the issuance of voting certificates and/or other
evidence of the right to vote in such names as they may determine without the
necessity of a resolution or other action by the board.
SECTION THREE
DIRECTORS
3.01 Number of Directors and Quorum
The number of directors of the Corporation shall be the number
of directors as specified in the articles or, where a minimum and maximum number
of directors is provided for in the articles, the number of directors of the
Corporation shall be the number of directors determined from time to time by
special resolution or, if a special resolution empowers the directors to
determine the number, the number
<PAGE> 6
-6-
of directors determined by resolution of the board. Subject to paragraph 3.08,
the quorum for the transaction of business at any meeting of the board shall be
a majority of the number of directors then in office and or such greater number
of directors as the board may from time to time by resolution determine,
provided that if the Corporation has fewer than three directors, all directors
must be present at any meeting of the board to constitute a quorum.
3.02 Qualification
No person shall be qualified for election as a director if he
is less than 18 years of age; if he is of unsound mind and has been so found by
a court in Canada or elsewhere; if he is not an individual; or if he has the
status of a bankrupt. A director need not be a shareholder. A majority of the
directors shall be resident Canadians, provided that if the Corporation has only
one or two directors, that director or one of the two directors, as the case may
be, shall be a resident Canadian. If the Corporation is or becomes an offering
corporation within the meaning of the Act, at least one-third of the directors
of the Corporation shall not be officers or employees of the Corporation or any
of its affiliates.
3.03 Election and Term
The election of directors shall take place at the first
meeting of shareholders and at each succeeding annual meeting of shareholders
and all the directors then in office shall retire but, if qualified, shall be
eligible for re-election. The number of directors to be elected at any such
meeting shall be the number of directors as specified in the articles or, if a
minimum and maximum number of directors is provided for in the articles, the
number of directors determined by special resolution or, if the special
resolution empowers the directors to determine the number, the number of
directors determined by resolution of the board. The voting on the election
shall be by show of hands unless a ballot is demanded by any shareholder. If an
election of directors is not held at the proper time, the incumbent directors
shall continue in office until their successors are elected.
3.04 Removal of Directors
Subject to the provisions of the Act, the shareholders may by
ordinary resolution passed at a meeting specially called for such purpose
<PAGE> 7
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remove any director from office and the vacancy created by such removal may be
filled at the same meeting failing which it may be filled by a quorum of the
directors.
3.05 Vacation of Office
A director ceases to hold office when he dies or, subject to
the Act, resigns; he is removed from office by the shareholders in accordance
with the Act; he becomes of unsound mind and is so found by a court in Canada or
elsewhere or if he acquires the status of a bankrupt.
3.06 Vacancies
Subject to the Act, a quorum of the board may fill a vacancy
in the board, except a vacancy resulting from an increase in the number or
maximum number of directors or from a failure of the shareholders to elect the
number of directors required to be elected at any meeting of shareholders. In
the absence of a quorum of the board, or if the vacancy has arisen from a
failure of the shareholders to elect the number of directors required to be
elected at any meeting of shareholders, the directors then in office shall
forthwith call a special meeting of shareholders to fill the vacancy. If the
directors then in office fail to call such meeting or if there are no directors
then in office, any shareholder may call the meeting.
<PAGE> 8
-8-
3.07 Action by the Board
The board shall manage or supervise the management of the
business and affairs of the Corporation. Subject to paragraphs 3.08 and 3.09,
the powers of the board may be exercised at a meeting at which a quorum is
present or by resolution in writing signed by all the directors entitled to vote
on that resolution at a meeting of the board. Where there is a vacancy in the
board, the remaining directors may exercise all the powers of the board so long
as a quorum of the board remains in office.
3.08 Canadian Majority
The board shall not transact business at a meeting other than
to fill a vacancy in the board, unless a majority of the directors present are
resident Canadians, except where
(a) 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
(b) a majority of resident Canadians would have been present had
that director been present at the meeting.
3.09 Meeting by Telephone
If all the directors of the Corporation present or
participating in the meeting consent, a director may participate in a meeting of
the board or of a committee of the board by means of such telephone, electronic
or other communications facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously, and a
director participating in such a meeting by such means is deemed to be present
at the meeting. 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 and of committees of the board held while a director holds
office.
3.10 Place of Meetings
Meetings of the board may be held at any place within or
outside Ontario. In any financial year of the Corporation a majority of the
meetings of the board need not be held within Canada.
<PAGE> 9
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3.11 Calling of Meetings
Subject to the Act, meetings of the board shall be held from
time to time on such day and at such time and at such place as the board, the
Chairman of the Board (if any), the President, a Vice-President who is a
director or any two directors may determine and the Secretary, when directed by
the board, the Chairman of the Board (if any), the President, a Vice-President
who is a director or any two directors shall convene a meeting of the board.
3.12 Notice of Meeting
Notice of the date, time and place of each meeting of the
board shall be given in the manner provided in paragraph 12.01 to each director
not less than 48 hours (exclusive of any part of a non-business day) 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.
A director may in any manner waive notice of or otherwise
consent to a meeting of the board.
3.13 First Meeting of New Board
Provided a quorum of directors is present, each newly elected
board may without notice hold its first meeting immediately following the
meeting of shareholders at which such board is elected.
3.14 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.
3.15 Regular Meetings
The board may appoint a day or days in any month or months for
regular meetings of the board at a place and hour to be named. A copy of any
resolution of the board fixing the place and time of such regular meetings shall
be sent to each director forthwith after being passed, but no other notice shall
be required for any such regular meeting except where the Act requires the
purpose thereof or the business to be transacted thereat to be specified.
3.16 Chairman
The chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and is present at the meeting: the Chairman of the Board, the President
or a Vice-President. If no such officer is present, the directors present shall
choose one of their number to be chairman.
<PAGE> 10
-10-
3.17 Votes to Govern
At all meetings of the board every question shall be decided
by a majority of the votes cast on the question. In case of an equality of votes
the chairman of the meeting shall not be entitled to a second or casting vote.
3.18 Conflict of Interest
A director or officer who is a party to, or who is a director
or officer of or has a material interest in any person who is a party to, a
material contract or transaction or proposed material contract or transaction
with the Corporation shall disclose in writing to the Corporation or request to
have entered in the minutes of the meetings of the directors the nature and
extent of his interest at the time and in the manner provided by the Act. Any
such contract or transaction or proposed contract or transaction shall be
referred to the board or shareholders for approval even if such contract is one
that in the ordinary course of the Corporation's business would not require
approval by the board or shareholders, and a director interested in a contract
so referred to the board shall not vote on any resolution to approve the same
except as permitted by the Act.
3.19 Remuneration and Expenses
The directors shall be paid such remuneration for their
services as the board may from time to time determine. The directors shall also
be entitled to be reimbursed for travelling and other expenses properly incurred
by them in attending meetings of the shareholders or of the board or any
committee thereof or otherwise in the performance of their duties. Nothing
herein contained shall preclude any director from serving the Corporation in any
other capacity and receiving remuneration therefor.
SECTION FOUR
COMMITTEES
4.01 Committee of Directors
The board may appoint a committee of directors, however
designated, and delegate to such committee any of the powers of the board except
those which pertain to items which, under the Act, a committee of directors has
no authority to exercise. A majority of the members of such committee shall be
resident Canadians.
<PAGE> 11
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4.02 Transaction of Business
The powers of a committee of directors may be exercised by a
meeting at which a quorum is present or by resolution in writing signed by all
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 within or outside Ontario.
4.03 Audit Committee
The board may, and shall if the Corporation becomes an
offering corporation within the meaning of the Act, elect annually from among
its number an audit committee to be composed of not fewer than three directors
of whom a majority shall not be officers or employees of the Corporation or its
affiliates. The audit committee shall have the powers and duties provided in the
Act.
4.04 Advisory Committees
The board may from time to time appoint such other committees
as it may deem advisable, but the functions of any such other committees shall
be advisory only.
4.05 Procedure
Unless otherwise determined by the board, each committee shall
have power to fix its quorum at not less than a majority of its members, to
elect its chairman and to regulate its procedure.
SECTION FIVE
OFFICERS
5.01 Appointment
The board may from time to time appoint a Chairman of the
Board, a President, one or more Vice-Presidents (to which title may be added
words indicating seniority or function), 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
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provisions of the Act, delegate to such officers powers to manage the business
and affairs of the Corporation. Subject to paragraph 5.02, an officer may but
need not be a director and one person may hold more than one office. In case and
whenever the same person holds the offices of Secretary and Treasurer, he may
but need not be known as the Secretary-Treasurer. All officers shall sign such
contracts, documents, or instruments in writing as require their respective
signatures. In the case of the absence or inability to act of any officer or for
any other reason that the board may deem sufficient, the board may delegate all
or any of the powers of such officer to any other officer or to any director for
the time being.
5.02 Chairman of the Board
The Chairman of the Board, if appointed, shall be a director
and shall, when present, preside at all meetings of the board and committees of
the board. The Chairman of the Board shall be vested with and may exercise such
powers and shall perform such other duties as may from time to time be assigned
to him by the board. During the absence or disability of the Chairman of the
Board, his duties shall be performed and his powers exercised by the President.
5.03 President
The President shall, and unless and until the board designates
any other officer of the Corporation to be the Chief Executive Officer of the
Corporation, be the Chief Executive Officer and, subject to the authority of the
board, shall have general supervision of the business and affairs of the
Corporation and such other powers and duties as the board may specify. The
President shall be vested with and may exercise all the powers and shall perform
all the duties of the Chairman of the Board if none be appointed or if the
Chairman of the Board is absent or unable or refuses to act.
5.04 Vice-President
Each Vice-President shall have such powers and duties as the
board or the President may specify. The Vice-President or, if more than one, the
Vice-President designated from time to time by the board or by the President,
shall be vested with all the powers and shall perform all the duties of the
President in the absence or inability or refusal to act of the President,
provided, however, that a Vice-President who is not a director shall not preside
as chairman at any meeting of the board and
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that a Vice-President who is not a director and shareholder shall not preside as
chairman at any meeting of shareholders.
5.05 Secretary
The Secretary shall give or cause to be given as and when
instructed, all notices to shareholders, directors, officers, auditors and
members of committees of the board; he shall be the custodian of the stamp or
mechanical device generally used for affixing the corporate seal of the
Corporation and all books, papers, records, documents and instruments belonging
to the Corporation, except when some other officer or agent has been appointed
for that purpose; and he shall have such other powers and duties as the board
may specify.
5.06 Treasurer
The Treasurer shall keep proper accounting records in
compliance with the Act and shall be responsible for the deposit of money, the
safekeeping of securities and the disbursement of the funds of the Corporation;
he shall render to the board whenever required an account of all his
transactions as Treasurer and of the financial position of the Corporation; and
he shall have such other powers and duties as the board may specify. Unless and
until the board designates any other officer of the Corporation to be the Chief
Financial Officer of the Corporation, the Treasurer shall be the Chief Financial
Officer of the Corporation.
5.07 Powers and Duties of Other Officers
The powers and duties of all other officers shall be such as
the terms of their engagement call for or as the board may specify. Any of the
powers and duties of an officer to whom an assistant has been appointed may be
exercised and performed by such assistant, unless the board otherwise directs.
5.08 Variation of Powers and Duties
The board may from time to time and subject to the provisions
of the Act, vary, add to or limit the powers and duties of any officer.
5.09 Term of Office
The board, in its discretion, may remove any officer of the
Corporation, with or without cause, without prejudice to such officer's rights
under any employment contract. Otherwise each officer appointed by the board
shall hold office until his successor is appointed or until the earlier of his
resignation or death.
5.10 Terms of Employment and Remuneration
The terms of employment and the remuneration of an officer
appointed by the board shall be settled by it from time to time. The fact that
any officer or employee is a director or shareholder of the Corporation shall
not disqualify him from receiving such remuneration as may be so determined.
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5.11 Conflict of Interest
An officer shall disclose his interest in any material
contract or transaction or proposed material contract or transaction with the
Corporation in accordance with paragraph 3.18.
5.12 Agents and Attorneys
The board shall have power from time to time to appoint agents
or attorneys for the Corporation in or outside Canada with such powers of
management or otherwise (including the powers to subdelegate) as may be thought
fit.
5.13 Fidelity Bonds
The board may require such officers, employees and agents of
the Corporation as the board deems advisable to furnish bonds for the faithful
discharge of their powers and duties, in such form and with such surety as the
board may from time to time determine but no director shall be liable for
failure to require any such bond or for the insufficiency of any such bond or
for any loss by reason of the failure of the Corporation to receive any
indemnity thereby provided.
SECTION SIX
PROTECTION OF
DIRECTORS, OFFICERS AND OTHERS
6.01 Submission of Contracts or
Transactions to Shareholders for Approval
The board in its discretion may submit any contract, act or
transaction for approval, ratification or confirmation at any meeting of the
shareholders called for the purpose of considering the same and any contract,
act or transaction that shall be approved, ratified or confirmed by a resolution
passed by a majority of the votes cast at any such meeting (unless any different
or additional requirement is imposed by the Act or by the Corporation's articles
or any other by-law) shall be as valid and as binding upon the Corporation and
upon all the shareholders as though it had been approved, ratified or confirmed
by every shareholder of the Corporation.
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6.02 For the Protection of Directors and Officers
In supplement of and not by way of limitation upon any rights
conferred upon directors by the provisions of the Act, it is declared that no
director shall be disqualified by his office from, or vacate his office by
reason of, holding any office or place of profit under the Corporation or under
any body corporate in which the Corporation shall be a shareholder or by reason
of being otherwise in any way directly or indirectly interested or contracting
with the Corporation either as vendor, purchaser or otherwise or being concerned
in any contract or arrangement made or proposed to be entered into with the
Corporation in which he is in any way directly or indirectly interested either
as vendor, purchaser or otherwise nor shall any director be liable to account to
the Corporation or any of its shareholders or creditors for any profit arising
from any such office or place of profit; and, subject to the provisions of the
Act, no contract or arrangement entered into by or on behalf of the Corporation
in which any director shall be in any way directly or indirectly interested
shall be avoided or voidable and no director shall be liable to account to the
Corporation or any of its shareholders or creditors for any profit realized by
or from any such contract or arrangement by reason of the fiduciary relationship
existing or established thereby. Subject to the provisions of the Act and to
paragraph 3.18, no director shall be obliged to make any declaration of interest
or refrain from voting in respect of a contract or proposed contract with the
Corporation in which such director is in any way directly or indirectly
interested.
6.03 Limitation of Liability
Except as otherwise provided in the Act, no director or
officer for the time being of the Corporation shall be liable for the acts,
receipts, neglects or defaults of any other director or officer or employee or
for joining in any receipt or act for conformity or for any loss, damage or
expense happening to the Corporation through the insufficiency or deficiency of
title to any property acquired by the Corporation or for or on behalf of the
Corporation or for the insufficiency or deficiency of any security in or upon
which any of the moneys of or belonging to the Corporation shall be placed out
or invested or for any loss or damage arising from the bankruptcy, insolvency or
tortious act of any persons, firm or corporation including any person, firm or
corporation with whom or which any moneys, securities or effects shall be lodged
or deposited for any loss, conversion, misapplication or misappropriation of or
any damage resulting from any dealings with any moneys, securities or other
assets belonging to the Corporation or for any other loss, damage or
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misfortune whatever which may happen in the execution of the duties of his
respective office or trust or in relation thereto unless the same shall happen
by or through his failure to exercise the powers and to discharge the duties of
his office honestly, in good faith and in the best interests of the Corporation
and in connection therewith to exercise the degree of care, diligence and skill
that a reasonably prudent person would exercise in comparable circumstances. The
directors for the time being of the Corporation shall not be under any duty or
responsibility in respect of any contract, act or transaction whether or not
made, done or entered into in the name or on behalf of the Corporation, except
such as shall have been submitted to and authorized or approved by the board. If
any director or officer of the Corporation shall be employed by or shall perform
services for the Corporation otherwise than as a director or officer or shall be
a member of a firm or a shareholder, director or officer of a company which is
employed by or performs services for the Corporation, the fact of his being a
director or officer of the Corporation shall not disentitle such director or
officer or such firm or company, as the case may be, from receiving proper
remuneration for such services.
6.04 Indemnity
Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or officer,
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, and his 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 him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or such body
corporate, if
(a) he acted honestly and in good faith with a view to the best
interest of the Corporation; and
(b) in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had
reasonable grounds for believing that his conduct was lawful.
The Corporation shall also indemnify such person in such other circumstances as
the Act permits or requires.
6.05 Insurance
The Corporation may purchase and maintain insurance for the
benefit of any person referred to in paragraph 6.04 against such liabilities and
in such amounts as the board may from time to time determine and are permitted
by the Act.
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SECTION SEVEN
SHARES
7.01 Allotment
The board may from time to time allot or grant options to
purchase the whole or any part of the authorized and unissued shares of the
Corporation at such times and to such 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.
7.02 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.
7.03 Registration of Transfers
Subject to the provisions of the Act, no transfer of shares
shall be registered in a securities register except upon presentation of the
certificate representing such shares with an endorsement which complies with the
Act made thereon or delivered therewith duly executed by an appropriate person
as provided by the Act, together with such reasonable assurance that the
endorsement is genuine and effective as the board may from time to time
prescribe, upon payment of all applicable taxes and any fees prescribed by the
board, upon compliance with such restrictions on transfer as are authorized by
the articles and upon satisfaction of any lien referred to in paragraph 7.05.
7.04 Transfer Agents and Registrars
The board may from time to time appoint one or more agents to
maintain, in respect of each class of securities of the Corporation issued by it
in registered form, a securities register and one or more branch securities
registers. Such a person may be designated as transfer agent and registrar
according to his functions and one person may be designated both registrar and
transfer agent. The board may at any time terminate such appointment.
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7.05 Lien for Indebtedness
The Corporation shall have a lien on any share registered in
the name of a shareholder or his legal representatives for a debt of that
shareholder to the Corporation, provided that if the shares of the Corporation
are listed on a stock exchange recognized by the Ontario Securities Commission,
the Corporation shall not have such lien. The Corporation may enforce any lien
that it has on shares registered in the name of a shareholder indebted to the
Corporation by the sale of the shares thereby affected or by any other action,
suit, remedy or proceeding authorized or permitted by law and, pending such
enforcement, the Corporation may refuse to register a transfer of the whole or
any part of such shares.
7.06 Non-recognition of Trusts
Subject to the provisions of the Act, the Corporation may
treat as absolute owner of any share the person in whose name the share is
registered in the securities register as if that person had full legal capacity
and authority to exercise all rights of ownership, irrespective of any
indication to the contrary through knowledge or notice or description in the
Corporation's records or on the share certificate.
7.07 Share Certificates
Every holder of one or more shares of the Corporation shall be
entitled, at his option, to a share certificate, or to a non-transferable
written acknowledgement of his right to obtain a share certificate, stating the
number and class or series of shares held by him 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 shall from
time to time approve. Any share certificate shall be signed in accordance with
paragraph 2.03 and need not be under the corporate seal; provided that, unless
the board otherwise determines, certificates representing shares in respect of
which a transfer agent and/or registrar has been appointed shall not be valid
unless countersigned by or on behalf of such transfer agent and/or registrar.
The signature of one of the signing officers or, in the case of share
certificates which are not valid unless countersigned by or on behalf of a
transfer agent and/or registrar, the signatures of both signing officers, may be
printed or mechanically reproduced in facsimile upon share certificates and
every such facsimile signature shall for all purposes be deemed to be the
signature of the officer whose signature it reproduces and shall be binding upon
the Corporation. A share certificate executed as aforesaid shall be valid
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notwithstanding that one or both of the officers whose facsimile signature
appears thereon no longer holds office at the date of issue of the certificate.
7.08 Replacement of Share Certificates
The board or any officer or agent designated by the board may
in its or his discretion direct the issue of a new share certificate in lieu of
and upon cancellation of a share certificate that has been mutilated or in
substitution for a share certificate claimed to have been lost, destroyed or
wrongfully taken on payment of such fee, not exceeding $3.00, 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.
7.09 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 shares.
7.10 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 law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.
SECTION EIGHT
DIVIDENDS AND RIGHTS
8.01 Dividends
Subject to the provisions of the Act, the board may from time
to time declare dividends payable to the shareholders according to their
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respective rights and interest in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation.
8.02 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 his recorded
address, unless 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 recorded address.
The mailing of such 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.
8.03 Non-receipt of Cheques
In the event of non-receipt 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.
8.04 Record Date for Dividends and Rights
The board may fix in advance a date, preceding by not more
than 50 days the date for the payment of any dividend or the date for the issue
of any warrant or other evidence of the right to subscribe for securities of the
Corporation, as a record date for the determination of the persons entitled to
receive payment of such dividend or to exercise the right to subscribe for such
securities, and notice of any such record date shall be given not less than
seven days before such record date in the manner provided by the Act. If no
record date is so fixed, the record date for the determination of the persons
entitled to receive payment of any dividend or to exercise the right to
subscribe for securities of the Corporation shall be at the close of business on
the day on which the resolution relating to such dividend or right to subscribe
is passed by the board.
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8.05 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.
SECTION NINE
MEETINGS OF SHAREHOLDERS
9.01 Annual Meetings
The annual meeting of shareholders shall be held at such time
in each year as the board, the Chairman of the Board (if any) or the President
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 an auditor and for the transaction of
such other business as may properly be brought before the meeting.
9.02 Special Meetings
The board, the Chairman of the Board (if any) or the President
shall have power to call a special meeting of shareholders at any time.
9.03 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.
9.04 Notice of Meetings
Notice of the time and place of each meeting of shareholders
shall be given in the manner provided in paragraph 12.01 not less than 21 days
nor more than 50 days before the date of the meeting to each director, to the
auditor and to each shareholder who at the close of business on the record date
for notice is entered in the securities register as the holder of one or more
shares carrying the right to vote at the meeting. Notice of a meeting of
shareholders called for any purpose other than consideration of the financial
statements and auditor's report,
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election of directors and reappointment of the incumbent auditor shall state or
be accompanied by a statement of the nature of such 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. A
shareholder and any other person entitled to attend a meeting of shareholders
may in any manner waive notice of or otherwise consent to a meeting of
shareholders.
9.05 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 held by each
shareholder entitled to vote at the meeting. If a record date for the meeting is
fixed pursuant to paragraph 9.06, the shareholders listed shall be those
registered at the close of business on 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 notice of the meeting
is given, or where no such notice is given, the day on which the meeting is
held. The list shall be available for examination by any shareholder during
usual business hours at the registered office of the Corporation or at the place
where the central securities register is maintained and at the meeting for which
the list was prepared.
9.06 Record Date for Notice
The board may fix in advance a date, preceding the date of any
meeting of shareholders by not more than 50 days and not less than 21 days, as a
record date for the determination of the shareholders entitled to notice of the
meeting, provided that notice of any such record date shall be given not less
than seven days before such record date by newspaper advertisement in the manner
provided in the Act and, if any shares of the Corporation are listed for trading
on a stock exchange in Canada, by written notice to each such stock exchange. If
no record date is so fixed, the record date for the determination of the
shareholders entitled to notice of the meeting shall be at the close of business
on the day immediately preceding the day on which the notice is given or, if no
notice is given, the day on which the meeting is held.
9.07 Meetings without Notice
A meeting of shareholders may be held without notice at any
time and place permitted by the Act
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(a) if all the shareholders entitled to vote thereat are present
in person or represented by proxy waive notice of or otherwise
consent to such meeting being held, and
(b) if the auditor and the directors are present or waive notice
of or otherwise consent to such meeting being held, so long as
such shareholders, auditor and directors present are not
attending for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is
not lawfully called. At such a meeting any business may be
transacted which the Corporation at a meeting of shareholders
may transact. If the meeting is held at a place outside
Canada, shareholders not present or represented by proxy, but
who have waived notice of or otherwise consented to such
meeting, shall also be deemed to have consented to the meeting
being held at such place.
9.08 Chairman, Secretary and Scrutineers
The chairman of any meeting of shareholders shall be the first
mentioned of such of the following officers as have been appointed and who is
present at the meeting: the President or a Vice-President who is a director and
a shareholder. If no such officer is present within 15 minutes from the time
fixed for holding the meeting, the persons present and entitled to vote shall
choose one of their number to be chairman. If the Secretary of the Corporation
is absent, the chairman 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 a resolution or
by the chairman with the consent of the meeting.
9.09 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 the
auditor 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 the
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.
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9.10 Quorum
Subject to section 9.20 of this by-law, a quorum for the
transaction of business at any meeting of shareholders shall be 2 persons
present in person, each being a shareholder entitled to vote thereat or a duly
appointed proxy or proxyholder for an absent shareholder so entitled, holding or
representing in the aggregate not less than 10% of the issued shares of the
Corporation enjoying voting rights at such meeting.
9.11 Right to Vote
Subject to the provisions of the Act as to authorized
representatives of any other body corporate or association, at any meeting of
shareholders for which the Corporation has prepared the list referred to in
paragraph 9.05, every person who is named in such list shall be entitled to vote
the shares shown opposite his name except to the extent that such person has
transferred any of his shares after the record date determined in accordance
with paragraph 9.06 and the transferee, having produced properly endorsed
certificates evidencing such shares or having otherwise established that he owns
such shares, has demanded not later than 10 days before the meeting that his
name be included in such list. In any such case the transferee shall be entitled
to vote the transferred shares at the meeting. At any meeting of shareholders
for which the Corporation has not prepared the list referred to in paragraph
9.05, 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.
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9.12 Proxies
Every shareholder entitled to vote at a meeting of
shareholders may appoint a proxyholder, or one or more alternate proxyholders,
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 his attorney authorized in
writing and shall conform with the requirements of the Act.
9.13 Time for Deposit of Proxies
The board may by resolution specify in a notice calling a
meeting of shareholders a time, preceding the time of such meeting or an
adjournment thereof by not more than 48 hours exclusive of any part of a
non-business day, 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, only if it has
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.
9.14 Joint Shareholders
If two or more persons hold shares jointly, any one of them
present in person or represented by proxy at a meeting of shareholders may, in
the absence of the other or others, vote the shares; but if two or more of those
persons are present in person or represented by proxy and vote, they shall vote
as one the shares jointly held by them.
9.15 Votes to Govern
At any meeting of shareholders every question shall, unless
otherwise required by the articles or by-laws or by law, be determined by a
majority of the votes cast on the question. In case of an equality of votes
either upon a show of hands or upon a poll, the chairman of the meeting shall
not be entitled to a second or casting vote.
9.16 Show of Hands
Subject to the provisions of the Act, 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
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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.
9.17 Ballots
On any question proposed for consideration at a meeting of
shareholders, and whether or not a vote by show of hands has been taken thereon,
any shareholder or proxyholder entitled to vote at the meeting may require or
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 he 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.
9.18 Adjournment
The chairman at the meeting of shareholders may with the
consent of the meeting and subject to such conditions as the meeting may decide,
or where otherwise permitted under the provisions of the Act, adjourn the
meeting from time to time and from place to place. 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.
9.19 Resolution in Writing
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 unless a written
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statement with respect to the subject matter of the resolution is submitted by a
director or the auditor in accordance with the Act.
9.20 Only One Shareholder
Where the Corporation has only one shareholder or only one
holder of any class or series of shares, all business which the Corporation may
transact at an annual or special meeting of shareholders shall be transacted in
the manner provided for in paragraph 9.19.
SECTION TEN
INFORMATION AVAILABLE TO SHAREHOLDERS
10.01 Information Available to Shareholders
Except as provided by the Act, no shareholder shall be
entitled to discovery of any information respecting any details or conduct of
the Corporation's business which in the opinion of the directors it would be
inexpedient in the interests of the Corporation to communicate to the public.
10.02 Directors' Determination
The directors may from time to time, subject to the rights
conferred by the Act, determine whether and to what extent and at what time and
place and under what conditions or regulations the documents, books and
registers and accounting records of the Corporation or any of them shall be open
to the inspection of shareholders and no shareholder shall have any right to
inspect any document or book or register or accounting record of the Corporation
except as conferred by statute or authorized by the board or by a resolution of
the shareholders in general meeting.
SECTION ELEVEN
DIVISIONS AND DEPARTMENTS
11.01 Creation and Consolidation of Divisions
The board may cause the business and operations of the
Corporation or any part thereof to be divided or to be segregated into one or
more divisions upon such basis, including without limitation, character
<PAGE> 28
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or type of operation, geographical territory, product manufactured or service
rendered, as the board may consider appropriate in each case. The board may also
cause the business and operations of any such division to be further divided
into sub-units and the business and operations or any such divisions or
sub-units to be consolidated upon such basis as the board may consider
appropriate in each case.
11.02 Name of Division
Any division or its sub-units may be designated by such name
as the board may from time to time determine and may transact business under
such name, provided that the Corporation shall set out its name in legible
characters in all contracts, invoices, negotiable instruments and orders for
goods or services issued or made by or on behalf of the Corporation.
<PAGE> 29
-29-
11.03 Officers of Division
From time to time the board or, if authorized by the board,
the Chief Executive Officer, may appoint one or more officers for any division,
prescribe their powers and duties and settle their terms of employment and
remuneration. The board or, if authorized by the board, the Chief Executive
Officer, may remove at its or his pleasure any officer so appointed, without
prejudice to such officer's rights under any employment contract. Officers of
divisions or their sub-units shall not, as such, be officers of the Corporation.
SECTION TWELVE
NOTICES
12.01 Method of Giving Notices
Any notice (which term includes any communication or document)
to be given (which term includes sent, delivered or served) pursuant to the Act,
the regulations thereunder, the articles, the by-laws or otherwise to a
shareholder, director, officer, auditor or member of a committee of the board
shall be sufficiently given if delivered personally to the person to whom it is
to be given or if delivered to his recorded address or if mailed to him at his
recorded address by prepaid mail or if sent to him at his recorded address by
any means of prepaid transmitted or recorded communication. A notice so
delivered shall be deemed to have been given when it is delivered personally or
to the recorded address as aforesaid; a notice so mailed shall be deemed to have
been given when deposited in a post office or public letter box and shall be
deemed to have been received on the fifth day after so depositing; and a notice
so sent by any means of transmitted or recorded communication shall be deemed to
have been given when dispatched or delivered to the appropriate communication
company or agency or its representative for dispatch. The Secretary may change
or cause to be changed the recorded address of any shareholder, director,
officer, auditor or member of a committee of the board in accordance with any
information believed by him to be reliable.
12.02 Signature to Notices
The signature of any director or officer of the Corporation to
any notice or document to be given by the Corporation may be written,
<PAGE> 30
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stamped, typewritten or printed or partly written, stamped, typewritten or
printed.
12.03 Proof of Service
A certificate of the Chairman of the Board (if any), the
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 a transfer officer of any transfer agent or branch transfer
agent of shares of any class of the Corporation as to the facts in relation to
the mailing or delivery of any notice or other document to any shareholder,
director, officer or auditor or publication of any notice or other document
shall be conclusive evidence thereof and shall be binding on every shareholder,
director, officer or auditor of the Corporation as the case may be.
12.04 Notice to Joint Shareholders
All notices with respect to shares registered in more than one
name shall, if more than one address appears on the records of the Corporation
in respect of such joint holdings, be given to all of such joint shareholders at
the first address so appearing, and notice so given shall be sufficient notice
to the holders of such shares.
12.05 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.
12.06 Undelivered Notices
If any notice given to a shareholder pursuant to paragraph
12.01 is returned on three consecutive occasions because he cannot be found, the
Corporation shall not be required to give any further notices to such
shareholder until he informs the Corporation in writing of his new address.
12.07 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
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 found thereon.
12.08 Deceased Shareholders
Any notice or other document delivered or sent by post or left
at the address of any shareholder as the same appears in the records of the
Corporation 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 any person or persons) until some other person be entered in his
stead in
<PAGE> 31
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the records 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 or document on his heirs, executors or administrators and on all persons,
if any, interested with him in such shares.
12.09 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 he derives his title to such share prior
to his name and address being entered on the securities register (whether such
notice was given before or after the happening of the event upon which he became
so entitled) and prior to his furnishing to the Corporation the proof of
authority or evidence of his entitlement prescribed by the Act.
12.10 Waiver of Notice
Any shareholder (or his duly appointed proxyholder), director,
officer, auditor or member of a committee of the board may at any time waive any
notice, or waive or abridge the time for any notice, required to be given to him
under any provision of the Act, the regulations thereunder, the articles, the
by-laws or otherwise and such waiver or abridgement, whether given before or
after the meeting or other event of which notice is required to be given 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 or of a committee of the board
which may be given in any manner.
SECTION THIRTEEN
EFFECTIVE DATE
13.01 Effective Date
This by-law shall come into force upon being passed by the
board.
ENACTED this 24th day of October, 1996.
WITNESS the seal of the Corporation.
<PAGE> 32
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- ------------------------------ ---------------------------------
President - Earl Hoellen Secretary - John H. Craig
BE IT RESOLVED THAT the foregoing By-Law No. 1 being a by-law
relating generally to the transaction of the business and affairs of the
Corporation be and the same is hereby made as a by-law of the Corporation and
the President and the Secretary be and they are hereby authorized to sign the
by-law and to apply the corporate seal thereto.
The undersigned, being the sole director of the Corporation by
his signature hereby consents, pursuant to the provisions of the Business
Corporations Act, to the foregoing resolution.
DATED the 24th day of October, 1996.
---------------------------------
John H. Craig
BE IT RESOLVED THAT the foregoing By-Law No. 1 being a by-law
relating generally to the transaction of the business and affairs of the
Corporation be and the same is hereby confirmed without amendment as a by-law of
the Corporation.
The undersigned, being the sole shareholder of the Corporation
by his signature hereby consents, pursuant to the provisions of the Business
Corporations Act, to the foregoing resolution.
DATED the 24th day of October, 1996.
---------------------------------
John H. Craig
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(a) - AMALGAMATION AGREEMENT
- --------------------------------------------------------------------------------
06/05/97-2
THIS AMALGAMATION AGREEMENT made as of the 5th day of May,
1997.
B E T W E E N:
INTERNATIONAL URANIUM CORPORATION, a corporation
incorporated under the laws of the Province
of Ontario,
(hereinafter called "INTERNATIONAL URANIUM")
OF THE FIRST PART;
- and -
THORNBURY CAPITAL CORPORATION, a
corporation incorporated under the laws of
the Province of Ontario,
(hereinafter called "THORNBURY CAPITAL")
OF THE SECOND PART.
WHEREAS International Uranium was incorporated under the laws
of the Province of Ontario pursuant to the Business Corporations Act (Ontario)
(the "ACT") by Certificate dated October 3, 1996 and is governed by the Act;
AND WHEREAS Thornbury Capital was incorporated under the laws
of the Province of Ontario pursuant to the Act by Letters Patent dated September
29, 1950 and is governed by the Act;
AND WHEREAS the parties have each made full and complete
disclosure to one another of all their respective known assets and liabilities;
AND WHEREAS the authorized capital of International Uranium
consists of an unlimited number of common shares of which 26,500,000 common
shares are issued and outstanding as fully paid and non-assessable and
37,800,000 common shares have been reserved for issuance pursuant to the
exercise of certain special warrants issued by International Uranium,
<PAGE> 2
- 2 -
and approximately 2,540,000 common shares have been reserved for issuance
pursuant to options to be granted prior to the amalgamation (subject to
additional increase to reflect options granted to officers, directors, eligible
employees of, or consultants to, International Uranium);
AND WHEREAS the authorized capital of Thornbury Capital
consists of an unlimited number of common shares of which 7,215,334 common
shares are issued and outstanding as fully paid and non-assessable;
AND WHEREAS under the authority conferred by the Act, each of
International Uranium and Thornbury Capital desire and have agreed to amalgamate
as one corporation upon the terms and conditions hereinafter set out;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants herein contained, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto covenant and agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 In this Agreement:
(a) "ACT" means the Business Corporations Act (Ontario);
(b) "AMALGAMATED CORPORATION" means the corporation continuing
from the amalgamation of the Amalgamating Corporations;
(c) "AMALGAMATING CORPORATIONS" means International Uranium and
Thornbury Capital;
(d) "AMALGAMATION" means the amalgamation of the Amalgamating
Corporations as herein provided;
(e) "CERTIFICATE" means the Certificate of Amalgamation issued by
the Director under the Act;
(f) "EFFECTIVE DATE" means the date shown on the Certificate of
Amalgamation issued by the Director under the Act giving
effect to the Amalgamation;
<PAGE> 3
- 3 -
(g) "LETTER AGREEMENT" means the letter agreement dated February
13, 1997 between International Uranium and Thornbury Capital,
as amended by agreements dated March 31, 1997 and April 30,
1997;
(h) "OFFERING MEMORANDUM" means the Confidential Offering
Memorandum of International Uranium dated March 19, 1997
respecting the offering of up to 40,000,000 Special Warrants;
(i) "SPECIAL WARRANT" means a special warrant issued by
International Uranium pursuant to a special warrant indenture
dated as of March 26, 1997 between International Uranium and
Montreal Trust Company of Canada, which special warrant is
exercisable into one Common Share of International Uranium.
ARTICLE 2 - RECITALS
2.1 The parties hereto confirm the truth and accuracy of the
foregoing recitals and agree that such recitals are incorporated into this
Agreement.
ARTICLE 3 - AMALGAMATION
3.1 Each of the Amalgamating Corporations hereby agrees to
amalgamate, under the provisions of section 174 of the Act and to continue as
one corporation under the terms and conditions hereinafter set out.
3.2 Upon the issue of a Certificate giving effect to the
Amalgamation:
(a) the Amalgamating Corporations shall be amalgamated and shall
continue as one corporation effective on the date of the
Certificate under the terms and conditions prescribed in this
Agreement;
(b) the Amalgamated Corporation shall possess all the property,
rights, privileges and franchises and be subject to all the
liabilities, including civil, criminal and quasi-criminal, and
all the contracts, disabilities and debts of each of the
Amalgamating Corporations;
<PAGE> 4
- 4 -
(c) a conviction against, or ruling, order or judgment in favour
of or against an Amalgamating Corporation may be enforced by
or against the Amalgamated Corporation;
(d) the Articles of Amalgamation of the Amalgamated Corporation
shall be deemed to be the articles of incorporation of the
Amalgamated Corporation and the Certificate, except for
purposes of subsection 117(1) of the Act, shall be deemed to
be the certificate of incorporation of the Amalgamated
Corporation;
(e) the Amalgamated Corporation shall be deemed to be the party
plaintiff or the party defendant, as the case may be, in any
civil action commenced by or against an Amalgamating
Corporation before the Amalgamation has become effective.
3.3 All rights of creditors against the property, rights and
assets of the Amalgamating Corporations and all liens upon their property,
rights and assets shall be unimpaired by such amalgamation and all debts,
contracts, liabilities and duties of the Amalgamating Corporations shall attach
to the Amalgamated Corporation and may be enforced against it.
3.4 No action or proceeding by or against any of the Amalgamating
Corporations shall abate or be affected by the Amalgamation.
ARTICLE 4 - NAME
4.1 The name of the Amalgamated Corporation shall be
"International Uranium Corporation".
ARTICLE 5 - REGISTERED OFFICE
5.1 The registered office of the Amalgamated Corporation shall be
in the City of Toronto, in the Municipality of Metropolitan Toronto, in the
Province of Ontario.
5.2 The address of the first registered office of the Amalgamated
Corporation shall be:
Suite 2100
40 King Street West
Toronto, Ontario
M5H 3C2
<PAGE> 5
- 5 -
ARTICLE 6 - RESTRICTIONS ON BUSINESS
6.1 There shall be no restrictions on the business the
Amalgamated Corporation may carry on or on the powers the Amalgamated
Corporation may exercise.
ARTICLE 7 - BY-LAWS AND STOCK OPTION PLAN
7.1 The by-laws of the Amalgamated Corporation shall be the
by-laws of International Uranium.
7.2 The stock option plan of the Amalgamated Corporation shall be
the stock option plan of International Uranium in effect as at the Effective
Date.
7.3 Copies of the proposed by-laws and the proposed stock option
plan of the Amalgamated Corporation may be examined at the following address:
Suite 2100
40 King Street West
Toronto, Ontario
M5H 3C2
ARTICLE 8 - DIRECTORS
8.1 The board of directors of the Amalgamated Corporation shall
consist of a minimum of three directors and a maximum of 10 directors, until
changed in accordance with the Act. Until changed by special resolution of the
shareholders of the Amalgamated Corporation, or if the directors of the
Amalgamated Corporation are so authorized by special resolution of the
shareholders of the Amalgamated Corporation, by resolution of the said
directors, the board of directors of the Amalgamated Corporation shall consist
of seven directors, and the first directors of the Amalgamated Corporation shall
be the following:
Resident
Name Address aaaaa Canadian
- ---------------------- ---------------------- --------
John H. Craig 8 Saunders Street Yes
Toronto, Ontario
M5M 3S4
<PAGE> 6
- 6 -
David C. Frydenlund 885 West Georgia Street Yes
Vancouver, British Columbia
V6C 3E8
Christopher J.F. Harrop 320 Bay Street Yes
Suite 1210
Toronto, Ontario
M5H 4A6
Earl E. Hoellen 3 Vista Road No
Englewood, Colorado
U.S.A. 80110
Adolf H. Lundin 6 rue de Rive No
Geneva 3
Switzerland
Lukas H. Lundin 885 West Georgia Street Yes
Vancouver, British Columbia
V6C 3E8
William A. Rand 885 West Georgia Street Yes
Vancouver, British Columbia
V6C 3E8
8.2 The said first directors shall hold office until the first
annual meeting of the shareholders of the Amalgamated Corporation, or until
their successors are elected or appointed in accordance with the by-laws of the
Amalgamated Corporation and the Act. The subsequent directors shall be elected
each year thereafter by ordinary resolution at either an annual meeting of the
shareholders or a special meeting of the shareholders by a majority of the votes
cast at such meeting. The directors shall manage or supervise the management of
the business and affairs of the Amalgamated Corporation, subject to the
provisions of the Act.
ARTICLE 9 - AUTHORIZED CAPITAL
9.1 The Amalgamated Corporation is authorized to issue an
unlimited number of Common Shares.
<PAGE> 7
- 7 -
ARTICLE 10 - ISSUANCE OF SHARES UPON AMALGAMATION
10.1 The authorized but unissued shares and the issued and
outstanding shares in the capital of the Amalgamating Corporations shall be
respectively cancelled and/or converted into issued shares in the capital of the
Amalgamated Corporation as follows:
(a) International Uranium:
each issued and outstanding Common Share of International
Uranium shall become one Common Share of the Amalgamated
Corporation and the remaining authorized but unissued Common
Shares of International Uranium shall be cancelled; and
(b) Thornbury Capital:
each five issued and outstanding Common Shares of Thornbury
Capital shall become one Common Share of the Amalgamated
Corporation and the remaining authorized but unissued Common
Shares of Thornbury Capital shall be cancelled.
For greater certainty, the parties agree that each Special
Warrant of International Uranium that is exercised immediately prior to the
Amalgamation and each option of International Uranium shall entitle the holder
thereof to receive one Common Share of the Amalgamated Corporation upon the
completion of the Amalgamation.
10.2 After the filing of Articles of Amalgamation in respect of
this Agreement and the issue of a Certificate, the shareholders of the
Amalgamating Corporations shall, when requested by the Amalgamated Corporation,
surrender the certificates representing or entitling them to shares in the
Amalgamating Corporations and, subject to the provisions of the Act, in return
shall be entitled to receive certificates for shares of the Amalgamated
Corporation as set forth in section 10.1 herein on the basis aforesaid.
10.3 Holders of shares of either of the Amalgamating Corporations
shall not be entitled to receive any consideration in respect of fractional
shares of the Amalgamated Corporation resulting from the conversion described
above or to be registered on the books of the Amalgamated Corporation with
respect to fractional shares, and any such shares shall be deemed to be
cancelled.
ARTICLE 11 - TRANSFER OF SHARES
11.1 The right to transfer shares in the capital of the Amalgamated
Corporation shall not be restricted.
<PAGE> 8
- 8 -
ARTICLE 12 - SPECIAL PROVISIONS
12.1 Subject to the provisions of the Act, the following provisions
shall apply to the Amalgamated Corporation:
Without in any way restricting the powers conferred upon the
Amalgamated Corporation or its board of directors by the Act, as now enacted or
as the same may from time to time be amended, re-enacted or replaced, the board
of directors may from time to time, without authorization of the shareholders,
in such amounts and on such terms as it deems expedient:
(a) borrow money upon the credit of the Amalgamated Corporation;
(b) issue, re-issue, sell or pledge debt obligations of the
Amalgamated Corporation;
(c) subject to the provisions of the Act, as now enacted or as the
same may from time to time be amended, re-enacted or replaced,
give a guarantee on behalf of the Amalgamated Corporation to
secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Amalgamated Corporation
owned or subsequently acquired, to secure any obligation of
the Amalgamated Corporation.
The board of directors may from time to time delegate to a
director, a committee of directors or an officer of the Amalgamated Corporation
any or all of the powers conferred on the board as set out above, to such extent
and in such manner as the board shall determine at the time of such delegation.
ARTICLE 13 - COVENANTS, REPRESENTATIONS AND WARRANTIES
13.1 Thornbury Capital covenants, represents and warrants to International
Uranium as follows and acknowledges that International Uranium is relying on
such covenants, representations and warranties in entering into this Agreement
and that the same will be true and correct on and up to the Effective Date as if
made on and as of the Effective Date (with such modifications as may be
acceptable to International Uranium in its sole discretion):
(a) INCORPORATION AND ORGANIZATION OF THORNBURY CAPITAL. Thornbury
Capital is duly incorporated under the laws of Ontario and is
duly organized and validly
<PAGE> 9
- 9 -
existing under such laws with the corporate power and
authority to own or lease and operate its properties and
assets and to carry on business.
(b) AUTHORIZED CAPITAL AND SHARES RESERVED FOR ISSUE. The
authorized capital of Thornbury Capital consists of an
unlimited number of Common Shares of which 7,215,334 Common
Shares have been duly issued as fully paid and non-assessable
shares.
(c) QUALIFICATION. Thornbury Capital has the requisite corporate
power and capacity to enter into this Agreement and to perform
its obligations hereunder.
(d) DUE AUTHORIZATION. All requisite corporate acts and
proceedings have been done and taken by Thornbury Capital to
authorize the execution and delivery of this Agreement and the
performance of Thornbury Capital's obligations hereunder.
(e) VALIDITY OF AGREEMENT. The execution and delivery of this
Agreement and the performance of Thornbury Capital's
obligations hereunder do not and will not (i) violate any
provision of law or administrative regulation or any judicial
or administrative order, award, judgment or decree applicable
to Thornbury Capital; (ii) conflict with, result in a breach
of, or cause a default under any indenture, mortgage, deed of
trust, loan agreement or any other agreement or instrument to
which Thornbury Capital is a party or by which Thornbury
Capital or any of its property or assets is bound or to which
its property is subject, or result in the cancellation,
suspension or material alteration in the terms of any licence,
permit or authority held by Thornbury Capital or result in the
creation of any lien, charge, security interest or encumbrance
upon any of the assets of Thornbury Capital or give to others
any material interest or rights, including rights of purchase,
termination, cancellation or acceleration, under any such
agreement or instrument; or (iii) conflict with or result in
any violation of the provisions of Thornbury Capital's
articles, by-laws or other constating documents or any
resolution of Thornbury Capital's shareholders or directors or
any laws of Thornbury Capital's jurisdiction of incorporation
or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over Thornbury Capital or
any of its property or assets.
(f) ENFORCEABILITY OF AGREEMENT. This Agreement and each other
agreement or instrument executed by Thornbury Capital and
delivered on or before the Effective Date constitutes and will
constitute a legal, valid and binding obligation of Thornbury
Capital enforceable against Thornbury Capital in accordance
with their respective terms.
(g) BUSINESS. Thornbury Capital is conducting its business in
compliance in all material respects with all applicable laws,
rules and regulations and is not in
<PAGE> 10
- 10 -
breach of any such laws, rules or regulations. Thornbury
Capital holds all material licenses, certificates,
registrations, permits, consents or qualifications required by
the appropriate state, provincial, municipal or federal
regulatory agencies or bodies necessary in order to enable its
business to be carried on as now conducted or as proposed to
be conducted and all such licences, certificates,
registrations, permits, consents and qualifications are valid
and subsisting and in good standing and do not contain any
unusual or burdensome provision, condition or limitation which
has or may have a material adverse effect on the operation of
the business of Thornbury Capital as now conducted or as
presently proposed to be conducted and Thornbury Capital has
not received any notice of proceedings relating to the
revocation or modification of any such licenses, certificates,
registrations, permits, consents or qualifications which, if
the subject of an unfavourable decision, ruling or finding,
would materially and adversely affect the conduct of the
business, operations, financial condition, income or future
prospects of Thornbury Capital.
(h) OTHER RIGHTS. No person, firm or corporation has any
agreement, option, warrant, right or privilege (whether
pre-emptive or contractual, written or oral) capable of
becoming an agreement, option or warrant for the purchase of
Common Shares from Thornbury Capital or any agreement, option,
warrant, right or privilege (whether pre-emptive or
contractual, written or oral) capable of becoming an
agreement, option or warrant for the purchase, subscription or
issuance of any unissued shares or other securities in the
capital of Thornbury Capital.
(i) NO CONSENTS OR CONTRAVENTIONS. The execution and delivery by
Thornbury Capital of this Agreement and the performance of its
obligations hereunder does not require any consent, approval,
authorization or order of any court or governmental agency or
body, and will not contravene any statute or regulation
binding on Thornbury Capital.
(j) DISSOLUTION. No proceedings are now pending for and Thornbury
Capital is unaware of any proceedings leading to the
dissolution or winding-up of Thornbury Capital or the placing
of Thornbury Capital in bankruptcy nor is Thornbury Capital
subject to any other laws governing the affairs of insolvent
persons.
(k) CLAIMS. Thornbury Capital owns the eight mining claims
situated in the Mayo Mining District of the Yukon Territory
(the "Claims") free and clear of any and all mortgages,
pledges, liens, charges, security interests, adverse claims,
demands and encumbrances of whatsoever nature and howsoever
incurred. All assessment work and/or other requirements have
been done or met to keep the Claims in good standing and all
governmental rules and regulations made or relating to or
<PAGE> 11
- 10 -
governing the Claims or the work carried out therefrom have
been complied with. All work, exploration, development and
mining carried out on the Claims has been carried out in
accordance with recognized good and miner-like exploration and
engineering practices and in conformity in all respects with
all applicable governmental, mining, pollution and
environmental laws and regulations. There is not any adverse
claim or challenge against or to the ownership of or title to
the Claims nor is there any basis therefor and there are no
outstanding agreements or options to acquire or purchase the
Claims or any portion thereof.
(l) DIVIDENDS, ETC. Thornbury Capital has not, directly or
indirectly, declared, paid or authorized any dividends or
other distributions on or payments in respect of its shares or
securities. There is not, in the constating documents or
by-laws of Thornbury Capital or in any agreement, mortgage,
note, debenture, indenture or other instrument or document to
which Thornbury Capital is a party, any restriction upon or
impediment to the declaration or payment of dividends by the
directors of Thornbury Capital or the payment of dividends by
Thornbury Capital to the holders of its shares.
(m) FINANCIAL STATEMENTS. The financial statements of Thornbury
Capital for the year ended December 31, 1996 (the "Audited
Financial Statements") present fairly, in all material
respects, the financial position of Thornbury Capital as at
the date thereof and the results of its operations and the
changes in its financial position for the period then ended in
accordance with generally accepted accounting principles
applied on a consistent basis and do not and shall not omit to
state any material facts that are required by generally
accepted accounting principles or by applicable law to be
stated or reflected therein or which is necessary to make the
statements contained therein not misleading.
(n) TAX RETURNS. Thornbury Capital has filed all necessary tax
returns and notices and has paid all applicable taxes of
whatever nature for all tax years to the date hereof to the
extent such taxes have become due or have been alleged to be
due and Thornbury Capital is not aware of any tax deficiencies
or interest or penalties accrued or accruing or alleged to be
accrued or accruing with respect to Thornbury Capital.
(o) CONTRACTS. The only material contracts (the "Material
Contracts") to which Thornbury Capital is a party have been
disclosed in writing to International Uranium. Thornbury
Capital is not in default under or in breach of any term of
any such Material Contracts and there exists no state of facts
which, after notice or lapse of time or both or otherwise,
would constitute a default under or breach of a term of any of
such Material Contracts. All such Material Contracts are in
good standing and in full force and effect, unamended.
<PAGE> 12
- - 12 -
(p) LIABILITIES. Thornbury Capital is not subject to any
liabilities or obligations, direct or indirect, absolute or
accrued, contingent or otherwise, other than the liabilities
or obligations disclosed in the Audited Financial Statements
or incurred in the ordinary course of business. Without
limiting the generality of any covenant, representation or
warranty given in this Agreement, there are not any facts or
circumstances which might reasonably serve as the basis for or
give rise to any liabilities or obligations, contingent or
otherwise, on the part of Thornbury Capital.
(q) GUARANTEES. Thornbury Capital is not a party to or bound by
any agreement of guarantee, indemnification, assumption or
endorsement or any like commitment of the obligations,
liabilities (contingent or otherwise) or indebtedness of any
other person, firm or corporation.
(r) BOOKS AND RECORDS. All accounts, books, ledgers and official
and other records of whatsoever kind have been fully, properly
and accurately kept and completed for and by Thornbury Capital
and there are no material inaccuracies or discrepancies of any
kind contained or reflected therein.
(s) ABSENCE OF UNUSUAL TRANSACTIONS. Since the last audited
financial year-end of Thornbury Capital, other than as
disclosed in this Agreement or as disclosed in writing to
International Uranium, Thornbury Capital has not:
(i) transferred, assigned, sold or otherwise disposed of
any significant assets other than marketable
securities (for which Thornbury Capital received cash
proceeds);
(ii) incurred, assumed or paid any obligation or liability
(fixed or contingent) other than obligations or
liabilities incurred in the ordinary course of
business;
(iii) mortgaged, pledged, subjected to lien, granted a
security interest in or otherwise encumbered any of
its assets or property;
(iv) suffered any damage, destruction or loss or waived
any rights or entered into any commitment or
transaction where such loss, rights, commitment or
transaction is or would be material except
commitments or transactions in the ordinary course of
business; or
(v) authorized or agreed or otherwise become committed to
any of the foregoing.
<PAGE> 13
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(t) CONTINUING COMMITMENTS. Thornbury Capital is carrying on its
business in the ordinary course and continues to pay, satisfy
and discharge its obligations and liabilities in the ordinary
course of its business.
(u) CONDITION OF ASSETS. All material tangible assets owned or
used by Thornbury Capital are in good condition, repair and
proper working order, subject to normal wear and tear, and are
fit and appropriate for use for the purpose for which they
were intended, and Thornbury Capital owns all of the assets
listed in the Audited Financial Statements free and clear of
any liability or obligation whether accrued, absolute,
contingent or otherwise other than those arising in the
ordinary course of business.
(v) CAPITAL EXPENDITURES. Since the date of the last audited
financial year-end of Thornbury Capital, Thornbury Capital has
not made any capital expenditures except in the ordinary
course of business.
(w) CORPORATE ACTION. All necessary corporate action has been
taken in connection with the performance of Thornbury
Capital's obligations pursuant to this Agreement.
(x) ENVIRONMENTAL MATTERS. No notice, citation, summons or order
has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or
threatened by any authority with respect to any alleged
violation of any applicable environmental law or regulation by
Thornbury Capital and there are no environmental charges,
privileges or encumbrances ("Environmental Liens") relating to
the Claims and no actions have been taken or are in process or
pending which could subject the Claims to such Environmental
Liens. Thornbury Capital knows of no facts or circumstances
with respect to environmental matters relating to the Claims
that could lead to any further environmental claims,
liabilities or responsibilities.
(y) MINUTE BOOKS. The minute books of Thornbury Capital contain
accurate and complete copies of its charter documents (and any
and all amendments thereto) and by-laws. There are not
outstanding any applications or filings which would alter in
any way the charter documents or corporate status of Thornbury
Capital. No resolutions or by-laws have been passed, enacted,
consented to or adopted by the directors or shareholders of
Thornbury Capital except those contained in the said minute
books. The corporate records of Thornbury Capital have been
maintained in accordance with all applicable statutory
requirements and are complete and accurate.
(z) LITIGATION. There are no judgments, decrees, injunctions,
rules, executions or order of any court, governmental
department, commission, agency,
<PAGE> 14
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instrumentality, tribunal or arbitration outstanding against
Thornbury Capital and there are no suits, actions or legal,
administrative, arbitration or other proceedings or
governmental or regulatory investigations or any adverse
change affecting the business, operations, prospects, property
or affairs of Thornbury Capital pending, in progress or
threatened by or against Thornbury Capital, its property or
the conduct of its business.
(aa) BROKER'S FEES. Other than as disclosed in the Audited
Financial Statements, there is no person, firm or corporation
acting or purporting to act at the request of Thornbury
Capital, who is entitled to any brokerage or finder's fee from
Thornbury Capital in connection with the transactions
contemplated herein, and in the event that any person, firm or
corporation acting or purporting to act for Thornbury Capital
establishes a claim for any fee from International Uranium,
Thornbury Capital covenants to indemnify and hold harmless
International Uranium with respect thereto and with respect to
all costs reasonably incurred in the defence thereof.
(ab) NO MATERIAL ADVERSE CHANGE. Since December 31, 1994, there has
been no material adverse change in the business, operations,
properties, assets, liabilities or conditions, financial or
otherwise, of Thornbury Capital.
(ac) DISCLOSURE. In connection with the disclosure of information
relating to Thornbury Capital, neither this Agreement, nor the
Letter Agreement, the Offering Memorandum or any other
document or certificate furnished pursuant to this Agreement
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
Thornbury Capital is current in the filing of all public
disclosure documents required to be filed by Thornbury Capital
under applicable securities and other laws and all of such
filings are complete and correct and do not contain any
misrepresentations, as such term is defined in the Securities
Act (Ontario).
(ad) APPLICABLE SECURITIES LAWS. No securities commission or
similar regulatory authority has issued any cease trade or
other order which is currently outstanding preventing or
suspending trading in any securities of Thornbury Capital,
Thornbury Capital is not in default of any requirement of any
applicable securities laws and no investigation or other
proceedings concerning Thornbury Capital are currently in
progress or pending before any securities regulatory
authority.
(ae) REPORTING ISSUER. Thornbury Capital is a "reporting issuer" in
the Province of Ontario, has been a reporting issuer for at
least 12 months immediately prior to the date of this
Agreement, and its Common Shares are quoted for trading on the
Canadian Dealing Network Inc.
<PAGE> 15
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(af) ADDITIONAL COVENANTS TO THE EFFECTIVE DATE. Up to and
including the Effective Date, Thornbury Capital shall:
(i) not declare or pay any dividend or make any
distribution of its properties or assets to its
shareholders, or purchase or retire any of its Common
Shares other than the cancellation of 57,639 Common
Shares held by it;
(ii) not allot or issue, or enter into any agreement for
the allotment or issuance of, or grant of any other
rights to acquire, shares of its capital stock or
securities convertible into, exchangeable for, or
which carry the right to acquire, directly or
indirectly, any shares of its capital stock;
(iii) not sell all or any part of its assets to any other
person or agree to do so or perform any act or enter
into any transaction or negotiation which could
reasonably be expected to interfere or be
inconsistent with the consummation of the transaction
contemplated by this Agreement or which would render
inaccurate any of the representations and warranties
set forth above if such representations and
warranties were made at a date subsequent to such
act, negotiation or transaction and all references to
the date of this Agreement were deemed to be such
later date;
(iv) not merge, amalgamate or consolidate into or with any
person or enter into any other corporate
reorganization or sell all or any substantial part of
its assets to any person or perform any act or enter
into any transaction or negotiation which can
reasonably be expected to interfere or be
inconsistent with the consummation of the
transactions contemplated by this Agreement or which
would render inaccurate any of the representations or
warranties set forth in this section 13.1 if such
representations and warranties were made at a date
subsequent to such act, negotiations, or transaction
and all references to the date of this Agreement were
deemed to be such later date;
(v) not alter or amend any of its articles or by-laws, as
the same exist on the date of this Agreement;
(vi) use all reasonable efforts to obtain all consents,
approvals and waivers, including the approval of the
directors and shareholders, that may be necessary or
desirable in connection with the Amalgamation and the
other transactions contemplated in the Letter
Agreement and take such other measures as may be
appropriate to fulfill its obligations hereunder and
to carry out the transactions contemplated in this
Agreement or the Letter Agreement;
<PAGE> 16
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(vii) afford to International Uranium and its financial and
other advisers, reasonable access during normal
business hours during the period prior to the
Effective Date to the management, properties, books,
contracts, commitments and records of Thornbury
Capital and to allow International Uranium and such
advisers to perform an examination of the financial
condition, business, affairs property and assets of
Thornbury Capital and during such period, furnish
promptly to International Uranium a copy of each
material change report or similar document filed by
it during such period pursuant to the requirements of
any securities laws, and all other information
concerning its business, properties and personnel as
International Uranium may reasonably request;
(viii) use its best efforts to cause each of the conditions
precedent set forth in this Agreement to be complied
with on or before the Effective Date and take such
measures as may be necessary or desirable to fulfill
its obligations hereunder and thereunder so as to
implement the Amalgamation;
(ix) not carry on its business other than in the ordinary
course of business consistent with recent past
practice, unless otherwise approved in writing by
International Uranium; and
(x) have a minimum of 300 shareholders each holding a
minimum of 500 Common Shares of Thornbury Capital.
(ag) COVENANTS ON THE EFFECTIVE DATE. On the Effective Date,
Thornbury Capital shall:
(i) have assets net of liabilities of not less than
$300,000 (after payment of all success fees and
finder's fees by Thornbury Capital) which assets
shall consist of cash and/or marketable securities;
and
(ii) provide International Uranium with valid and legally
binding waivers, releases and resignations from each
director and officer of Thornbury Capital, which
waivers and releases shall provide that each such
director and officer waives any and all rights or
claims whatsoever to any compensation, shares,
options, rights or warrants of any kind whatsoever in
or from International Uranium, Thornbury Capital or
the Amalgamated Corporation.
(ah) FURTHER ASSURANCES. Thornbury Capital will do all such other
acts and things as may be necessary or desirable in order to
give effect to the Amalgamation and,
<PAGE> 17
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without limiting the generality of the foregoing, will use its
best efforts to apply for and obtain, and will cooperate in
applying for and obtaining, among other things (i) at the
option of International Uranium, the quotation of the Common
Shares of the Amalgamated Corporation on the Canadian Dealing
Network Inc.; and (ii) such other consents, orders or
approvals as International Uranium's counsel may advise are
necessary or desirable for the implementation of the
Amalgamation.
13.2 Thornbury Capital acknowledges and agrees that the covenants,
representations and warranties contained in this Agreement have been given by
Thornbury Capital for the benefit of International Uranium and its directors and
officers, Salman Partners Inc., CIBC Wood Gundy Securities Inc., Griffiths
McBurney & Partners, Newcrest Capital Inc. and First Marathon Securities Limited
(collectively, the "Agents") and their respective directors and officers and the
purchasers of the Special Warrants. Thornbury Capital further acknowledges and
agrees that International Uranium holds the covenants, representations and
warranties contained in this Agreement for itself and its directors and
officers, and for the benefit of the Agents and their respective directors and
officers and the purchasers of the Special Warrants in connection with the
consummation of the transactions contemplated in this Agreement.
13.3 International Uranium covenants, represents and warrants to
Thornbury Capital as follows and acknowledges that Thornbury Capital is relying
on such covenants, representations and warranties in entering into this
Agreement and that the same will be true and correct on and up to the Effective
Date as if made on and as of the Effective Date (with such modifications as may
be acceptable to Thornbury Capital in its sole discretion):
(a) INCORPORATION AND ORGANIZATION OF INTERNATIONAL URANIUM.
International Uranium is duly incorporated and subsisting
under the laws of the Province of Ontario and has the
corporate power and authority to own or lease its property and
assets and to carry on its business as now conducted by it.
(b) OFFERING MEMORANDUM. With respect to International Uranium,
the Offering Memorandum does not contain any untrue statement
of a material fact and does not omit to state a material fact
that is required to be stated or omit to state a material fact
that is necessary to be stated in order for the statement not
to be misleading.
(c) COSTS. International Uranium will pay all reasonable legal
costs of legal counsel of each of the Amalgamating
Corporations in respect of the Amalgamation, including in
respect of the implementation of the Amalgamation.
(d) COVENANTS ON THE EFFECTIVE DATE. On the Effective Date,
International Uranium's only material non-cash asset will
consist of substantially all of the uranium producing assets
and business (the "Energy Fuels Assets") of Energy
<PAGE> 18
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Fuels, Ltd., Energy Fuels Exploration Co. and Energy Fuels
Nuclear, Inc. and International Uranium will have 26,500,000
Common Shares issued and outstanding (each of which will have
been issued for a cash consideration of $0.25 per share) a
portion of the proceeds of which will be used to pay the costs
associated with the acquisition of the Energy Fuels Assets,
and save and except for the Special Warrant financing and
options to purchase Common Shares of International Uranium
pursuant to a share option plan, no warrants or other
securities of International Uranium will be issued or
outstanding and International Uranium is not a party to any
agreement, written or oral, to issue any Common Shares or
other securities save as aforesaid.
13.4 International Uranium acknowledges and agrees that the
covenants, representations and warranties contained in this Agreement have been
given by International Uranium for the benefit of Thornbury Capital and its
directors and officers, and further acknowledges and agrees that Thornbury
Capital holds the covenants, representations and warranties contained in this
Agreement for itself and its directors and officers, in connection with the
consummation of the transactions contemplated in this Agreement.
13.5 The representations and warranties of each of Thornbury
Capital and International Uranium shall survive the execution and delivery of
this Agreement with full force and effect until May 5, 1998 in the event that
the Amalgamation is consummated, failing which they shall survive and continue
in full force and effect until August 31, 1997.
ARTICLE 14 - CONDITIONS
14.1 The obligation of the parties to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment of the
following conditions by the respective parties prior to the time of the
endorsement of the Certificate:
(a) the Amalgamation shall have been adopted and approved without
amendment by a special resolution passed by the shareholders
of each of the Amalgamating Corporations in accordance with
the provisions of the Act;
(b) the respective boards of directors of each of the Amalgamating
Corporations shall have approved of the Amalgamation;
(c) the Amalgamating Corporations shall have completed their due
diligence inquiries and investigations in connection with the
Amalgamation to their satisfaction;
(d) all approvals shall have been obtained from applicable
regulatory authorities and stock exchanges relating to the
Amalgamation, including, without limitation, The Toronto Stock
Exchange;
<PAGE> 19
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(e) the representations, warranties and covenants set out herein
shall not have been breached and any conditions set out herein
or in the Letter Agreement in respect of the completion of the
Amalgamation shall have been fulfilled;
(f) all conditions precedent to the closing of the acquisition of
the Energy Fuels Assets shall have been satisfied other than
the payment of the purchase price by International Uranium
which will be satisfied immediately following completion of
the Amalgamation;
(g) International Uranium shall have received an opinion of
counsel for Thornbury Capital, addressed to International
Uranium and the Agents, as to the due incorporation, valid
existence and corporate capacity, power and authority of
Thornbury Capital, the due authorization and execution of the
Letter Agreement and this Agreement by Thornbury Capital and
the enforceability of such documents, and such other matters
as counsel to International Uranium may reasonably require;
(h) the business affairs and activities of the parties shall have
been conducted in the ordinary course of business and there
shall have been no material adverse change in the affairs of
such companies except for the transactions contemplated in the
Letter Agreement;
(i) there shall be immediately prior to the completion of the
Amalgamation 64,300,000 International Uranium Common Shares
issued and outstanding, assuming the exercise of the
37,800,000 Special Warrants, and 7,215,334 Thornbury Capital
Common Shares issued and outstanding;
(j) the number of Common Shares of the Amalgamated Corporation
reserved for issue or to be reserved for issue pursuant to
options and warrants shall not exceed 2,540,000 Common Shares
of the Amalgamated Corporation (subject to additional increase
to reflect any options granted to officers, directors,
eligible employees of, or consultants to, International
Uranium);
(k) Thornbury Capital and International Uranium agreeing to comply
with the conditions imposed by The Toronto Stock Exchange
relating to its approval of the listing of the Common Shares
of the Amalgamated Corporation; and
(l) there shall not be in force any order or decree restraining or
enjoining the consummation of the transactions contemplated by
the Letter Agreement or this Agreement.
<PAGE> 20
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14.2 If any conditions as set out in this Article 14 are not
fulfilled or performed on or before the time of the endorsement of the
Certificate, the Amalgamating Corporation entitled to the benefit thereof, may
terminate this Agreement or waive the conditions, in whole or in part.
14.3 The directors of each Amalgamating Corporation may terminate
the Agreement at any time before or after the obtaining of the approval of the
shareholders of the Amalgamating Corporation, but no later than the time of the
endorsement of the Certificate, without any further action on the part of the
shareholders of such Amalgamating Corporation if: (i) in the case of Thornbury
Capital, the results of their due diligence of International Uranium reveal that
the Amalgamation is not in the best interests of the shareholders of Thornbury
Capital; and (ii) in the case of International Uranium, they determine, in their
sole and unfettered discretion, that it is not advisable to proceed with the
Amalgamation.
ARTICLE 15 - FILING OF ARTICLES OF AMALGAMATION
15.1 Upon the approval of this Agreement by the shareholders of
each of the Amalgamating Corporations in accordance with the requirements of the
Act, the parties hereto shall jointly complete and file articles of
amalgamation, in duplicate, in prescribed form with the Director appointed under
the Act, providing for the amalgamation of International Uranium and Thornbury
Capital upon and subject to the terms of this Agreement.
IN WITNESS WHEREOF this Agreement has been duly executed by
the parties hereto under their respective corporate seals as witnessed by the
signatures of their proper officers in that behalf.
INTERNATIONAL URANIUM
CORPORATION
Per:
----------------------------------------
THORNBURY CAPITAL CORPORATION
Per:
----------------------------------------
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(b) - AGENCY AGREEMENT
- --------------------------------------------------------------------------------
AGENCY AGREEMENT
March 14, 1997
International Uranium Corporation
1320 - 885 West Georgia Street
Vancouver, B.C.
V6C 3E8
ATTENTION: LUKAS LUNDIN, PRESIDENT
Dear Sirs:
We, Salman Partners Inc., CIBC Wood Gundy Securities Inc., Griffiths
McBurney & Partners, Newcrest Capital Inc. and First Marathon Securities
Limited (collectively, the "Agents"), understand that International Uranium
Corporation (the "Company") proposes to create, issue and sell a total of
40,000,000 special warrants (the "Special Warrants") of the Company having the
attributes and characteristics specified herein.
Upon and subject to the terms and conditions set forth herein, the
Agents hereby offer to act as, and by their acceptance hereof the Company
hereby agrees to appoint the Agents as, the sole and exclusive agents of the
Company to use their reasonable best efforts to offer up to 40,000,000 Special
Warrants for sale to purchasers on a private placement basis at a price (the
"Purchase Price") of $1.25 per Special Warrant for an aggregate Purchase Price
of up to $50,000,000. It is understood and agreed that the Agents are under no
obligation to purchase any of the Special Warrants, although the Agents may
subscribe for Special Warrants if they so desire.
The Company agrees that the Agents will be permitted to appoint other
registered dealers (or other dealers duly qualified in their respective
jurisdictions) as their agents to assist in the private placement contemplated
hereby and that the Agents may determine the remuneration payable, from the
commission payable to the Agents hereunder, to such other dealers appointed by
them.
In consideration of the Agents' services in effecting the sale of the
Special Warrants and the distribution of the Special Warrants on a private
placement basis, the Company agrees, at the time and in the manner specified in
paragraph 6.3 hereof, to
<PAGE> 2
pay to the Agents the Commission (as hereinafter defined) in the amount
specified in paragraph 6.3 hereof.
This offer and all of the Agents' obligations hereunder are subject to
the additional terms and conditions set forth below.
1. DEFINITIONS
1.1 In this Agreement, unless the context otherwise requires, all
capitalized terms, unless otherwise defined herein, shall have the meanings
attributed thereto in the Offering Memorandum and:
"Acquisition" means the acquisition by the Company of substantially
all of the uranium producing assets and business of Energy Fuels
materially on the terms and conditions described in, and pursuant to
the Acquisition Agreement referred to in, the Offering Memorandum;
"Acquisition Agreement" means that certain asset purchase agreement
made as of the 19th day of December, 1996 between Energy Fuels and
International Uranium Holdings Corporation, a subsidiary of the
Company, setting out the terms and conditions of the Acquisition;
"Agents' Counsel" means McCarthy Tetrault;
"Amalgamated IUC" means the corporation to be formed upon the
amalgamation of the Company and Thornbury pursuant to the Amalgamation
Agreement;
"Amalgamation" means the proposed amalgamation of the Company and
Thornbury under the Business Corporations Act (Ontario) on the terms
and conditions described in, and pursuant to the Amalgamation
Agreement referred to in, the Offering Memorandum;
"Amalgamation Agreement" means the amalgamation agreement to be
entered into between the Company and Thornbury in connection with the
Amalgamation;
"Amalgamation Date" means the date shown on the certificate of
amalgamation issued by the Director under the Business Corporations
Act (Ontario) in respect of the Amalgamation;
"Automatic Retraction Time" means 5:00 p.m. (Toronto time) on the day
which is 90 days from the Closing Date;
"business day" means a day which is not a Saturday, a Sunday or a
statutory holiday in the Provinces of British Columbia or Ontario;
- 2 -
<PAGE> 3
"Closing" means the completion of the issue and sale by the Company
and the purchase by the Purchasers of the Special Warrants pursuant to
this Agreement and the Subscription Agreements;
"Closing Date" means March 25, 1997 or such other date as the Company
and the Agents may agree;
"Closing Time" means 9:00 a.m. (Toronto time) on the Closing Date or
such other time on the Closing Date as the Company and the Agents may
agree;
"Commission" has the meaning attributed thereto in paragraph 6.3
hereof;
"Common Shares" means common shares without par value in the capital
of the Company as constituted on the date hereof;
"Company's Counsel" means Cassels Brock & Blackwell;
"Deemed Exercise Time" means the time at which the Escrow Release
Conditions are satisfied;
"Energy Fuels" means, collectively, Energy Fuels, Ltd., Energy Fuels
Exploration Company and Energy Fuels Nuclear, Inc.;
"Escrow Funds" means the amount equal to the aggregate proceeds of
issue (net of Commission) of the Special Warrants sold by the Company
to the Purchasers at the Closing;
"Escrow Release Conditions" means, collectively (i) the completion of
the Amalgamation, subject only to the filing of pre-approved articles
of amalgamation in respect of the Amalgamation with the Director under
the Business Corporations Act (Ontario); (ii) the closing of the
Acquisition in escrow, subject only to payment; and (iii) the
obtaining by the Company of a conditional listing of the common shares
of Amalgamated IUC on The Toronto Stock Exchange;
"Exemptions" has the meaning attributed thereto in paragraph 3.1
hereof;
"Expiry Time" means the earlier of (i) the Deemed Exercise Time and
(ii) the Automatic Retraction Time;
"Information Circular" means the Management Information Circular and
Proxy Statement dated February 17, 1997 of Thornbury, as from time to
time amended or supplemented;
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<PAGE> 4
"material change", "material fact" and "misrepresentation" have the
respective meanings attributed thereto in any of the Securities Laws;
"Material Subsidiaries" means International Uranium U.S. Finance LLC,
International Uranium (Bermuda I) Ltd., International Uranium (Bermuda
II) Ltd., Energy Fuels Exploration Company Ltd., International Uranium
Holdings Corporation, Gurvan Saihan Joint Venture Corp. (effective on
the closing of the Acquisition), International Uranium (U.S.A.)
Corporation, IUC White Mesa LLC, IUC Exploration LLC, IUC Reno Creek
LLC, IUC Sunday Mine LLC, IUC Colorado Plateau LLC, IUC Arizona Strip
LLC, IUC Properties LLC as such companies exist after giving effect to
the Acquisition;
"Offering Memorandum" means the Confidential Offering Memorandum dated
March 19, 1997 of the Company, as from time to time amended or
supplemented;
"Principal Documents" means this Agreement and the Special Warrant
Indenture;
"Purchasers" means purchasers of Special Warrants pursuant to
Subscription Agreements;
"Securities Laws" means, collectively, the applicable securities laws
of each of the Selling Jurisdictions and the respective rules and
regulations made and forms prescribed thereunder together with all
applicable published policy statements, notices, interpretation notes
and blanket orders and rulings of applicable securities regulatory
authorities (including national policy statements of the Canadian
Securities Administrators);
"Selling Jurisdictions" means those jurisdictions in Canada in which
the Special Warrants are offered for sale and sold pursuant to this
Agreement;
"Special Warrants" means the special warrants to be issued by the
Company as contemplated herein;
"Special Warrant Indenture" has the meaning attributed thereto in
paragraph 2.1 hereof;
"Subscription Agreements" means the agreements to subscribe for and
purchase Special Warrants to be entered into between the Purchasers,
the Company and the Agents, in the form or forms agreed to between the
Company and the Agents;
"subsidiary" has the meaning attributed thereto in the Securities Act
(Ontario);
- 4 -
<PAGE> 5
"this Agreement" means the agreement formed by the acceptance by the
Company of the offer made by the Agents in this letter;
"Thornbury" means Thornbury Capital Corporation, a company created
pursuant to the laws of Ontario;
"Underlying Shares" means the Common Shares from time to time issuable
upon the exercise of the Special Warrants; and
"Warrant Agent" means Montreal Trust Company of Canada, as warrant
agent under the Special Warrant Indenture.
2. TERMS OF SPECIAL WARRANTS
2.1 The Special Warrants shall be issued under and governed by a special
warrant indenture (the "Special Warrant Indenture") to be dated as of the
Closing Date and made between the Company and the Warrant Agent as warrant
agent thereunder.
2.2 The Special Warrant Indenture shall contain provisions substantially
to the effect that:
(a) each Special Warrant will entitle the holder thereof, upon the
exercise thereof and without payment of any additional consideration,
to be issued one Common Share, subject to adjustment as provided in
the Special Warrant Indenture;
(b) each holder of Special Warrants will be entitled to exercise its
Special Warrants during the period commencing on the Closing Date and
ending at the Expiry Time;
(c) if the Deemed Exercise Time does not occur prior to the Automatic
Retraction Time, the Special Warrants then outstanding will
automatically and immediately thereafter be retracted by the Warrant
Agent on behalf of the holders thereof for repayment to such holders
out of the Escrow Funds of the aggregate Purchase Price for such
retracted Special Warrants together with payment of an amount equal to
the proportionate share attributed to such Special Warrants of the
interest earned by the Warrant Agent on the Escrow Funds, calculated
from the Closing Date to and including the day immediately preceding
the date of payment to such holder.
(d) any Special Warrant not exercised prior to the Deemed Exercise Time
will be exercised at the Deemed Exercise Time by the Warrant Agent on
behalf of the holder thereof (without any further action on the part
of the holder thereof or the Company) subject to applicable securities
laws; and
- 5 -
<PAGE> 6
(e) upon the satisfaction of the Escrow Release Conditions, the Company
and the Agents will forthwith, and in any event not later than the
first business day thereafter, give written notice thereof to the
Warrant Agent and the Warrant Agent will forthwith give written notice
thereof to the holders of Special Warrants.
2.3 The provisions of the Special Warrant Indenture and the attributes and
characteristics of the Special Warrants provided for therein shall be
substantially as described herein, with such changes thereto as the Agents and
the Company may agree to, and otherwise the Special Warrant Indenture shall be
in such form and contain such terms and provisions (including customary
anti-dilution provisions) as are satisfactory to the Company and the Agents,
acting reasonably.
3. NATURE OF TRANSACTION
3.1 The offering and sale of the Special Warrants to Purchasers is to be
effected in a manner exempt from any prospectus filing or delivery requirements
of all securities laws and policies applicable in the various jurisdictions in
which the Special Warrants are offered for sale and sold, without the necessity
of obtaining any order or ruling of any securities regulatory authority.
Accordingly, each Purchaser shall purchase Special Warrants from the Company,
insofar as the laws of the Province of Ontario are concerned, under prospectus
filing exemptions contained in paragraphs 72(1)(a), (c) or (d) of the
Securities Act (Ontario) and, insofar as the laws of other Selling
Jurisdictions are concerned, under similar exemptions, if available, provided
for in the applicable securities legislation of such Selling Jurisdictions (the
"Exemptions"). The Agents will notify the Company with respect to the identity
and jurisdiction of residence of each Purchaser as soon as practicable (and in
any event not later than the business day prior to the Closing Date) and with a
view to affording sufficient time to allow the Company to secure compliance
with all applicable regulatory requirements in connection with the sale of the
Special Warrants to Purchasers under the Exemptions.
3.2 The Company shall at its expense comply with all applicable regulatory
requirements of the Selling Jurisdictions in connection with the sale of the
Special Warrants to the Purchasers under the Exemptions, including the filing
of any required reports (without, if and to the extent permitted, the
disclosure therein of the names and addresses of the Purchasers) and the
payment of applicable fees relating thereto.
3.3 The Agents shall conduct their activities (and shall require any agent
appointed as contemplated on page 1 hereof to agree with the Agents, for the
benefit of the Company, to conduct its activities) in connection with the
distribution of the Special Warrants in compliance with all applicable laws and
regulatory requirements and, without limiting the foregoing, the Agents
represent and agree (and shall require any such agent to agree with the Agents
for the benefit of the Company) that:
(a) all solicitation, offering and other selling efforts carried out by
the Agents in connection with the distribution of the Special Warrants
have been and will be
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<PAGE> 7
made, and all purchases of Special Warrants will be made, in
accordance with the provisions of the Exemptions in a manner such that
no prospectus need be prepared and filed or delivered by the Company
in connection therewith;
(b) no advertising of the Special Warrants has been or will be made by the
Agents in any media whatsoever (other than by way of "tombstone"
announcement appearing as a matter of record only after the Closing);
(c) a copy of the Offering Memorandum will be delivered to each
prospective purchaser or Purchaser and no delivery has been or will be
made by the Agents to any prospective purchaser or Purchaser of any
other document which, individually or together with any other
document, would constitute an offering memorandum (as such term is
defined in subsection 32(1) of the Regulation to the Securities Act
(Ontario)); and
(d) no solicitation, offering or other selling efforts with respect to the
distribution of the Special Warrants have been or will be made by the
Agents in the United States or to any U.S. Person (as such term is
defined in Regulation S under the United States Securities Act of
1933, as amended) except in accordance with the terms and conditions
of Schedule A attached hereto, which terms and conditions are
incorporated herein by reference;
provided that, for greater certainty, the Company acknowledges that any term
sheet relating to the Special Warrants, annual and quarterly reports, material
change reports and press releases issued by the Company and generally available
research reports, memoranda and other materials concerning the Company,
Thornbury or Energy Fuels prepared by others do not, individually or
collectively, constitute an offering memorandum for purposes of subparagraph
(c) above.
3.4 The Agents shall obtain from each Purchaser a properly completed and
duly executed Subscription Agreement in accordance with the provisions of this
Agreement. In order to facilitate organization for the Closing, the Agents
will use their reasonable best efforts to provide copies of such documents to
the Company's Counsel not less than 24 hours prior to the Closing Time,
provided that no provision of such documents shall constitute a delivery
thereof for purposes of paragraph 6.2 hereof.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
4.1 Subject to paragraph 4.2, the Company represents and warrants to the
Agents and the Purchasers, and acknowledges that the Agents will be relying
upon such representations and warranties in rendering their services hereunder
and the Purchasers will be relying upon such representations and warranties in
purchasing the
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<PAGE> 8
Special Warrants, that, other than as previously disclosed to the Agents and
the Purchasers, whether in the Offering Memorandum or otherwise in writing:
(a) each of the Company and the Material Subsidiaries has been, or prior
to the completion of the Acquisition will be, duly incorporated or
registered and organized and is, or prior to the completion of the
Acquisition will be, validly existing and in good standing under the
laws of its jurisdiction of incorporation or registration, is, or
prior to the completion of the Acquisition will be, duly qualified to
carry on its business as it is presently and proposed to be carried on
and is, or prior to the completion of the Acquisition will be, duly
qualified and authorized to carry on business and is, or prior to the
completion of the Acquisition will be, in good standing as a foreign
corporation in each jurisdiction in which the character of its
properties or the nature of its business makes such qualification or
authorization necessary and has, or prior to the completion of the
Acquisition will have, all requisite power and authority to carry on
its business as it is currently and is proposed to be carried on and
to own, lease and operate its properties and assets, and, in the case
of the Company, to execute and deliver each of the Amalgamation
Agreement and the Principal Documents, to consummate the transactions
contemplated thereby and to duly observe and perform all of its
covenants and obligations therein set forth;
(b) the Company and each of the Material Subsidiaries has conducted and is
conducting, or upon incorporation will conduct, its business in
compliance in all material respects with all applicable licensing,
resource extraction and environmental protection legislation, rules,
regulations and bylaws and other similar legislation and all other
laws, rules, regulations and other lawful requirements of any
governmental or regulatory bodies which are applicable to the Company
and the Material Subsidiaries, and the Company is not aware of any
legislation, regulation, rule or lawful requirements presently in
force or proposed to be brought into force which the Company
anticipates the Company or any of the Material Subsidiaries will be
unable to comply with without materially adversely affecting the
financial condition, results of operations, business, prospects or
viability of Amalgamated IUC and its subsidiaries, taken as a whole,
after giving effect to the completion of the Amalgamation and the
Acquisition;
(c) after giving effect to the completion of the Amalgamation and the
Acquisition, Amalgamated IUC will have no subsidiaries which are
carrying on active business or which hold material assets or have any
material liabilities other than the Material Subsidiaries, Amalgamated
IUC will legally and beneficially own, directly or indirectly, all of
the issued and outstanding shares (except for any director's
qualifying shares or shares held in trust for the benefit of
Amalgamated IUC) in the capital of each of the Material Subsidiaries
in each case as described in the Offering Memorandum, subject to no
security interests, all of such shares will have been duly authorized
and validly issued and will be outstanding as fully paid and
non-assessable shares and no person will have any right, agreement or
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<PAGE> 9
option, present or future, contingent or absolute, or any right
capable of becoming a right, agreement or option, for the purchase
from Amalgamated IUC or any of the Material Subsidiaries of any
interest in any of such shares or for the issue or allotment of any
unissued shares in the capital of any Material Subsidiary or any other
security convertible into or exchangeable or exercisable for any such
shares;
(d) the Offering Memorandum is true, correct and accurate in all material
respects, contains no misrepresentation and was prepared in accordance
with and complies with Securities Laws;
(e) the unaudited consolidated balance sheet and the unaudited
consolidated statement of cash flows of the Company including the
notes thereto, all as set forth in the Offering Memorandum, were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby (after
giving retroactive effect to any accounting changes described in the
notes thereto) and accurately and fairly present the assets,
liabilities (contingent or otherwise) and financial condition and
position and the revenue, losses, results of operations and changes in
financial position of the Company on a consolidated basis as at the
dates thereof and during the periods covered thereby;
(f) the pro forma condensed consolidated balance sheet of Amalgamated IUC,
including the notes thereto, all as set forth in the Offering
Memorandum, was prepared in accordance with generally accepted
accounting principles and accurately and fairly presents the assets,
liabilities (contingent or otherwise) and financial condition and
position of Amalgamated IUC on a consolidated basis as at the date
thereof after giving effect to the transactions and assumptions
described in the notes thereto;
(g) the authorized capital of the Company consists of an unlimited number
of Common Shares, of which 26,500,000 are issued and outstanding on
the date hereof, and, after giving effect to the completion of the
Amalgamation (assuming the cancellation of 57,639 common shares of
Thornbury, the exercise of 250,000 options to acquire common shares of
Thornbury and that all of the Special Warrants are issued and
exercised prior to the Amalgamation), the authorized capital of
Amalgamated IUC will consist of an unlimited number of common shares,
of which 67,943,066 will be issued and outstanding, as fully paid and
non-assessable shares and, except with respect to stock options that
when granted, will entitle the holders thereof to purchase up to
2,540,000 Common Shares from the Company and currently outstanding
stock options to purchase 250,000 common shares of Thornbury, in each
case on the terms set forth in the Offering Memorandum, and except
with respect to the securities of the Company
- 9 -
<PAGE> 10
to be issued as contemplated in this Agreement, no person has or,
after giving effect to the completion of the Amalgamation or the
Acquisition, will have any right, agreement or option, present or
future, contingent or absolute, or any right capable of becoming a
right, agreement or option, for the issue or allotment of any unissued
shares in the capital of the Company, the Material Subsidiaries or
Amalgamated IUC or any other security convertible into or exchangeable
or exercisable for any such shares or to require the Company to
purchase, redeem or otherwise acquire any of the issued and
outstanding Common Shares;
(h) neither the Company nor any of the Material Subsidiaries is in breach
or violation of or default under (and no event has occurred and is
continuing which with the giving of notice or lapse of time or both
would constitute an event of default under), and neither the execution
and delivery by the Company or any of the Material Subsidiaries (as
applicable) of any of the Principal Documents, the Amalgamation
Agreement or the Acquisition Agreement, nor the consummation of the
transactions contemplated thereby nor the due observance and
performance by the Company of any of its covenants or obligations
contained therein conflicts or will conflict with, results or will
result in a breach or violation of, or constitutes or will constitute
a default (or any event which with the giving of notice or lapse of
time or both would constitute an event of default) under, any of the
terms or provisions of the constating documents of the Company or any
of the Material Subsidiaries or of any resolutions of the directors or
shareholders of the Company or any of the Material Subsidiaries, or of
any of the terms or provisions of any agreement, instrument or permit
to which the Company or any of the Material Subsidiaries is a party or
by which the Company or any of the Material Subsidiaries is bound or
to which any of their respective properties or assets are subject or
of any judgment, decree, order, law, rule or regulation by which the
Company or any of the Material Subsidiaries is bound or to which any
of their respective properties or assets are subject, the effect of
any of which conflicts, breaches, violations or defaults, singularly
or in the aggregate, might materially adversely affect the financial
condition, results of operations, business, prospects or viability of
Amalgamated IUC and its subsidiaries, taken as a whole, after giving
effect to the completion of the Amalgamation and the Acquisition, or
would impair the ability of the Company or the Material Subsidiaries,
as the case may be, to consummate the Amalgamation or the Acquisition
or the transactions contemplated hereby or thereby or to duly observe
and perform any of its covenants or obligations contained in the
Amalgamation Agreement, the Acquisition Agreement or the Principal
Documents;
(i) each of the Amalgamation Agreement and the Acquisition Agreement has
been or, prior to the completion of the Amalgamation and the
Acquisition, will have been duly authorized, executed and delivered
by, and at the time of such completion will be a legal, valid and
binding obligation of, and will be enforceable in accordance with its
terms against, the Company and the Material Subsidiaries to the extent
a party thereto, each of the Amalgamation Agreement and the
Acquisition Agreement, by its terms and under all applicable laws,
rules and
- 10 -
<PAGE> 11
regulations, will be effective at the time of such completion and none
of the Amalgamation Agreement or the Acquisition Agreement will have
been terminated or otherwise nullified, each of the representations
and warranties of the Company and the Material Subsidiaries are or,
prior to the time of such completion will be, true, correct and
accurate in all material respects, neither the Company nor the
Material Subsidiaries, to the best of the knowledge of the Company,
any of the other parties to the Acquisition Agreement is or, prior to
the time of such completion, will be in any material respect in breach
or violation of or default under (and no event has or will have
occurred and is or will be continuing which with the giving of notice
or lapse of time or both would constituted an event of default under)
any of the terms or provisions of the Amalgamation Agreement or the
Acquisition Agreement, each of the conditions, covenants and
obligations contained in the Amalgamation Agreement or the Acquisition
Agreement required to be satisfied, observed or performed at or prior
to the time of such completion have been or will have been satisfied,
observed or performed at or prior to such time by the Company and the
Material Subsidiaries as applicable and all consents of third parties
and approvals, consents and orders of and filings with governmental
authorities and regulatory bodies required to be obtained or made in
order to consummate the Amalgamation or the Acquisition will have been
obtained or made prior to and will be effective at the time of such
completion;
(j) no litigation, administrative proceeding, arbitration or other
proceeding before or of any court, tribunal, arbitrator, governmental
authority or regulatory body or dispute with any governmental
authority or regulatory body is presently in process, pending or, to
the knowledge of the Company, threatened against the Company or any of
the Material Subsidiaries which, if determined adversely to the
Company or any of the Material Subsidiaries, might have a material
adverse effect on the financial condition, results of operations,
business, prospects or viability of Amalgamated IUC and its
subsidiaries, taken as a whole, after giving effect to the completion
of the Amalgamation and the Acquisition, or which would impair the
ability of the Company to consummate the Amalgamation or the
Acquisition or the transactions contemplated hereby or to duly observe
and perform any of its covenants or obligations contained in the
Amalgamation Agreement, the Acquisition Agreement or the Principal
Documents;
(k) there has not occurred any adverse material change or any adverse
material fact, financial or otherwise, in the assets (including
information or data relating to the estimated or book value of
assets), liabilities (contingent or otherwise), business, affairs,
ownership, management, operations, financial condition, capital,
prospects or viability of the Company or the Material Subsidiaries,
taken as a whole, since December 31, 1996 which is not described in
the Offering Memorandum; and
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<PAGE> 12
(l) since December 31, 1996, except as described in the Offering
Memorandum:
(i) there has not been any material change in the assets,
liabilities (contingent or otherwise), business, operations,
financial condition, prospects or viability of the Company and
its Material Subsidiaries taken as a whole;
(ii) there has not been any material change in the capital or
indebtedness of the Company and its Material Subsidiaries
taken as a whole; and neither the Company or any of its
Material Subsidiaries has received or been informed that it
will receive any demand for repayment of any such
indebtedness;
(iii) there has not been any adverse material change in the
financial position of the Company and its Material
Subsidiaries on a consolidated basis, and there has not been
and there is currently not contemplated any material
revaluation of any assets or any cancellation of any debt or
waiver or release of any rights or claims held by or owed to
the Company and its Material Subsidiaries taken as a whole
(except for cancellations, waivers and releases in the
ordinary course of business which in the aggregate are not
material) or any material increase in the age of outstanding
accounts receivable, the allowance for doubtful accounts or
the bad debt losses of the Company and its Material
Subsidiaries taken as a whole;
(iv) there has not been any termination or amendment of, or any
failure in any material respect to observe or perform any
covenants or obligations under, any material contract, lease
or agreement to which the Company or any of its Material
Subsidiaries is a party or by which the Company or any of its
Material Subsidiaries is bound; and
(v) each of the Company and its Material Subsidiaries has carried
on its business and operated and maintained its assets in the
ordinary course of business and consistent with past practice,
and other than as contemplated in the Offering Memorandum (A)
has not entered into and does not currently contemplate
entering into any material transaction not in the ordinary
course of business and (B) has not made any material capital
or exploration and development expenditures or commitments for
material capital or exploration and development expenditures.
4.2 It is acknowledged and agreed that one or more of the Material
Subsidiaries may not be incorporated on the basis that management of the
Company is of the view that such company is not required or necessary.
4.3 All of the representations and warranties made by Energy Fuels in the
Acquisition Agreement are hereby incorporated by reference as if made by the
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<PAGE> 13
Company to the Agents and the Purchasers, provided that the giving of all such
representations and warranties by the Company is subject to any and all of the
restrictions, limitations, defences and set-offs contained in the Acquisition
Agreement, including, without limiting the generality of the foregoing, any and
all restrictions pertaining to the survival thereof and the indemnities in
relation thereto and the maximum amount payable by the vendors for breaches of
representations and warranties under the Acquisition Agreement.
5. CONDITIONS TO PURCHASE OBLIGATIONS
5.1 The following are conditions to the obligations of the Agents and the
Purchasers to complete the transactions contemplated hereby, which conditions
the Company covenants to satisfy or fulfill at or prior to the Closing Time and
which conditions may be waived in writing in whole or in part by the Agents on
behalf of the Purchasers:
(a) all actions required to be taken by or on behalf of the Company,
including the passing of all requisite resolutions of directors of the
Company, shall have been taken so as to validly create, issue and sell
the Special Warrants and the Underlying Shares;
(b) the Company shall have made all necessary filings and obtained all
necessary approvals, consents and acceptances of appropriate
regulatory authorities required to be made or obtained prior to the
Closing Time in order to permit the Company to issue and sell the
Special Warrants to the Purchasers as contemplated hereby;
(c) the Special Warrant Indenture shall have been entered into by and be
in effect between the Company and the Warrant Agent;
(d) the Company shall have duly accepted each Subscription Agreement
submitted to it by the Agents in accordance with this Agreement other
than those Subscription Agreements which the Company elects to reject,
acting reasonably;
(e) members of the Lundin family shall have entered into escrow agreements
in form and substance satisfactory to the Agents with respect to
22,750,000 common shares of Amalgamated IUC to be held by such persons
upon completion of the Amalgamation (the "Restricted Shares"), which
agreements shall provide, among other things, that such Restricted
Shares will not be sold, assigned, transferred, hypothecated or
otherwise dealt with by the holders thereof for a period of 90 days
from the Deemed Exercise Time without the consent of the Agents, such
consent not to be unreasonably withheld;
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<PAGE> 14
(f) the Company shall have caused favourable legal opinions, addressed to
the Agents, the Purchasers and the Agents' Counsel and dated the
Closing Date, and in form and content reasonably acceptable to the
Agents and the Agents' Counsel, to be delivered to the Agents by the
Company's Counsel with respect to such matters relating to the Company
and its subsidiaries, International Uranium Holdings Corporation and
International Uranium (U.S.A.) Corporation and the transactions
contemplated hereby as the Agents may reasonably request;
(g) the Agents shall have received a favourable legal opinion, addressed
to the Agents and the Purchasers and dated the Closing Date, from the
Agents' Counsel with respect to such matters as the Agents may
reasonably request;
(h) the Company shall have delivered to the Agents a certificate signed on
behalf of the Company by the President and the Secretary of the
Company, or by such other officers of the Company as are acceptable to
the Agents, addressed to the Agents and the Purchasers and dated the
Closing Date, and in a form reasonably satisfactory to the Agents and
the Agents' Counsel, certifying that, to the best of the knowledge,
information and belief of such officers, having made due inquiry:
(i) no order ceasing or suspending trading in any securities of
the Company or prohibiting the sale of the Special Warrants or
the issuance of the Underlying Shares is in effect (except for
any such order based solely upon the activities or alleged
activities of the Agents and not of the Company) and, to the
knowledge of such officers, no proceedings for such purpose
are pending or threatened;
(ii) each of the representations and warranties contained in
paragraph 4.1 hereof is true, correct and accurate in all
material respects and contains no misrepresentation as of the
Closing Time as if such representations and warranties had
been made at and as of the Closing Time; and
(iii) the Company has in all material respects complied with each of
the covenants and satisfied each of the terms and conditions
of this Agreement on its part to be complied with or satisfied
at or prior to the Closing Time;
(i) each of the representations and warranties contained in paragraph 4.1
hereof, and the statements in any officer's certificate delivered
pursuant hereto or in connection herewith, shall be, and the Agents
shall be reasonably satisfied (based on its due diligence
investigations and examinations) that each of such representations,
warranties and statements is, true, correct and accurate in all
material respects and contains no misrepresentation as of the Closing
Time as if such representations, warranties and statements had been
made at and as of the Closing Time.
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<PAGE> 15
5.2 The Company agrees that copies of the legal opinions and certificates
referred to in paragraph 5.1 hereof addressed to the Purchasers and delivered
to the Agents at the Closing may also be delivered to any persons to whom the
Agents, if it purchases any of the Special Warrants, may resell any of such
Special Warrants within 30 days after the Closing Date.
6. CLOSING
6.1 The closing of the transactions contemplated hereby shall be completed
at the offices of the Company's Counsel in Toronto at the Closing Time.
6.2 At the Closing, the Agents shall deliver or cause to be delivered to
the Company's counsel, Cassels Brock & Blackwell, a certified cheque or bank
draft made payable to Cassels Brock & Blackwell, in trust on the Closing Date
in an amount equal to the aggregate proceeds of issue of the Special Warrants
sold by the Company to the Purchasers at the Closing and the Agents shall also
deliver to the Company properly completed and duly executed original or
facsimile copies of the Subscription Agreements relating to the Special
Warrants issued and sold to Purchasers at the Closing, and the Company shall
deliver or cause to be delivered to or upon the direction of the Agents Special
Warrant certificates evidencing all of such Special Warrants registered in the
name of the Purchasers and the Company shall also deliver or cause to be
delivered to the Agents the requisite certificates, opinions and other
documents as contemplated hereby.
6.3 At the Closing, the Company shall cause Cassels Brock & Blackwell, for
and on behalf of the Company, to deliver or cause to be delivered to the
Warrant Agent a certified cheque or bank draft made payable to the Warrant
Agent on the Closing Date in an amount equal to the Escrow Funds. Upon delivery
of the Escrow Funds to the Warrant Agent, the Company shall cause Cassels Brock
& Blackwell, for and on behalf of the Company, in consideration of the Agents'
services hereunder, to deliver or cause to be delivered to the Agents a
certified cheque or a bank draft made payable to the Agents in an amount (the
"Commission") equal to 6% of the aggregate Purchase Price for the Special
Warrants issued and sold at the Closing other than in respect of 4,100,000
Special Warrants to be purchased by Purchasers introduced to the Agents by
members of the Lundin family. For greater certainty, it is acknowledged and
agreed that no Commission shall be payable in respect of the 4,100,000 Special
Warrants to be sold to Purchasers introduced to the Agents by members of the
Lundin family.
6.4 The Special Warrant Indenture shall contain provisions to the effect
that the Escrow Funds paid to the Warrant Agent in accordance with paragraph
6.2 hereof will be deposited with and held in escrow by the Warrant Agent and
invested by it in accordance with the terms of the Special Warrant Indenture
and that the Escrow Funds
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<PAGE> 16
and interest earned thereon (i) at the Deemed Exercise Time, will be released
from escrow and paid by the Warrant Agent to the Company as soon as practicable
after the Company and the Agent deliver a written certificate to the Warrant
Agent to the effect that the Escrow Release Conditions have been satisfied or
(ii) at the Automatic Retraction Time, will be applied by the Warrant Agent to
repay to holders of Special Warrants upon the automatic retraction of such
Special Warrants by the Warrant Agent on behalf of such holders as contemplated
in subparagraph 2.2(c) the aggregate Purchase Price for the Special Warrants
and to pay to such holder the proportionate share attributed to such Special
Warrants of the interest earned by the Warrant Agent on the Escrow Funds
calculated from the Closing Date to and including the day immediately preceding
the date of payment to such holder.
6.5 The Company will make all necessary arrangements for the delivery of
the Special Warrant certificates referred to in paragraph 6.2 hereof at the
Closing. It is understood and agreed that no charge will be made by the
Warrant Agent (other than to the Company) in respect of any transfer, exchange
or registration of any of the Special Warrants if carried out within a period
of 30 days following the Closing Date.
7. TERMINATION RIGHTS
7.1 Each of the Agents shall be entitled, at its option, to terminate and
cancel, without any liability on the Agents' part, its obligations under this
Agreement, and on behalf of the Purchasers arranged for by the Agents, to
terminate and cancel, without any liability on the Purchasers' part, their
respective obligations to purchase the Special Warrants, by giving written
notice to the Company at any time prior to the Closing Time, if at any time
prior to the Closing:
(a) there shall have occurred any adverse material change or adverse
material fact in relation to the Company and its Material
Subsidiaries, taken as a whole (taking into account the fact that the
Company intends to complete the Amalgamation and the Acquisition) or a
development that could result in an adverse material change or adverse
material fact in relation to the Company and its Material
Subsidiaries, taken as a whole (taking into account the fact that the
Company intends to complete the Amalgamation and the Acquisition); or
(b) there shall have occurred any change in the applicable laws or
regulations of Canada or any province thereof or the United States or
any state thereof, or any inquiry, investigation or other proceeding
is made or any order is issued under or pursuant to any such laws or
regulations or under or pursuant to the rules of any stock exchange,
or any such change, inquiry, investigation or other proceeding or
order is announced, commenced or threatened, and is material in
relation to the Company and its Material Subsidiaries, taken as a
whole (taking into account the fact that the Company intends to
complete the Amalgamation and the Acquisition) or any of its
securities (except for any inquiry, investigation or other proceeding
or order based upon activities of the Agents and not upon activities
of the Company);
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<PAGE> 17
which, in the opinion of any of the Agents, acting reasonably, operates or
would operate to prevent or restrict trading in or the distribution of the
Special Warrants or the Underlying Shares or adversely affects or might
reasonably be expected to adversely affect the investment quality or
marketability of the Special Warrants or the Underlying Shares or the ability
of Amalgamated IUC and its subsidiaries, after giving effect to the completion
of the Amalgamation and the Acquisition, to carry on their business as it is
currently and is proposed to be carried on;
(c) there should develop, occur or come into effect or existence any
event, action, state, condition or major financial occurrence of
national or international consequence or any law or regulation, which,
in the opinion of any of the Agents, acting reasonably, seriously
adversely affects or involves, or will seriously adversely affect or
involve, the financial markets or the business, operations, affairs,
prospects or viability of the Company and its Material Subsidiaries,
taken as a whole (taking into account the fact that the Company
intends to complete the Amalgamation and the Acquisition);
(d) a cease trading order is made by the Ontario Securities Commission or
any other competent authority by reason of the fault of the Company or
its directors, officers or agents and such cease trading order is not
rescinded within 48 hours of the Closing Date;
(e) the Special Warrants cannot, in the reasonable opinion of any of the
Agents, be marketed or placed in a satisfactory manner due to the
state of the financial markets; or
(f) any of the Agents are not reasonably satisfied with the results of any
due diligence investigations and examinations with respect to the
Company, Thornbury or Energy Fuels or their respective subsidiaries
conducted by or on behalf of the Agents.
7.2 The rights of termination contained in paragraph 7.1 hereof are in
addition to any other rights or remedies the Agents or the Purchasers may have
in respect of any default, act or failure to act or non-compliance by the
Company in respect of any of the matters contemplated by this Agreement.
7.3 If the obligations of the Agents and the Purchasers hereunder are
terminated pursuant to paragraph 7.1 hereof, the respective obligations of the
parties hereunder will terminate and none of the Agents, the Purchasers or
(subject to the rights or remedies referred to in paragraph 7.2 hereof) the
Company will have any liability to the other, except that the Company's
obligations under paragraphs 9.1 and 10.1 to 10.5 shall survive and continue.
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<PAGE> 18
8. ADDITIONAL COVENANTS
8.1 The Company covenants with the Agents as follows:
(a) prior to the completion of the Amalgamation and the Acquisition, the
Company will allow the Agents to conduct all due diligence
investigations and examinations which the Agents may require in order
to satisfy themselves with respect thereto; and
(b) from and after the date hereof until the later of completion of the
distribution of the Underlying Shares and the completion of the
Amalgamation and the Acquisition, the Company will promptly notify the
Agents (which notification will be confirmed in writing if reasonably
requested) of any material change or any change in a material fact, in
either case whether actual, anticipated, contemplated or threatened,
or any event or development involving a prospective material change,
in any or all of the business, affairs, ownership, management,
operations, assets (including information or data relating to the
estimated or book value of assets), liabilities (contingent or
otherwise), financial condition, capital, prospects or viability of
the Company and its Material Subsidiaries, taken as a whole (taking
into account the fact that the Company intends to complete the
Amalgamation and the Acquisition) or of any change which is of such a
nature as to result in, or which could result in, a misrepresentation
in the Offering Memorandum. The Company will promptly, and in any
event within any applicable time limitation, comply with all filing
and other requirements under the Securities Laws applicable to the
Company as a result of any such change, event or development, provided
that the Company shall not file or distribute any amendment to the
Offering Memorandum without first obtaining from the Agents their
approval as to the form and content thereof, such approval not to be
unreasonably withheld. In addition to the foregoing, the Company will
in good faith discuss with the Agents any event or change in
circumstances which is of such a nature that there is or ought to be
consideration given by the Company as to whether notice of such event
or change need be given to the Agents pursuant to this subparagraph.
8.2 The Company covenants with the Agents and the Purchasers as follows:
(a) the Company will apply for, and will use its reasonable best efforts
to obtain, conditional approval of the listing of the common shares of
Amalgamated IUC on The Toronto Stock Exchange;
(b) from and after the date hereof until the completion of the
distribution of the Underlying Shares, the Company will not, and will
not permit any of the Material Subsidiaries to, agree to any material
supplement or amendment to the Amalgamation Agreement or the
Acquisition Agreement that results in or could
- 18 -
<PAGE> 19
result in a misrepresentation in the Offering Memorandum without in
good faith consulting with the Agents in respect of any such
supplement or amendment;
(c) to the extent that the funds deposited with and held in escrow by the
Warrant Agent pursuant to paragraph 6.2 hereof are not sufficient to
enable the Warrant Agent to make any required payment to the holders
of Special Warrants upon the automatic retraction of such Special
Warrants, the Company will, within one business day of receipt of
notice from the Warrant Agent specifying such deficiency, provide the
Warrant Agent with sufficient funds to enable the Warrant Agent to
make such payment in full;
(d) the Company will apply the proceeds from the sale of the Special
Warrants substantially in the manner set forth in the Offering
Memorandum in connection with the closing of the Acquisition, and as
to the balance of such proceeds, the Offering Memorandum provides an
accurate statement of management's current intention (it being
acknowledged that such intention may change depending on a number of
factors that may affect the Company's business including, without
limitation, the price of uranium); and
(e) from the date hereof until six months after the Closing Date, the
Company shall not, without the prior written consent of the Agents
(such consent not to be unreasonably withheld), directly or
indirectly, allot, issue, offer, sell or grant any option or other
right to purchase, or agree, become bound or announce any intention to
allot, issue, offer, sell or grant any option or other right to
purchase, any Common Shares (or any financial instruments or other
securities convertible into or exchangeable or exercisable for Common
Shares) other than as contemplated hereby or in connection with the
Company's director, officer, employee and consultant stock option
plans or in connection with existing agreements regarding interests in
mineral properties.
For greater certainty, each of the foregoing covenants shall apply to
Amalgamated IUC and with respect to the common shares of Amalgamated IUC after
the Amalgamation Date.
9. PAYMENT OF EXPENSES
9.1 Subject to paragraph 9.2, the Company shall pay or cause to be paid
all expenses of or incidental to the issuance and sale of the Special Warrants
and the distribution of the Underlying Shares and all other matters in
connection with the transactions contemplated hereby and the Amalgamation and
the Acquisition Transactions, including, without limitation, the reasonable
out-of-pocket expenses from time to time incurred by or on behalf of the Agents
(including the reasonable fees and disbursements (and taxes thereon) of the
Agents' Counsel and any local counsel
- 19 -
<PAGE> 20
retained by the Agents' counsel to assist it in due diligence concerning Energy
Fuels up to a maximum of $100,000 plus applicable Goods and Services taxes).
9.2 In the event the Closing occurs but the Escrow Release Conditions are
not satisfied prior to the Automatic Retraction Time, the Agents shall be
responsible for payment of their out-of-pocket expenses (including fees and
disbursements of Agents' Counsel and any local counsel retained by it to assist
in due diligence concerning Energy Fuels).
10. INDEMNITY
10.1 The Company, which for the purposes of this section 10, shall be
deemed to include Amalgamated IUC, shall indemnify and save the Agents and each
of the Agents' shareholders, directors, officers, employees and agents
(collectively, in this section 10, the "Indemnified Persons"), harmless against
and from all liabilities, claims, demands, losses (other than losses of profit
in connection with the distribution of the Special Warrants), costs, damages
and expenses to which any of the Indemnified Persons may be subject or which
any of the Indemnified Persons may suffer or incur, whether under the
provisions of any statute or otherwise, in any way caused by, or arising
directly or indirectly from or in consequence of:
(a) any misrepresentation or alleged misrepresentation (except a
misrepresentation relating solely to the Agents) contained in the
Offering Memorandum or any document filed on or before the
Amalgamation Date with the Ontario Securities Commission or any other
competent authority or contained in this Agreement or any certificate
or other document delivered to the Agents or the Purchasers hereunder
(collectively, in this section 10, the "Documents");
(b) any prohibition or restriction of trading in the securities of the
Company or Amalgamated IUC or any prohibition or restriction affecting
the distribution of the Special Warrants or the Underlying Shares or
the common shares of Amalgamated IUC imposed by the Ontario Securities
Commission or any other competent authority if such prohibition or
restriction is based on any misrepresentation or alleged
misrepresentation (except a misrepresentation relating solely to the
Agents) in the Documents;
(c) any order made or any inquiry, investigation (whether formal or
informal) or other proceeding commenced or threatened by the Ontario
Securities Commission or any other competent authority relating to the
Company or any of the Material Subsidiaries or to Amalgamated IUC, or
any of their respective directors or officers or relating to or
affecting the distribution of the Special Warrants, the Underlying
Shares or the common shares of Amalgamated IUC other than any such
order, enquiry, investigation or other proceeding based solely upon
the activities or alleged activities of the Agents; or
- 20 -
<PAGE> 21
(d) any breach of, default under or non-compliance by the Company or any
of the Material Subsidiaries or by Amalgamated IUC with any
representation, warranty, covenant, term or condition of the
Amalgamation Agreement or the Acquisition Agreement or the Principal
Documents or of any agreement or instrument relating to the
transactions contemplated thereby or with any requirement of
applicable securities legislation.
10.2 If any claim contemplated by paragraph 10.1 hereof shall be asserted
against any of the Indemnified Persons in respect of which indemnification is
or might reasonably be considered to be provided for in such paragraph, such
Indemnified Person shall notify the Company as soon as possible of the nature
of such claim (provided that any failure to so notify shall not affect the
Company's liability hereunder) and the Company shall be entitled (but not
required) to assume the defence of any suit brought to enforce such claim,
provided however, that the defence shall be through legal counsel selected by
the Company and reasonably acceptable to the Indemnified Person and that no
settlement may be made by the Company or the Indemnified Person without the
prior written consent of the other, such consent not to be unreasonably
withheld. The Indemnified Person shall have the right to retain its own
counsel in any proceeding relating to a claim contemplated by paragraph 10.1
hereof if:
(a) the Indemnified Person has been advised by counsel that there may be
legal defences available to the Indemnified Person which are different
from or additional to defences available to the Company (in which case
the Company shall not have the right to assume the defence of such
proceedings on the Indemnified Person's behalf);
(b) the Company shall not have taken the defence of such proceedings and
employed counsel within ten days after notice of commencement of such
proceedings; or
(c) the employment of such counsel has been authorized by the Company in
connection with the defence of such proceedings;
and, in any such event, the reasonable fees and expenses of such Indemnified
Person's counsel shall be paid by the Company.
10.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Agreement is
due in accordance with its terms but is, for any reason, held by a court to be
unavailable from the Company, each of the Company and the Indemnified Person
seeking indemnification shall contribute to the aggregate liabilities, claims,
demands, losses (other than losses of profit in connection with the
distribution of the Special Warrants), costs, damages and expenses (including
- 21 -
<PAGE> 22
legal or other expenses reasonably incurred in connection with investigation or
defence of the same) to which they may be subject or which they may suffer or
incur:
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and by the Indemnified Person
seeking indemnity on the other hand, from the sale of the Special
Warrants; or
(b) if the allocation provided by subparagraph (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in subparagraph (a) above but
also to reflect the relative fault of the Indemnified Person seeking
indemnity, on the one hand, and the Company and other applicable
parties, on the other hand, in connection with the statements or
omissions or other matters which resulted in such liabilities, claims,
demands, losses, costs, damages or expenses as well as any other
relevant equitable considerations.
The relevant benefits received by the Company, on the one hand, and the Agents,
on the other hand, shall be deemed to be in the same proportion that the total
proceeds of the sale of the Special Warrants received by the Company (net of
the Commission but before deducting expenses) bear to the Commission received
by the Agents. In the case of liability arising out of any of the Documents,
the relative fault of the Company, on the one hand, and of the Agents, on the
other hand, shall be determined by reference, among other things, to whether
the untrue or alleged untrue statement or omission or other matter relates to
information supplied or which ought to have been supplied by the Company and
other applicable parties or the Agents and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, omission or other matter. The Company agrees that it would not be
just and equitable if contributions pursuant to this Agreement were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The rights to
contribution provided in this paragraph 10.3 shall be in addition to, and
without prejudice to, any other right to contribution which the Indemnified
Persons may have.
10.4 The Company will not make any claim for, and hereby irrevocably waives
any right by statute or common law to, contribution against the Agents or any
of the other Indemnified Persons with respect to any matter in respect of which
the Company has agreed to indemnify the Indemnified Persons hereunder.
10.5 The rights to indemnity and contribution herein provided shall be in
addition to and not in derogation of any other right to indemnity or
contribution which any Indemnified Person may have by statute or otherwise at
law. It is the intention of the Company to constitute the Agents trustee for
its shareholders, directors, officers, employees and agents of the covenants of
the Company under paragraphs 10.1 to 10.4 hereof with respect to such persons
and the Agents agree to accept such trust and to hold and enforce such
covenants on behalf of such persons.
- 22 -
<PAGE> 23
11. MISCELLANEOUS
11.1 Any notice to be given hereunder shall be in writing and shall be
given by facsimile (if receipt of any such facsimile notice is confirmed) or by
personal delivery to an officer of the party to whom notice is given and shall,
in the case of notice to the Company and Amalgamated IUC, be addressed and sent
to:
International Uranium Corporation
1320 - 885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
Attention: Lukas Lundin
Facsimile No.: (604) 689-4250
with a copy to:
Cassels Brock & Blackwell
Suite 2100 - Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3C2
Attention: John H. Craig
Facsimile No.: (416) 360-8877
and in the case of notice to the Agents, be addressed and sent to:
Salman Partners Inc.
Suite 2230
885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
Attention: Alan Herrington
Facsimile No.: (604) 685-2471
CIBC Wood Gundy Securities Inc.
BCE Place, P.O. Box 500
161 Bay Street, 4th Floor
Toronto, Ontario
M5J 2S8
Attention: David Williams
Facsimile No.: (416) 594-8848
- 23 -
<PAGE> 24
Griffiths McBurney & Partners
145 King Street
Suite 1100
Toronto, Ontario
M5H 1J8
Attention: Leon Raubenheimer
Facsimile No.: (416) 943-6160
Newcrest Capital Inc.
Suite 1905
Commerce Court West
P.O. Box 403
Toronto, Ontario
M5L 1G3
Attention: Peter Grosskopf
Facsimile No.: (416) 863-7360
First Marathon Securities Limited
Commerce Place
400 Burrard Street
Suite 2000
Vancouver, British Columbia
V6C 3A6
Attention: Keith Peck
Facsimile No.: (604) 682-2132
with a copy to:
McCarthy Ttrault
Barristers and Solicitors
P.O. Box 10424, Pacific Centre
1300 - 777 Dunsmuir Street
Vancouver, British Columbia
V7Y 1K2
Attention: George W. Holloway
Facsimile No.: (604) 643-7900
and any such notice given in accordance with the foregoing will be deemed to
have been received on the date of facsimile transmission or the date of
delivery, as the case may be. The Company, Amalgamated IUC and the Agents may
change their respective addresses for notice by notice given in the manner
aforesaid.
11.2 The Company represents and warrants to the Agents that no fees or
commissions are or will be payable by the Company to any person (other than the
Agents and other than as described in the Offering Memorandum) in connection
with
- 24 -
<PAGE> 25
the issue and sale of the Special Warrants or the transactions contemplated
hereby and the Company agrees to indemnify and hold harmless the Agents against
any claims, demands and losses in respect of any such fees or commissions.
11.3 All terms and conditions of this Agreement shall be construed as
conditions, and any material breach or failure to comply with any such terms or
conditions shall entitle the Agents, without limitation of any other remedies
of the Agents, to terminate the Agents' obligations hereunder and the
Purchasers' obligations to purchase the Special Warrants by giving written
notice to that effect to the Company prior to the Closing Time notwithstanding
any act taken by the Agents including, without limitation, any act of the
Agents related to the offering or continued offering of the Special Warrants
and the Agents shall only be considered to have waived or be estopped from
relying upon any of its rights hereunder if such waiver or estoppel is in
writing and specifically waives or estops such exercise of reliance.
11.4 The representations, warranties, covenants, obligations and agreements
of the Company contained herein or delivered pursuant hereto shall survive the
Closing and the completion of the Amalgamation and the purchase by the
Purchasers of the Special Warrants and, other than the indemnity contemplated
by Section 10 which shall continue indefinitely, shall continue in full force
and effect after the Amalgamation Date and notwithstanding any subsequent
exercise or disposition by the Purchasers of the Special Warrants or the
Underlying Shares for a period of one year after the Closing Date, and the
Agents and the Purchasers shall be entitled to rely on the representations and
warranties of the Company contained herein or delivered pursuant hereto
notwithstanding any investigation which the Agents or the Purchasers may
undertake or which may be undertaken on the their behalf.
11.5 Any reference herein to "this Agreement" and to the words "herein",
"hereof", "hereunder" and other words of similar import refer to this Agreement
as a whole.
11.6 This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
11.7 Time shall be of the essence hereof.
11.8 This Agreement shall be effective as of and from March 14, 1997
notwithstanding the actual date or dates this letter was signed and delivered
by the Agents and accepted by the Company.
11.9 This Agreement may be executed in any number of counterparts, each of
which when delivered, either in original or facsimile form, shall be deemed to
be an original and all of which together shall constitute one and the same
document.
- 25 -
<PAGE> 26
If the foregoing is in accordance with your understanding and agreed
to by you, please signify your acceptance on the accompanying counterparts of
this letter and return the same to us whereupon this letter as so accepted will
constitute an agreement between the Company and the Agents in accordance with
the foregoing.
Yours very truly,
SALMAN PARTNERS INC.
By:
------------------------------
CIBC WOOD GUNDY SECURITIES INC.
By:
------------------------------
GRIFFITHS MCBURNEY & PARTNERS
By:
------------------------------
NEWCREST CAPITAL INC.
By:
------------------------------
FIRST MARATHON SECURITIES LIMITED
By:
------------------------------
The foregoing is accepted and agreed to as of March 14, 1997
INTERNATIONAL URANIUM CORPORATION
By:
------------------------------
- 26 -
<PAGE> 27
SCHEDULE A
UNITED STATES OFFERS AND SALES
As used in this Schedule A, the following terms shall have the meanings
indicated:
(a) "Accredited Investor" means an institutional accredited investor as
that term is defined in Rule 501(a) (1), (2), (3) or (7) of Regulation
D;
(b) "Directed Selling Efforts" means directed selling efforts as that term
is defined in Regulation S. Without limiting the foregoing, but for
greater clarity in this Schedule, it means, subject to the exclusions
from the definition of directed selling efforts contained in Regulation
S, any activity undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the
United States for any of the Special Warrants or Underlying Shares, and
includes the placement of any advertisement in a publication with a
general circulation in the United States that refers to the offering of
the Special Warrants or any of the Underlying Shares;
(c) "Foreign Issuer" means a foreign issuer as that term is defined in
Regulation S;
(d) "Regulation D" means Regulation D adopted by the SEC under the U.S.
Securities Act;
(e) "Regulation S" means Regulation S adopted by the SEC under the U.S.
Securities Act;
(f) "SEC" means the United States Securities and Exchange Commission;
(g) "Substantial U.S. Market Interest" means substantial U.S. market
interest as that term is defined in Regulation S;
(h) "United States" means the United States of America, its territories and
possessions, any state of the United States, and the District of
Columbia;
(i) "U.S. Person" means a U.S. person as that term is defined in Regulation
S; and
(j) "U.S. Securities Act" means the United States Securities Act of 1933,
as amended.
All other capitalized terms used but not otherwise defined in this
Schedule A shall have the meanings assigned to them in the Agency Agreement to
which this Schedule A is attached.
- 27 -
<PAGE> 28
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE AGENTS
The Agents severally but not jointly acknowledge that the Special
Warrants and Underlying Shares have not been and will not be registered under
the U.S. Securities Act and may not be offered or sold to any person within the
United States except in accordance with Regulation S or pursuant to an exemption
from the registration requirements of the U.S. Securities Act. Accordingly, the
Agents severally but not jointly represent, warrant and covenant to the Company
that:
1. The Agent has offered and sold, and will offer and sell Special
Warrants only in accordance with Rule 903 of Regulation S or as
provided in paragraphs 2 through 6 below. Accordingly, neither the
Agent, its affiliates nor any persons acting on their behalf, has made
or will make (except as permitted in paragraphs 2 through 9 below) (i)
any offer to sell or any solicitation of an offer to buy, any Special
Warrants to any person in the United States, (ii) any sale of Special
Warrants to any purchaser unless, at the time the buy order was or will
have been originated, the purchaser was outside the United States, or
such Agent, affiliate or person acting on behalf of either reasonably
believed that such purchaser was outside the United States, or (iii)
any Directed Selling Efforts in the United States with respect to the
Special Warrants or Underlying Shares.
2. Each Agent, acting through its U.S. broker-dealer affiliate, may offer
the Special Warrants in the United States to Accredited Investors with
which such Agent has a preexisting relationship.
3. Sales to each purchaser of the Special Warrants in the United States
will have an aggregate purchase price of not less than US$250,000.
4. No form of general solicitation or general advertising (as those terms
are used in Regulation D) has been or will be used, including
advertisements, articles, notices or other communications published in
any newspaper, magazine, or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees had been invited
by general solicitation or general advertising, in connection with the
offer or sale of the Special Warrants in the United States.
5. Prior to completion of any sale of Special Warrants in the United
States, each U.S. purchaser thereof (a "U.S. Purchaser") will be
required to represent, warrant and covenant to the Company to the
effect that:
(a) Authorization and Effectiveness. The Purchaser is a valid and
subsisting corporation, has the necessary corporate capacity
and authority to execute and deliver this offer and to observe
and perform its covenants and obligations hereunder and has
taken all necessary corporate action in respect thereof, and,
upon acceptance by the Company, this offer will
- 28 -
<PAGE> 29
constitute a legal, valid and binding contract of the
Purchaser enforceable against the Purchaser in accordance with
its terms and neither the entering into of this Subscription
Agreement nor the completion of the transactions contemplated
hereby will result in a violation or breach of any law
applicable to the Purchaser or of any of the terms or
provisions of any constating documents of the Purchaser or of
any agreement to which the Purchaser is a party or by which it
is bound.
(b) Residence. The Purchaser is a resident of the jurisdiction
referred to under its address set forth on page 1 hereof,
which address is the residence or place of business of the
Purchaser and was not created nor is used solely for the
purpose of acquiring the Special Warrants.
(c) Purchasing as Principal. Except to the extent contemplated in
subparagraph (e), the Purchaser is purchasing the Purchaser's
Special Warrants (and the Underlying Shares in respect
thereof) as principal (as defined in applicable securities
legislation) for its own account, and not for the benefit of
any other person.
(d) Purchasing as Agents or Warrant Agent. In the case of the
purchase by the Purchaser of the Purchaser's Special Warrants
as agent or trustee for any principal whose identity is
disclosed or undisclosed or identified by account number only,
each beneficial purchaser of the Purchaser's Special Warrants
for whom the Purchaser is acting, is purchasing its
Purchaser's Special Warrants (and the Underlying Shares in
respect thereof) as principal for its own account, and not for
the benefit of any other person, for investment only and not
with a view to resale or distribution, and the Purchaser has
due and proper authority to act as agent or trustee for and on
behalf of such beneficial purchaser in connection with the
transactions contemplated hereby.
(e) Purchaser Has Benefit of Private Placement Exemption. The
Purchaser and, in the case of the purchase by the Purchaser of
the Purchaser's Special Warrants as agent or trustee for any
principal whose identity is disclosed or undisclosed or
identified by account number only, each beneficial purchaser
of the Purchaser's Special Warrants for whom the Purchaser is
acting or for which it exercises sole investment discretion is
purchasing a sufficient number of Special Warrants so that the
aggregate acquisition cost of the Purchaser or such beneficial
purchaser will not be less than US$250,000 and is not
purchasing the Special Warrants with a view to any resale,
distribution or other disposition of the Special Warrants in
violation of United States securities laws.
- 29 -
<PAGE> 30
(f) No Advertising. The offering and sale of the Purchaser's
Special Warrants to the Purchaser were not, so far as the
Purchaser is aware, made through an advertisement of the
Special Warrants in printed media of general and regular paid
circulation, radio or television or any other form of
advertisement or as part of a general solicitation and, except
for this Subscription Agreement, the only documents, if any,
delivered or otherwise furnished to the Purchaser in
connection with such offering and sale were the Offering
Memorandum, a term sheet relating to the Special Warrants,
annual or interim reports and other documents the contents of
which are prescribed by statute or regulation and generally
available research reports, memoranda and other materials
concerning the Company, Thornbury and Energy Fuels prepared by
others, which documents the Purchaser acknowledges do not,
individually or collectively, constitute an offering
memorandum or similar document (including an offering
memorandum as such term is defined in section 32(1) of the
Regulation to the Securities Act (Ontario)) and have not been
independently verified by the Agents. The Purchaser
acknowledges and agrees that the Company and the Agents take
no responsibility for the accuracy, adequacy or completeness
of the information contained in any such research reports,
memoranda or other materials concerning the Company, Thornbury
or Energy Fuels prepared by others.
(g) Offering Memorandum. The Purchaser has received and carefully
reviewed the Offering Memorandum and acknowledges that no
securities commission, agency, governmental authority,
regulatory body, stock exchange or other entity has reviewed
the Offering Memorandum or has made any finding or
determination as to the merits of an investment in, or made
any recommendation or endorsement with respect to, the Special
Warrants or the Underlying Shares.
(h) No Undisclosed Information. The Purchaser's Special Warrants
are not being purchased by the Purchaser as a result of any
material information concerning the Company that has not been
publicly disclosed and the Purchaser's decision to tender this
offer and acquire the Purchaser's Special Warrants has not
been made as a result of any oral or written representation as
to fact or otherwise made by or on behalf of the Company, the
Agents or any other person and is based entirely upon
currently available public information concerning the Company.
(i) Investment Intent. The Purchaser, or each beneficial purchaser
for whom it is purchasing, is acquiring Special Warrants to be
held for investment only and not with a view to resale,
distribution or other disposition of the Special Warrants or
the Underlying Shares in violation of the securities laws of
the United States.
- 30 -
<PAGE> 31
(j) Investment Suitability. The Purchaser, and any beneficial
purchaser referred to in subparagraph (e) above, acknowledges
that the Special Warrants and the Underlying Shares are
speculative investments which involve a substantial degree of
risk and the Purchaser and each such beneficial purchaser has
such knowledge and experience in financial and business
affairs as to be capable of evaluating the merits and risks of
the investment hereunder in the Purchaser's Special Warrants
(and the Underlying Shares in respect thereof) and is able to
bear the economic risk of loss of such investment. No oral or
written representation has been made to the Purchaser by or on
behalf of the Company, the Agents or any other person (i) that
any person will resell or repurchase, or (except as provided
herein) refund all or any of the purchase price of, any of the
Purchaser's Special Warrants (or any of the Underlying Shares
in respect thereof), (ii) as to the future value or price of
the Special Warrants or the Underlying Shares or (iii) that
the Special Warrants or the Underlying Shares will be listed
and posted for trading, or that application has been or will
be made to list and post the Special Warrants or the
Underlying Shares for trading, on any stock exchange.
(k) No Registration in U.S. The Purchaser is aware that the
Special Warrants and the Underlying Shares have not been and
will not be registered under the U.S. Securities Act and the
sale contemplated hereby is being made in reliance on an
exemption from registration thereunder only to Accredited
Investors.
(l) Accredited Investor. The Purchaser is an Accredited Investor
and is acquiring the Special Warrants for its own account or
for the account of an Accredited Investor with respect to
which it exercises sole investment discretion, and not with a
view to any resale, distribution or other disposition of the
Special Warrants or Underlying Shares in violation of United
States federal and state securities laws.
(m) Adequate Information. The Purchaser has had access to all
information concerning the Company as it has considered
necessary in connection with its investment decision to
acquire the Special Warrants.
(n) Initial Trade Report. The Purchaser will, with respect to a
sale by the Purchaser of either Special Warrants or Underlying
Shares in British Columbia, file with the British Columbia
Securities Commission a report in the form required under the
British Columbia Securities Commission's Blanket Order #95/17
(the "Initial Trade Report") or the report required under the
laws of the jurisdiction in which the Company carries on
business or in which the Company is organized provided that
the report
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<PAGE> 32
requires substantially the same information as required in the
Initial Trade Report (the "Purchaser's Report") within ten
days of the initial trade of such Special Warrants or
Underlying Shares by the Purchaser, provided that where the
Purchaser has filed such report, the Purchaser is not required
to file a further report of additional trades of the Special
Warrants or Underlying Shares acquired on the same date and
under the same exemptions.
(o) Resales. The Purchaser understands that if it decides to
offer, sell or otherwise transfer such Special Warrants or the
Underlying Shares, or any of them, such securities may be
offered, sold or otherwise transferred only (A) to the
Company, (B) outside the United States in accordance with Rule
904 of Regulation S, (C) pursuant to an exemption from
registration under the U.S. Securities Act provided by Rule
144 thereunder, if applicable, and in compliance with any
applicable state securities laws or (D) with the prior written
consent of the Company, pursuant to another exemption from
registration under the U.S. Securities Act and any applicable
state securities laws.
(p) Legend on Certificates. The Purchaser understands that all
certificates representing the Special Warrants sold in the
United States, as well as all certificates issued in exchange
for or in substitution of the foregoing securities, will bear
a legend to the following effect:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "U.S. SECURITIES ACT") AND MAY
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION UNDER THE U.S.
SECURITIES ACT, OR (C) PURSUANT TO AN EXEMPTION FROM
REGISTRATION S UNDER. THE U.S. SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND
IN COMPLIANCE WITH ANY STATE SECURITIES LAWS OR (D)
WITH THE PRIOR WRlTTEN CONSENT OF THE COMPANY,
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER
THE U. S. SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
and that all certificates representing the Underlying Shares,
as well as all certificates issued in exchange for or in
substitution of the foregoing securities, issued upon exercise
of any Special Warrants so legended
- 32 -
<PAGE> 33
shall bear the foregoing legend and shall bear the following
additional legend:
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN CANADA. A NEW CERTIFICATE BEARING NO
LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY": MAY BE OBTAINED FROM THE COMPANY'S
REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS
CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A
FORM SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT
AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF THE REGULATION S UNDER
THE U.S. SECURITIES ACT;
provided that, if any such securities are being sold outside
the United States in accordance with Rule 904 of Regulation S,
the legend may be removed by providing a declaration to the
Trustee, as registrar and transfer agent, to the effect set
forth in Exhibit 1 to this Subscription Agreement, or in such
other form as the Company may from time to time prescribe.
(q) Notation. The Purchaser understands and acknowledges that the
Company may instruct the Warrant Agent of the Special Warrants
not to record a transfer without first being notified by the
Company that it is satisfied that such transfer is exempt from
or not subject to registration under the U.S. Securities Act.
6. Any offer, sale or solicitation of an offer to buy Special Warrants
that has been made or will be made in the United States was or will be
made only to Accredited Investors that are exempt or in transactions
that are exempt from registration under applicable state securities
laws.
7. It will not solicit offers for, offer to sell, or sell, the Special
Warrants in any state or other jurisdiction where it is not registered
as a broker-dealer or otherwise exempt from such registration.
8. In the event any Special Warrants are sold to purchasers in the United
States, CIBC Wood Gundy Securities Inc. shall deliver to the Company at
the Closing Time a certificate substantially in the form attached
hereto as Appendix I to Schedule "A".
- 33 -
<PAGE> 34
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents, warrants, covenants and agrees that:
1. The Company is a Foreign Issuer with no Substantial U.S. Market
Interest in the Special Warrants or Underlying Shares.
2. Except with respect to offers and sales to Accredited Investors in
reliance upon an exemption from registration under Section 4(2) of the
U.S. Securities Act, neither the Company nor any of its affiliates, nor
any person acting on their behalf, has made or will make: (A) any offer
to sell, or any solicitation of an offer to buy, any Special Warrants
to a person in the United States; or (B) any sale of Special Warrants
or Underlying Shares unless, at the time the buy order was or will have
been originated, the purchaser is (i) outside the United States or (ii)
the Company, its affiliates, and any person acting on their behalf
reasonably believe that the purchaser is outside the United States.
3. During the period in which the Special Warrants are offered for sale,
neither it nor any of its affiliates, nor any person acting on their
behalf has made or will make any Directed Selling Efforts in the United
States, or has taken or will take any action that would cause the
exemption afforded by Section 4(2) of the U.S. Securities Act or
Regulation S to be unavailable for offers and sales of the Special
Warrants, pursuant to this Agreement.
4. None of the Company, its affiliates or any person acting on its or
their behalf have engaged or will engage in any form of general
solicitation or general advertising (as those terms are used in
Regulation D) with respect to offers or sales of the Special Warrants
in the United States, including advertisements, articles, notices or
other communications published in any newspaper, magazine or similar
media, or broadcast over radio, or television, or any seminar or
meeting whose attendees have been invited by general solicitation or
general advertising.
5. Except with respect to the offer and sale of the Special Warrants or
Underlying Shares offered hereby, the Company has not, for a period of
six months prior to the date hereof sold, offered for sale or solicited
any offer to buy any of its securities in the United States or to any
U.S. Person.
- 34 -
<PAGE> 35
APPENDIX I
TO SCHEDULE A
U.S. PRIVATE PLACEMENT CERTIFICATE
In connection with the private placement in the United States of the special
warrants (the "Special Warrants") of International Uranium Corporation (the
"Company") pursuant to the Agency Agreement dated as of March 14, 1997 among the
Company and the Agents named therein (the "Agency Agreement"), the undersigned,
on behalf of the several Agents and their respective U.S. affiliates, does
hereby certify as follows:
(i) each U.S. affiliate of each U.S. Agent who offered or sold Special
Warrants in the United States is a duly registered broker or dealer
with the United States Securities and Exchange Commission (the "SEC")
and the National Association of Securities Dealers, Inc. ("NASD") and
is in good standing with the SEC and the NASD on the date hereof;
(ii) each purchaser was provided with a copy of the Offering Memorandum
dated March 19, 1997, for the offering of the Special Warrants in the
United States;
(iii) no form of general solicitation or general advertising (as those terms
are used in Regulation D under the 1933 Act) was used by us, including
advertisements, articles, notices or other communications published in
any newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees had been invited
by general solicitation or general advertising, in connection with the
offer or sale of the Special Warrants in the United States or to U.S.
persons (as defined under Regulation S under the 1933 Act);
(iv) the offering of the Special Warrants in the United States has been
conducted by us through our U.S. affiliates in accordance with the
Agency Agreement;
(v) immediately prior to transmitting the U.S. Subscription Agreement to
the purchasers, we had reasonable grounds to believe that each offeree
was an Accredited Investor under the U.S. Securities Act, and, on the
date hereof, we continue to believe that each U.S. private placee
purchasing Special Warrants pursuant to Section 4(2) of the U.S.
Securities Act is an Accredited Investor; and
(vi) prior to any sale of Securities in the United States pursuant to
Section 4(2), we caused each U.S. private placee to execute a U.S.
Subscription Agreement.
- 35 -
<PAGE> 36
Terms used in this certificate have the meanings given to them in the Agency
Agreement unless otherwise defined herein.
DATED this day of March, 1997.
CIBC WOOD GUNDY SECURITIES INC.
on behalf of the several Agents
and their respective U.S. affiliates.
By:
------------------------------------
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<PAGE> 1
ATTACHMENT - ITEM 19(b)3(c) - SPECIAL WARRANT INDENTURE
- --------------------------------------------------------------------------------
25/03/97-3
INTERNATIONAL URANIUM CORPORATION
AND
MONTREAL TRUST COMPANY OF CANADA
SPECIAL WARRANT INDENTURE
(PRIVATE PLACEMENT)
PROVIDING FOR THE ISSUE OF
SPECIAL WARRANTS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTERPRETATION.......................................................................................2
Definitions..........................................................................................2
Interpretation not Affected by Headings, etc.........................................................6
Applicable Law.......................................................................................6
ISSUE OF SPECIAL WARRANTS............................................................................6
Issue of Special Warrants............................................................................6
Issue Price..........................................................................................6
Entitlement of Warrantholder.........................................................................6
Adjustments..........................................................................................6
Issue of Common Shares...............................................................................6
Warrantholder not a Shareholder......................................................................6
Special Warrants to Rank Pari Passu..................................................................7
Signing of Warrant Certificates......................................................................7
Certification by the Warrant Agent...................................................................7
Issue in Substitution for Lost Warrant Certificates..................................................7
Replacement of Warrant Certificates..................................................................8
Replacement Adjustment...............................................................................8
Charges for Replacement..............................................................................8
Ownership of Special Warrants........................................................................8
Transfer of Special Warrants.........................................................................9
U.S. Legends.........................................................................................9
Certain Transfers....................................................................................10
Residency Determination..............................................................................11
Entry of Agent in Register...........................................................................11
NOTICE TO WARRANTHOLDERS.............................................................................11
Notice...............................................................................................11
EXERCISE OF SPECIAL WARRANTS.........................................................................12
Method of Exercise of Special Warrants...............................................................12
Completion of Notice of Exercise Form................................................................12
Effect of Exercise of Special Warrants...............................................................13
Subscription for less than Entitlement...............................................................13
Warrant Certificates for Fractions of Common Shares..................................................14
Expiration of Special Warrants.......................................................................14
Cancellation of Surrendered Warrant Certificates.....................................................14
Adjustments in Certain Circumstances.................................................................15
Postponement.........................................................................................17
Notice of Adjustment.................................................................................17
</TABLE>
<PAGE> 3
-3-
<TABLE>
<S> <C>
PURCHASES BY THE COMPANY.............................................................................18
Optional Purchases by the Company....................................................................18
Surrender of Warrant Certificates....................................................................18
COVENANTS OF THE COMPANY.............................................................................18
General Covenants of the Company.....................................................................18
Warrant Agent's Remuneration and Expenses............................................................19
Performance of Covenants by Warrant Agent............................................................20
ENFORCEMENT..........................................................................................20
Suits by Warrantholders, etc.........................................................................20
Immunity of Shareholders, etc........................................................................20
Limitation of Liability..............................................................................20
MEETINGS OF WARRANTHOLDERS...........................................................................20
Right to Convene Meetings............................................................................20
Notice...............................................................................................21
Chairman.............................................................................................21
Quorum...............................................................................................21
Power to Adjourn.....................................................................................21
Show of Hands........................................................................................21
Poll.................................................................................................22
Voting...............................................................................................22
Regulations..........................................................................................22
Company and Warrant Agent may be Represented.........................................................22
Powers Exercisable by Extraordinary Resolution.......................................................23
Extraordinary Resolution.............................................................................23
Powers Cumulative....................................................................................24
Minutes..............................................................................................24
Instruments in Writing...............................................................................25
Binding Effect of Resolutions........................................................................25
Holdings by Company and Warrant Agent Disregarded....................................................25
SUPPLEMENTAL INDENTURES..............................................................................25
Provision for Supplemental Indentures for Certain Purposes...........................................25
Successor Company....................................................................................26
CONCERNING THE WARRANT AGENT.........................................................................26
Trust Indenture Legislation..........................................................................26
Rights and Duties of Warrant Agent...................................................................27
Evidence.............................................................................................27
Experts and Advisers.................................................................................28
Warrant Agent not Required to Give Security..........................................................28
Protection of Warrant Agent..........................................................................28
Replacement of Warrant Agent.........................................................................30
</TABLE>
<PAGE> 4
-4-
<TABLE>
<S> <C>
Conflict of Interest.................................................................................31
Acceptance of Trust..................................................................................31
Actions by Warrant Agent to Protect Interest.........................................................31
Documents, Moneys, etc. Held by Warrant Agent........................................................31
Warrant Agent Not to be Appointed Receiver...........................................................32
Warrant Agent to Exercise Special Warrants...........................................................32
FORM OF WARRANT CERTIFICATES.........................................................................32
Form of Warrant Certificates.........................................................................32
Transfer of Warrants.................................................................................36
ESCROW ARRANGEMENTS..................................................................................40
Net Proceeds and Investment Thereof..................................................................40
Disbursement of Escrowed Funds.......................................................................40
Additional Payments by Company.......................................................................40
Delivery to Third Party Escrow Agent.................................................................41
REGISTER OF WARRANTHOLDERS...........................................................................41
Register of Special Warrants.........................................................................41
Location of Warrant Register.........................................................................41
Validity of Registration.............................................................................41
GENERAL..............................................................................................41
Notice to the Company and the Warrant Agent..........................................................41
Time of the Essence..................................................................................42
Counterparts.........................................................................................42
Satisfaction and Discharge of Indenture..............................................................43
Provisions of Indenture and Warrant Certificates for the Sole Benefit of
Parties and Warrantholders...........................................................................43
</TABLE>
<PAGE> 5
-5-
THIS SPECIAL WARRANT INDENTURE dated as of the 26th day of
March, 1997.
B E T W E E N:
INTERNATIONAL URANIUM CORPORATION
a corporation incorporated pursuant to the laws of Ontario,
(hereinafter called the "Company"),
OF THE FIRST PART
-and-
MONTREAL TRUST COMPANY OF CANADA,
a trust company incorporated pursuant to the laws of Canada
(hereinafter called the "Warrant Agent"),
OF THE SECOND PART
WHEREAS the authorized share capital of the Company consists
of an unlimited number of common shares of which 26,500,000 common shares are
issued and outstanding;
AND WHEREAS the Company proposes to issue 40,000,000 special
warrants (the "Special Warrants"), each Special Warrant entitling the holder
thereof to receive one Common Share without further payment upon the terms and
conditions herein set forth;
AND WHEREAS the Company deems it necessary to create and issue
Special Warrants to be constituted and issued in the manner hereinafter
appearing;
AND WHEREAS the Company under the laws relating thereto is
duly authorized to create and issue the Special Warrants to be constituted and
issued as herein provided;
AND WHEREAS the Special Warrants will be evidenced by Special
Warrant certificates;
<PAGE> 6
-6-
AND WHEREAS all things necessary have been or will be done and
performed to make the Special Warrants and the Special Warrant certificates
(when certified by the Warrant Agent and issued as provided in this Indenture)
legal, valid and binding upon the Company with the benefit and subject to the
terms of this Indenture;
AND WHEREAS the Warrant Agent is to hold the net proceeds of
the issuance of the Special Warrants in escrow upon the terms and conditions of
this Agreement;
AND WHEREAS the foregoing recitals are made as representations
and statements of fact by the Company and not by the Warrant Agent;
NOW THEREFORE THIS INDENTURE WITNESSETH that for good and
valuable consideration mutually given and received, the receipt and sufficiency
of which is hereby acknowledged, it is hereby agreed and declared as follows:
ARTICLE ONE
INTERPRETATION
1.01 DEFINITIONS. - In this Indenture, unless there is something
in the subject-matter or context inconsistent therewith, the terms defined in
this Section 1.01 or elsewhere herein shall, for the purpose of this Indenture
and all supplemental indentures hereto, have the respective meanings specified
in this Section 1.01 or elsewhere herein:
"Acquisition" means the acquisition by the Company of
substantially all of the uranium producing assets and business
of Energy Fuels pursuant to the Acquisition Agreement;
"Acquisition Agreement" means that certain asset purchase
agreement made as of December 19, 1996 between the Company's
subsidiary International Uranium Holdings Corporation and
Energy Fuels;
"Agents" means Salman Partners Inc., CIBC Wood Gundy
Securities Inc., Griffiths McBurney & Partners, Newcrest
Capital Inc. and First Marathon Securities Limited;
"Agents' Commission" means the sum of $2,692,500, comprised of
6.0% of the gross proceeds of the issuance of the Special
Warrants save and except for the gross proceeds attributable
to purchases of 4,100,000 Special Warrants by purchasers
introduced to the Agents by Mr. Adolf H. Lundin or members of
his family;
<PAGE> 7
-7-
"Amalgamated IUC" means the corporation to be formed upon the
amalgamation of the Company and Thornbury pursuant to the
Amalgamation Agreement;
"Amalgamation" means the proposed amalgamation of the Company
and Thornbury under the Business Corporations Act (Ontario)
pursuant to the Amalgamation Agreement;
"Amalgamation Agreement" means the amalgamation agreement to
be entered into between the Company and Thornbury in
connection with the Amalgamation;
"Applicable Legislation" means the provisions of any statute
or regulation of Canada or a Province of Canada applicable to
warrant indentures or to the rights, duties and obligations of
trustees and of corporations under warrant indentures, to the
extent that such provisions are at the time in force and
applicable to this Indenture;
"Automatic Retraction Time" means 5:00 p.m. (Toronto time) on
June 24, 1997;
"business day" means a day which is not a Saturday or Sunday
or a civic or statutory holiday in any of the cities where
Warrant Certificates may be surrendered to the Warrant Agent
pursuant to the provisions hereof;
"Certified Resolution of the Company" means a copy of a
resolution certified by a senior officer or Director of the
Company, which may but need not be under its corporate seal,
to have been duly passed by the Directors and to be in full
force and effect on the date of such certification;
"Common Shares" means the common shares in the capital of the
Company;
"Company" means International Uranium Corporation and its
lawful successors from time to time;
"Company's auditors" means the firm of chartered accountants
duly appointed as auditors of the Company for the time being;
"counsel" means a barrister or solicitor or firm of barristers
or solicitors retained by the Warrant Agent or retained by the
Company, who may be counsel to the Company, acceptable to the
Warrant Agent;
<PAGE> 8
-8-
"Deemed Exercise Time" means the time at which the Escrow
Release Conditions are satisfied;
"Director" means a director of the Company from time to time,
and, unless otherwise specified herein, reference to "action
by the Directors" means action by the directors of the Company
as a board or, whenever duly empowered, action by any
committee of the board;
"dollars" and "$" mean monies which are legal tender in Canada
unless otherwise noted;
"Energy Fuels" means collectively, Energy Fuels, Ltd., Energy
Fuels Exploration Company and Energy Fuels Nuclear, Inc.;
"Escrow Certificate" means the certificate issued by the
Company and the Agents to the Warrant Agent confirming that
all of the Escrow Release Conditions have been satisfied,
instructing the Warrant Agent to release, to the extent not
previously delivered pursuant to the direction referred to in
Section 12.04, the Escrowed Funds to or to the direction of
the Company, and having attached thereto (i) a copy of the
letter from the Company and Thornbury delivering the articles
of amalgamation, together with a covering letter, to counsel
for the Agents and instructing counsel for the Agents to
deliver such documents to the Director under the Business
Corporations Act (Ontario) immediately upon receiving written
confirmation from the Company that all conditions precedent to
the Acquisition Closing have occurred and (ii) a copy of the
receipt issued by counsel for the Agents for the documents
referred to in item (i) above together with its
acknowledgement and undertaking that it will deliver such
documents in accordance with the instructions contained
therein;
"Escrow Release Conditions" means, collectively (i) the
completion of the Amalgamation, subject only to the filing of
pre-approved articles of amalgamation in respect of the
Amalgamation with the Director under the Business Corporations
Act (Ontario); (ii) the closing of the Acquisition in escrow,
subject only to payment; and (iii) the obtaining by the
Company of a conditional listing of the common shares of
Amalgamated IUC on The Toronto Stock Exchange;
"Escrowed Funds" means the net proceeds of the offering of the
Special Warrants (after deducting the Agents' Commission);
"Exercise Date" with respect to any Special Warrant means the
date on which such Special Warrant is duly surrendered for
exercise or is deemed to be exercised in accordance with the
provisions of Article Four;
<PAGE> 9
-9-
"Expiry Time" means the earlier of: (i) the Deemed Exercise
Time; and (ii) the Automatic Retraction Time;
"extraordinary resolution" has the meaning ascribed thereto in
Subsection 8.12(1);
"person" means an individual, corporation, partnership, trust
or any unincorporated organization;
"Shareholder" means a holder of record of one or more Common
Shares;
"Special Warrants" means the special warrants of the Company
described herein and issued as described under Article Two
hereof;
"Subscription Funds" means the gross proceeds of the offering
of the Special Warrants;
"this Warrant Indenture", "this Indenture", "herein", "hereby"
and similar expressions mean or refer to this indenture and
any indenture, deed or instrument supplemental hereto; and the
expressions "Article", "Section" and "Subsection" followed by
a number mean and refer to the specified article, section or
subsection of this Indenture;
"Thornbury" means Thornbury Capital Corporation, a company
created pursuant to the laws of Ontario;
"Transfer Agent" means the transfer agent for the time being
of the Common Shares, which is the Company at the date hereof;
"United States" means the United States of America, its
territories and possessions, any State of the United States,
and the District of Columbia;
"U.S. Person" means U.S. Person as that term is defined in
Regulation S under the U.S. Securities Act;
"U.S. Securities Act" means the United States Securities Act
of 1933, as amended;
"Warrant Agent" means Montreal Trust Company of Canada and its
successors in the trusts hereby created;
<PAGE> 10
-10-
"Warrant Certificates" means the certificates evidencing the
Special Warrants issued and certified hereunder and for the
time being outstanding;
"Warrantholders" or "holders" without reference to Common
Shares means the persons for the time being who are registered
holders of the Special Warrants;
"Warrantholders' Request" means an instrument signed in one or
more counterparts by Warrantholders holding not less than
twenty-five per cent (25%) of all Special Warrants then
unexercised and outstanding, requesting the Warrant Agent to
take some action or proceeding specified therein;
"Warrant Register" means the register of Warrantholders
described in Article Thirteen hereof; and
"written order of the Company", "written request of the
Company", "written consent of the Company" and "certificate of
the Company" mean respectively a written order, request,
consent and certificate signed in the name of the Company by
any one officer or director of the Company.
Unless herein otherwise expressly provided or unless the
context otherwise requires, words importing the singular include the plural and
vice versa and words importing the masculine include the feminine and neutral
genders.
1.02 INTERPRETATION NOT AFFECTED BY HEADINGS, ETC. - The division
of this Indenture into Articles, Sections and Subsections, the provision of the
table of contents and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of this Indenture.
1.03 APPLICABLE LAW. - This Indenture, the Warrant Certificates and
the Special Warrants represented by such Warrant Certificates shall be construed
in accordance with the laws of the Province of Ontario and the laws of Canada
applicable thereto and shall be treated in all respects as Ontario contracts.
The parties irrevocably attorn to the Courts of such province.
ARTICLE TWO
ISSUE OF SPECIAL WARRANTS
2.01 ISSUE OF SPECIAL WARRANTS. - The Special Warrants may be
issued only upon and subject to the conditions and limitations hereinafter set
forth. The Company is authorized to issue in the aggregate 40,000,000 Special
Warrants, entitling the holders
<PAGE> 11
-11-
thereof to subscribe for and be issued an aggregate of 40,000,000 Common Shares
(plus such additional indeterminate number of Common Shares as may be issued
pursuant to the adjustments referred to in Article Four). Warrant Certificates
shall be issued only in registered form in the form or substantially in the form
provided in Article Eleven. Fractional Special Warrants will not be issued.
2.02 ISSUE PRICE. - The Special Warrants shall be issued for $1.25
per Special Warrant or such other price as may be established by action by the
Directors from time to time (with notice of such action being given to the
Warrant Agent).
2.03 ENTITLEMENT OF WARRANTHOLDER. - Subject to Sections 4.01,
4.02 and 4.04, each Special Warrant authorized to be issued hereunder shall
entitle the holder thereof to subscribe for and be issued one Common Share
without further consideration to the Company. Special Warrants may be
exercisable by the holder, in whole only, at any time prior to the Expiry Time.
2.04 ADJUSTMENTS. - The number of Common Shares which may be issued
pursuant to the exercise or deemed exercise of the Special Warrants shall be
adjusted in the events and in the manner specified in Article Four.
2.05 ISSUE OF COMMON SHARES. - Upon the exercise of the rights
conferred upon Warrantholders to exercise their Special Warrants for Common
Shares and provided that the provisions of Sections 4.01, 4.02 and 4.04 are
complied with, the Company shall issue that number of Common Shares from its
unissued share capital as are issuable pursuant to such exercise of Special
Warrants. At all times prior to such exercise, the Company shall have reserved
and allotted for issuance that number of Common Shares issuable upon exercise of
the Special Warrants.
2.06 WARRANTHOLDER NOT A SHAREHOLDER. - Except as otherwise
provided herein, nothing in this Indenture nor in the holding of a Special
Warrant, Warrant Certificate, or otherwise, shall be construed as conferring
upon a Warrantholder any right or interest whatsoever as a Shareholder or as a
holder of any other shares of the Company.
2.07 SPECIAL WARRANTS TO RANK PARI PASSU. - All Special Warrants
shall rank pari passu, regardless of the actual date of issue of the same.
2.08 SIGNING OF WARRANT CERTIFICATES. - The Warrant Certificates
shall be signed by any one Director or officer of the Company and may but need
not be under the Company's seal or a facsimile thereof (which shall be deemed to
be the Company's seal). The signature of such Director or officer may be
mechanically reproduced in facsimile and Warrant Certificates bearing such
facsimile signature shall be binding upon the Company as if they had been
manually signed by such officer or Director. Notwithstanding that any such
person whose manual or facsimile signature appears on
<PAGE> 12
-12-
any Warrant Certificate as such officer may no longer hold office at the date of
such Warrant Certificate or at the date of certification or delivery thereof,
any Warrant Certificate signed as aforesaid shall, subject to Section 2.09
hereof, be valid and binding upon the Company and the holder thereof shall be
entitled to the benefit of this Indenture. Warrant Certificates shall be dated
as of the date of the original issue of the Special Warrants evidenced thereby.
2.09 CERTIFICATION BY THE WARRANT AGENT. -
(1) No Warrant Certificate shall be issued or, if issued, shall be valid
for any purpose or entitle the holder to the benefit hereof until it
has been countersigned and certified by manual signature by or on
behalf of the Warrant Agent and such countersignature and certification
by the Warrant Agent upon any Warrant Certificate shall be conclusive
evidence as against the Company that the Warrant Certificate so
countersigned and certified has been duly issued hereunder and that the
holder is entitled to the benefit hereof.
(2) The countersignature and certification of the Warrant Agent on Warrant
Certificates issued hereunder shall not be construed as a
representation or warranty by the Warrant Agent as to the validity of
this Indenture or of a Warrant Certificate (except the due
certification thereof) and the Warrant Agent shall in no respect be
liable or answerable for the use made of the Warrant Certificates or
any of them or of the consideration therefor, except as otherwise
specified herein.
2.10 ISSUE IN SUBSTITUTION FOR LOST WARRANT CERTIFICATES. -
(1) In case any Warrant Certificates issued and certified hereunder shall
become mutilated, lost, destroyed or stolen, the Company, subject to
applicable law, shall issue and thereupon the Warrant Agent shall
certify and deliver a new certificate of like date and tenor as the one
mutilated, lost, destroyed or stolen (i) in exchange for and in place
of and upon cancellation of such mutilated certificate or (ii) in lieu
of and in substitution for such lost, destroyed or stolen certificate
and the substituted certificate shall be in a form approved by the
Warrant Agent and shall be entitled to the benefit hereof and shall
rank equally in accordance with its terms with all other Warrant
Certificates issued or to be issued hereunder.
(2) The applicant for the issue of a new certificate pursuant to Subsection
2.10(1) shall bear the cost of the issue thereof and in case of loss,
destruction or theft shall, as a condition precedent to the issue
thereof, furnish to the Company and to the Warrant Agent such evidence
of ownership and of the loss, destruction or theft, as the case may be,
of the certificate so lost, destroyed or stolen as shall be
satisfactory to the Company and to the Warrant Agent, acting
reasonably, in their discretion and such applicant may also be required
to furnish indemnity or
<PAGE> 13
-13-
security in amount and form satisfactory to the Company and the Warrant
Agent in their discretion to save each of them harmless, and shall pay
the expenses, charges and any taxes applicable thereto of the Company
and the Warrant Agent in connection therewith.
2.11 REPLACEMENT OF WARRANT CERTIFICATES. -
(1) Warrant Certificates issued and certified hereunder, representing
Special Warrants to subscribe for and purchase any specified number of
Common Shares may, upon compliance with the reasonable requirements of
the Warrant Agent, be replaced by Warrant Certificate(s) representing
in the aggregate a like number of Special Warrants.
(2) Warrant Certificates may be replaced at the stock transfer office of
the Warrant Agent in the City of Toronto or any other place that is
designated by the Company with the approval of the Warrant Agent. Any
Warrant Certificate tendered for replacement shall be surrendered to
the Warrant Agent and cancelled by the Warrant Agent, who will forward
to the Company, a certificate evidencing such cancellation. The Company
shall sign and the Warrant Agent shall countersign and certify all
Warrant Certificates necessary to carry out replacements as aforesaid.
2.12 REPLACEMENT ADJUSTMENT. - Irrespective of any adjustments
pursuant to Article Four hereof, all replacement Warrant Certificates shall
continue to express the number of Special Warrant(s) evidenced thereby as if
such Warrant Certificates were initially issued as of the date of original issue
of the Special Warrants.
2.13 CHARGES FOR REPLACEMENT. - For each Warrant Certificate
replaced, the Warrant Agent, except as otherwise herein provided, shall, if
required by the Company, charge to the Warrantholder a reasonable sum for each
new Warrant Certificate issued. Payment for any and all taxes or governmental or
other charges required to be paid shall be made by the Warrantholder requesting
such replacement, as a condition precedent to the issuance thereof.
2.14 OWNERSHIP OF SPECIAL WARRANTS. - The Company and the Warrant
Agent shall deem and treat the registered holder of any Special Warrant as shown
on the Warrant Register or his legal representative or his attorney duly
appointed by an instrument in writing as the absolute holder and owner of such
Special Warrant for all purposes, and the Company and the Warrant Agent shall
not be affected by any notice or knowledge to the contrary. Except as otherwise
provided herein, the registered holder of a Warrant Certificate shall be
entitled to the rights evidenced by such Warrant Certificate free from all
rights of set-off or counterclaim between the Company and the original or any
intermediate holder thereof. All actions relating to any Warrantholder
<PAGE> 14
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shall be valid and effectual to satisfy and discharge any liability hereunder
and under any Warrant Certificates.
2.15 TRANSFER OF SPECIAL WARRANTS. - The Special Warrants may only
be transferred upon compliance with the conditions herein on the Warrant
Register by a holder, his legal representative or his attorney duly appointed by
an instrument in writing in form and execution satisfactory to the Warrant Agent
and upon compliance with such reasonable requirements as the Warrant Agent may
prescribe and such transfer shall be duly noted on such Warrant Register by the
Warrant Agent. Notwithstanding anything to the contrary herein contained,
Special Warrants may only be transferred in accordance with applicable law. A
transferee shall not be entitled to the rights and privileges attached to the
Special Warrants unless the transfer is reflected in the Warrant Register.
Neither the Company nor the Warrant Agent shall be bound to inquire into the
title of any such registered holder.
2.16 U.S. LEGENDS. - The Warrant Agent understands and acknowledges
that the Special Warrants and the Common Shares issuable upon exercise of the
Special Warrants have not been and will not be registered under the U.S.
Securities Act. Each Warrant Certificate originally issued to a U.S. Person, and
each Warrant Certificate issued in exchange therefor or in substitution thereof,
shall bear the following legend unless such legend is to be removed pursuant to
the terms of this Indenture:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE
WITH ANY STATE SECURITIES LAWS OR (D) WITH THE PRIOR WRITTEN CONSENT OF THE
CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
Furthermore, all certificates representing Common Shares issued upon exercise of
the Special Warrants and all certificates issued in exchange therefor or in
substitution thereof or issued upon their exercise in accordance with Article
Four hereof, which are legended as above shall also bear the following
additional legend:
"DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT
OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE, BEARING NO
LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED
<PAGE> 15
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DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF CANADA
AND THE CORPORATION, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED
HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT."
provided that, if the Special Warrants or the Common Shares issued upon exercise
of the Special Warrants are being sold pursuant to Rule 904 of Regulation S
under the U.S. Securities Act, the legend may be removed if the holder provides
a declaration to the Warrant Agent or the Transfer Agent, as the case may be, to
the following effect (or as the Company may prescribe from time to time):
"The undersigned (a) acknowledges that the sale of the securities of
International Uranium Corporation (the "Company") to which this declaration
relates is being made in reliance on Rule 904 of Regulation S under the United
States Securities Act of 1933, as amended (the "1933 Act") and (b) certifies
that (1) the seller is not an affiliate of the Company (as defined in Rule 405
under the 1933 Act), (2) the offer of such securities was not made to a person
in the United States and either (A) at the time the buy order was originated,
the buyer was outside the United States, or the seller and any person acting on
its behalf reasonably believe that the buyer was outside the United States, or
(B) the transaction was executed on or through the facilities of The Toronto
Stock Exchange or any other designated offshore securities market, as defined in
Regulation S, and neither the seller nor any person acting on its behalf knows
that the transaction has been prearranged with a buyer in the United States, (3)
neither the seller nor any affiliate of the seller nor any person acting on its
or their behalf has engaged or will engage in any directed selling efforts in
the United States in connection with the offer and sale of such securities, (4)
the sale is bona fide and not for the purpose of "washing off" the resale
restrictions imposed because the securities are "restricted securities" (as such
term in defined in Rule 144(a)(3) under the 1933 Act), (5) the seller does not
intend to replace the securities sold in reliance on Rule 904 of the 1933 Act
with fungible unrestricted securities and (6) the contemplated sale is not a
transaction, or part of a series of transactions which, although in technical
compliance with Regulation S, is part of a plan or scheme to evade the
registration provisions of the 1933 Act. Terms used herein have the meanings
given to them by Regulation S."
and provided further, that, if any such securities are being sold pursuant to
Rule 144 under the U.S. Securities Act, the legend may be removed by delivery to
the Warrant Agent or the Transfer Agent, as the case may be, of an opinion of
counsel, of recognized standing reasonably satisfactory to the Company, that
such legend is no longer required under applicable requirements of the U.S.
Securities Act or state securities laws.
<PAGE> 16
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2.17 CERTAIN TRANSFERS. -
(i) If the Warrant Certificate tendered for transfer bears the legend set
forth in Section 2.16 hereof, and such legend is not to be removed in
accordance with Section 2.16 hereof: (a) the Warrant Agent shall not
issue or register a Warrant Certificate pursuant to such transfer in
the name of or for the benefit of any resident of Canada; or (b) in the
event that the transferee is a U.S. Person or is in the United States,
the Warrant Certificate issued to such transferee shall bear the legend
set forth in Section 2.16, and the requirement of such Section relating
to legending the Common Shares issuable upon exercise of the Special
Warrants shall also apply.
(ii) If the Warrant Certificate tendered for transfer does not bear the
legend set forth in Section 2.16, the Warrant Agent shall not register
such transfer unless the transferor has certified on the Warrant
Certificate that the transfer is being made, and the offer of the
securities being transferred was made, to a person not in the United
States. Notwithstanding the foregoing, the Warrant Agent shall not
register the transfer if the Warrant Agent has reason to believe that
the transferee is a person within the United States or is acquiring the
Special Warrants evidenced thereby for the account or benefit of a
person in the United States. Any Warrant Certificate issued to a
transferee in a transfer contemplated by this Subsection 2.17(ii) shall
not bear the legend set forth in Section 2.16.
2.18 RESIDENCY DETERMINATION - In determining who is a U.S. Person,
a person in the United States, or a resident of Canada, the Warrant Agent may
rely and shall be protected in relying upon the registered address of the holder
or the address of the transferee as indicated on the form of transfer for the
Special Warrants in question, as applicable, for all purposes.
2.19 ENTRY OF AGENT IN REGISTER - Notwithstanding the provisions of
this Article Two and Article Thirteen, any of the Agents shall be entitled to be
entered on the register as the holder of Special Warrants evidenced by a
particular Warrant Certificate upon delivery by such Agent to the Warrant Agent
of:
(i) the particular Warrant Certificate; and
(ii) a certificate of that Agent to the effect that the purchaser
of the Special Warrants evidenced by the particular Warrant
Certificate has declined or refused to accept delivery of, and
make payment for, the Special Warrants evidenced by the
particular Warrant Certificate in accordance with the
subscription or purchase agreement between such purchaser and
the Company.
<PAGE> 17
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ARTICLE THREE
NOTICE TO WARRANTHOLDERS
3.01 NOTICE. - Unless herein otherwise expressly provided, any
notice to be given hereunder to the Warrantholders shall be deemed to be validly
given if delivered personally or sent by registered letter postage prepaid
addressed to such Warrantholders at their post office addresses appearing in the
Warrant Register and shall be deemed to have been effectively given, received
and made on the date of personal delivery or on the fourth business day after
the time of mailing or upon actual receipt, whichever is sooner. Accidental
error or omission in giving notice or accidental failure to mail notice to any
Warrantholder or the inability of the Company to give or mail any notice due to
any matter beyond the reasonable control of the Company shall not invalidate any
action or proceeding taken in respect of matters pertaining to such notice
provided that in the case of disruption in postal services any notices, if
mailed, shall not be deemed to have been effectively given until it is
personally delivered. Any notice with respect to any Special Warrants, if
registered in the names of more than one holder, may be given to the holder
first named in the Warrant Register and any notice so given shall be sufficient
notice to all such registered holders having an interest in such Special
Warrants.
ARTICLE FOUR
EXERCISE OF SPECIAL WARRANTS
4.01 METHOD OF EXERCISE OF SPECIAL WARRANTS. - Holders of Special
Warrants who wish to exercise their Special Warrants for Common Shares may do so
prior to the Expiry Time by delivering to the Warrant Agent at its principal
stock transfer office in Toronto, Ontario and at any other place or places that
may be designated by the Company with the approval of the Warrant Agent, the
Warrant Certificate with a duly completed and executed notice of exercise.
4.02 COMPLETION OF NOTICE OF EXERCISE FORM. -
(1) Certificates representing the Common Shares for which Special Warrants
are exercised, shall be delivered or mailed as described in Section
4.03(2) to the Warrantholder, or as the Warrantholder may direct on the
notice of exercise form, upon surrender of the corresponding Warrant
Certificate(s) to the Warrant Agent. Certificates representing Common
Shares issued pursuant to such exercise of Special Warrants shall be
prepared in the name of the Warrantholder reflected in the Warrant
Register. A Warrant Certificate with the duly completed and executed
notice of exercise form shall be deemed to be surrendered only upon
delivery thereof or, if sent by mail or other means of transmission,
upon actual receipt thereof, in each case at the office of the Warrant
Agent where
<PAGE> 18
-18-
surrendered or such other place(s) provided for by the Company and
agreed to by the Warrant Agent.
(2) A notice of exercise form shall be signed by the Warrantholder and
shall specify (i) that all of the Common Shares which such holder is
entitled to acquire are subscribed for, (ii) the name of the holder,
and (iii) the address of such person.
(3) In connection with the replacement of Warrant Certificates and the
exercise of Special Warrants and in compliance with such other terms
and conditions hereof as may be required, the Company shall provide for
one or more agencies in the City of Toronto, Ontario and any other
place or places which may be designated by the Company (with the
approval of the Warrant Agent, acting reasonably) at which Warrant
Certificates may be surrendered for exercise for Common Shares.
(4) The Warrant Agent shall record the particulars of the Special Warrants
exercised for Common Shares which shall include the names and addresses
of the persons who become holders of Common Shares upon such exercise
and the Exercise Date. Within five business days of each Exercise Date,
the Warrant Agent shall provide such particulars in writing to the
Company and the Transfer Agent.
4.03 EFFECT OF EXERCISE OF SPECIAL WARRANTS. -
(1) Upon compliance by the holder of any Warrant Certificate with the
provisions of Section 4.01 and Section 4.02, and subject to the
provisions of Subsection 4.04(2), the number of Common Shares
subscribed for and thereby issuable shall be deemed to have been issued
and the person or persons to whom such Common Shares are to be issued
shall be deemed to have become the holder or holders of record of such
Common Shares on the Exercise Date unless the transfer books of the
Company shall be closed on such date, in which case the Common Shares
subscribed for and thereby issuable shall be deemed to have been
issued, and such person or persons shall be deemed to have become the
holder or holders of record of such Common Shares, on the date on which
such transfer books were reopened. Upon the exercise of Special
Warrants, that portion of the Escrowed Funds relating to such Special
Warrants shall be released to the Company in accordance with Article
Twelve hereof.
(2) The Company shall forthwith and in no event later than the third
business day after the surrender of the Warrant Certificate (i) cause
the Warrant Agent to mail to the person or persons in whose name or
names the Common Shares so subscribed for and thereby issuable are to
be issued, as specified in the notice of exercise completed on the
Warrant Certificate, at the address specified in such notice of
exercise or (ii) if so specified in such notice of exercise form, cause
the Warrant Agent to deliver to such person or persons at the office of
the Warrant
<PAGE> 19
-19-
Agent where such Warrant Certificate was surrendered, a share
certificate or certificates for the appropriate number of Common Shares
to which the Warrantholder is entitled to be issued pursuant to the
Warrant Certificate surrendered, provided that the Warrant Agent shall
not be required to deliver certificates representing Common Shares
issuable upon the exercise hereof when the Common Share transfer books
of the Company are properly closed prior to any meeting of shareholders
or for the payment of dividends or for any other purpose. In the event
of the exercise of any Special Warrants in accordance with the
provisions hereof during any such period delivery of certificates may
be postponed for not exceeding five (5) business days after the date of
the re-opening of said Common Shares transfer books.
4.04 SUBSCRIPTION FOR LESS THAN ENTITLEMENT. -
(1) No holder may subscribe for and be issued less than the full number of
Common Shares which are issuable pursuant to the Warrant Certificate.
(2) Notwithstanding any adjustment provided for in Section 4.08 hereof or
otherwise, the Company shall not be required, upon the exercise of a
Special Warrant, to issue fractions of Common Shares or to distribute
certificates which evidence fractional Common Shares. If the number of
Common Shares to which a Warrantholder would otherwise be entitled upon
the exercise of a Special Warrant is not a whole number then the number
of Common Shares to be issued will be rounded down to the next whole
number and the holder shall receive no consideration for any fraction
of a Common Share.
4.05 WARRANT CERTIFICATES FOR FRACTIONS OF COMMON SHARES. - To the
extent that the holder of a Warrant Certificate is entitled to receive on the
exercise a fraction of a Common Share, such right may only be exercised in
respect of such fraction in combination with another Warrant Certificate which
in the aggregate entitles the Warrantholder to receive a whole number of Common
Shares.
4.06 EXPIRATION OF SPECIAL WARRANTS. -
(1) In the event a holder does not exercise the Special Warrants by the
Expiry Time and all of the Escrow Release Conditions are satisfied as
evidenced by the delivery of the Escrow Certificate from the Company
and the Agents to the Warrant Agent (which delivery shall be on a
forthwith basis and in any event not later than the first business day
thereafter), the Special Warrants held by such holder shall be
exercised by the Warrant Agent on behalf of such holder at the Deemed
Exercise Time without any further action on the part of the holder or
the Company.
<PAGE> 20
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(2) In the event that the Escrow Release Conditions are not satisfied by
the Automatic Retraction Time, the Special Warrants held by a holder
shall be retracted by the Warrant Agent on behalf of such holder
without any further action on the part of the holder. At the time of
such retraction, the Company shall purchase all of the Special Warrants
registered in the holders' names at a price of $1.25 per Special
Warrant plus such holder's pro rata share of the interest accrued on
the Escrowed Funds, and the Warrant Agent shall pay to such holders
from the Escrowed Funds an amount equal to $1.25 per Special Warrant so
purchased together with the pro rata share of the interest accrued on
the Escrowed Funds, calculated from the date hereof to and including
the day immediately preceding the date of payment to such holders. Such
payment shall be made by way of cheque payable in the City of Toronto,
and upon delivery of such cheque the Special Warrants shall be void and
of no value. The foregoing is subject to the obligations of the Company
to pay to the Warrant Agent any additional amounts as may be necessary
in accordance with Section 12.03 hereof.
(3) The Warrant Agent shall have no obligation to review and approve the
documents attached to the Escrow Certificate, and shall be entitled to
release the Escrowed Funds upon the receipt of the Escrow Certificate
as provided for in this Indenture. Following the delivery of the Escrow
Certificate to the Warrant Agent, the Warrant Agent shall send a notice
to holders of Special Warrants in accordance with Section 3.01 advising
of the exercise of Special Warrants and providing instructions on how
such holders may obtain certificates representing Common Shares.
4.07 CANCELLATION OF SURRENDERED WARRANT CERTIFICATES. - All
Warrant Certificates surrendered to the Warrant Agent shall be cancelled by the
Warrant Agent who shall furnish the Company with a certificate identifying the
Warrant Certificates so cancelled and the number of Common Shares subscribed for
pursuant to each Warrant Certificate.
4.08 ADJUSTMENTS IN CERTAIN CIRCUMSTANCES. - Subject to Section
4.09:
(a) if at any time prior to the Expiry Time, the Company shall (i)
consolidate the outstanding Common Shares into a lesser number
of Common Shares or (ii) subdivide the outstanding Common
Shares into a greater number of Common Shares, as the case may
be, the holder, if the Special Warrants have not been
exercised prior to the effective date of such consolidation or
subdivision, as the case may be, upon the exercise of such
Special Warrant thereafter, shall be entitled to receive and
shall accept, the number of Common Shares of the Company that
the holder would have been entitled to receive on such
consolidation or subdivision if, on the record date or the
effective date thereof, as the case may be, it had been
<PAGE> 21
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the registered holder of the number of Common Shares to which
it is by its Warrant Certificate, prima facie, entitled. Such
adjustment shall be made successively whenever any event
referred to in this subsection (a) shall occur;
(b) if at any time prior to the Expiry Time, there is a
reclassification or redesignation of the Common Shares into
other shares or a reorganization of the Company (other than as
described in (a) hereof), or an amalgamation, merger or
arrangement of the Company with or into any other body
corporate or other entity (other than an amalgamation, merger
or arrangement, which does not result in a reclassification of
the outstanding Common Shares or a change of the Common Shares
into other shares) or a sale or conveyance of the property and
assets of the Company as an entirety or substantially as an
entirety to any other body corporate or other entity, the
holder, if the Special Warrants have not been exercised prior
to the effective date of such reclassification, redesignation,
change, reorganization, amalgamation, merger, arrangement,
sale or conveyance, upon the exercise of such Special Warrant
thereafter, shall be entitled to receive and shall accept the
number of Common Shares or other securities or property of the
Company or of the body corporate, or other entity, resulting
from such amalgamation, merger or arrangement or to which such
sale or conveyance may be made, as the case may be, that the
holder would have been entitled to receive on such
reclassification, redesignation, change, reorganization,
amalgamation, merger, arrangement, sale or conveyance if, on
the record date or the effective date thereof, as the case may
be, it had been the registered holder of the number of Common
Shares to which it is by its Warrant Certificate, prima facie,
entitled;
In the case of the amalgamation, merger or arrangement with or
sale or conveyance of the property and assets of the Company
as an entirety or substantially as an entirety to another body
corporate or other entity (the "Successor"), the Successor
shall expressly assume, by written agreement executed and
delivered to the holder, the due and punctual performance and
observance of each and every covenant and condition of this
Indenture and the Warrant Certificate to be performed and
observed by the Company;
(c) if at any time prior to the Expiry Time, the Company shall pay
any stock dividend or stock dividends upon the Common Shares,
the holder, if the Special Warrants have not been exercised
prior to the record date for payment of such stock dividend or
dividends, upon the exercise of such Special Warrants
thereafter, shall be entitled to receive in addition to the
number of Common Shares such additional number of securities
of the
<PAGE> 22
-22-
appropriate class that the holder would have been entitled to
receive if on the record date for payment of such stock
dividend or dividends it had been the registered holder of the
number of Common Shares to which it is by its Warrant
Certificate, prima facie, entitled;
(d) the adjustments provided for herein are cumulative. After any
adjustment pursuant hereto, the term "Common Shares" where
used in this Indenture shall be interpreted to mean Common
Shares of any class or classes which, as a result of all prior
adjustments pursuant hereto, the holder is entitled to receive
upon the exercise of its Special Warrants;
(e) in the event of any question arising with respect to
adjustments provided for herein, such question shall be
conclusively determined by the Company's auditors or, if they
are unable or unwilling to act, by such other firm of
independent chartered accountants as may be selected by the
board of directors of the Company, who shall have access to
all necessary records of the Company, the holder and all other
persons in interest, and such determination shall be binding
upon the Company, the Warrant Agent and the holder;
(f) notwithstanding anything in this Indenture to the contrary, no
adjustment shall be made in the number of Common Shares to be
acquired upon the exercise of the Special Warrants unless it
would result in a change of at least one one-hundredth of a
Common Share (but in each such case any adjustment that would
otherwise have been required then to be made shall be carried
forward and taken into account in any subsequent adjustment).
In case the Common Shares shall be subdivided into a greater
number or consolidated into a lesser number, the minimum
adjustment aforesaid shall thereupon be itself adjusted to
such amount which bears the same relation to the minimum
adjustment established immediately prior to such event as the
total number of Common Shares outstanding immediately prior
thereto bears to the total number of Common Shares outstanding
immediately thereafter. Any such minimum adjustment so
established shall continue in effect until the same shall
again be changed as herein provided;
(g) as a condition precedent to the taking of any action which
would require any adjustment pursuant hereto, the Company
shall take any corporate action which may, in the opinion of
counsel of the Company, be necessary in order that the Company
has unissued and allotted in its authorized capital and may
validly and legally issue as fully paid and non-assessable all
the securities which the holder is entitled to receive on the
full exercise of its Special Warrants in accordance with the
provisions hereof; and
<PAGE> 23
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(h) the Company shall from time to time immediately after the
occurrence of any event which requires an adjustment or
readjustment as provided herein, deliver a certificate of the
Company to the Company's auditors or, if they are unable or
unwilling to act, to such other firm of independent chartered
accountants as may be selected by the board of directors of
the Company, specifying the nature of the event requiring the
same and the amount of the adjustment necessitated thereby and
setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based, which
certificate and the amount of the adjustment specified therein
shall be verified by an opinion of the Company's auditors, or
the chartered accountants selected by the board, as the case
may be, and, when so verified, shall be conclusive and binding
on all parties in interest. When so verified, the Company
shall forthwith give notice to the holders in the manner
provided herein specifying the events requiring such
adjustment or readjustment and the result thereof.
4.09 POSTPONEMENT. - Any additional shares, rights, options or
warrants issuable or cash amounts payable to a Warrantholder pursuant to Section
4.08 shall be held in trust by the Warrant Agent pending the exercise of the
Special Warrants for Common Shares and shall not be released to the
Warrantholder until such exercise occurs.
4.10 NOTICE OF ADJUSTMENT. -
(1) At least ten (10) days prior to the effective date or record date, as
the case may be, of any event which requires or might require an
adjustment in any of the subscription rights to any of the Warrant
Certificates and the number of Common Shares which are issuable upon
the exchange thereof, the Company shall:
(a) file with the Warrant Agent a certificate of the Company
specifying the particulars of such event and, if determinable,
the required adjustment and the computation of such
adjustment; and
(b) give notice to the Warrantholders in the manner provided for
in Article Three of the particulars of such event and, if
determinable, the required adjustment.
(2) In case any adjustment for which a notice pursuant to Subsection
4.10(1) has been given is not then determinable, the Company shall
promptly after such adjustment is determinable;
(a) file with the Warrant Agent a computation of such adjustment;
and
<PAGE> 24
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(b) give notice to the Warrantholders in the manner provided for
in Article Three of the adjustment.
(3) Where a notice in Subsection 4.10(1) has been given, the Warrant Agent
shall be entitled to rely absolutely on any adjustment calculations of
the Company or the Company's auditors.
ARTICLE FIVE
PURCHASES BY THE COMPANY
5.01 OPTIONAL PURCHASES BY THE COMPANY. - The Company may from time
to time purchase Special Warrants on any stock exchange, in the open market, by
private agreement or otherwise. Any such purchase may be made in such manner,
from such persons, at such prices and on such terms as the Company in its sole
discretion may negotiate.
5.02 SURRENDER OF WARRANT CERTIFICATES. - Warrant Certificates
representing Special Warrants purchased pursuant to Section 5.01 shall be
surrendered to the Warrant Agent for cancellation.
ARTICLE SIX
COVENANTS OF THE COMPANY
6.01 GENERAL COVENANTS OF THE COMPANY. - The Company covenants
and/or represents and warrants with the Warrant Agent that so long as any
Warrant Certificates remain outstanding, until the Expiry Time:
(1) It will allot and keep available a sufficient number of Common Shares
for the purpose of enabling it to satisfy its obligations to issue
Common Shares in exchange for the Special Warrants.
(2) All Common Shares which shall be issued upon exercise of the Special
Warrants shall be issued as fully paid and non-assessable shares of the
Company.
(3) It will allot and cause the certificates representing the Common Shares
from time to time issued on exercise of the Special Warrants to be duly
issued and delivered in accordance with the Warrant Certificates and
the terms hereof.
(4) It will give to the Warrantholders, in the manner provided in Article
Three, and to the Warrant Agent, notice of its intention to fix a
record date, or effective date, as the case may be, for any event
referred to in Article Four which may give rise to an adjustment of the
number of Common Shares issuable upon exercise of
<PAGE> 25
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Special Warrants and, in each case, such notice shall specify the
particulars of such event and the record date, or the effective date,
for such event; provided that the Company shall only be required to
specify in such notice such particulars of such event as shall have
been fixed and determined on the date on which such notice is given.
Such notice shall be given in each case not less than twenty-one (21)
days prior to the applicable record date or effective date, as the case
may be.
(5) It will not close its transfer books nor take any other action which
might deprive a Warrantholder of the opportunity of exercising the
Warrantholder's right to subscribe for and be issued Common Shares upon
exercise of the Special Warrants held by such person during the period
of ten days after the giving of a notice required by this Section 6.01
or unduly restrict such opportunity.
(6) Generally, it will well and truly perform and carry out all of the acts
or things to be done by it as provided in this Indenture.
(7) It will carry on business in the ordinary course until the Expiry Time.
(8) It will use all reasonable efforts to diligently complete the
Acquisition and the Amalgamation and satisfy all of the Escrow Release
Conditions by June 24, 1997.
(9) It is duly authorized to create and issue the Special Warrants to be
issued hereunder and the Special Warrants, when issued as herein
provided, will be valid and enforceable against the Company in
accordance with their terms and subject to the provisions of this
Indenture.
(10) It shall not, prior to the earlier of the date on which all Special
Warrants have been exercised and the Expiry Time, amend or approve an
amendment of the articles of the Company in any manner which would
adversely affect the rights of the Warrantholders or any other
instrument relating to the issue of the Special Warrants without the
consent of the holders of a simple majority of the Special Warrants
outstanding.
(11) It will do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all other acts, deeds and
assurances in law as may be reasonably required to give full effect to
this Indenture.
(12) It shall, prior to the setting of a record date for any Shareholders'
meeting, give at least ten business days' notice to the Warrantholders
pursuant to Article Three and permit Warrantholders to attend any such
meeting as observers.
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6.02 WARRANT AGENT'S REMUNERATION AND EXPENSES. - The Company
covenants that it will pay to the Warrant Agent from time to time reasonable
remuneration for its services hereunder; and the Company will pay or reimburse
the Warrant Agent upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Warrant Agent in the administration or
execution of its duties hereunder (including the reasonable compensation and the
disbursements of its counsel and all other advisors and assistants not regularly
in its employ) both before any default hereunder and thereafter until all duties
of the Warrant Agent hereunder shall be finally and fully performed, except any
such expense, disbursement or advance as may arise out of or result from the
Warrant Agent's own negligent action, negligent failure to act, willful
misconduct or bad faith. Any amount due under this section and unpaid 30 days
after request for such payment shall bear interest at the current rate per annum
charged by the Warrant Agent from the expiration of such 30 days.
6.03 PERFORMANCE OF COVENANTS BY WARRANT AGENT. - If the Company
shall fail to perform any of its covenants contained in this Indenture, the
Warrant Agent may notify the Warrantholders of such failure on the part of the
Company or may itself perform any of the said covenants capable of being
performed by it, but shall be under no obligation to do so or to notify the
Warrantholders. All sums so expended or advanced by the Warrant Agent shall be
repayable upon request of the Warrant Agent by the Company as provided in
Section 6.02. No such performance or advance by the Warrant Agent shall be
deemed to relieve the Company of any default hereunder.
ARTICLE SEVEN
ENFORCEMENT
7.01 SUITS BY WARRANTHOLDERS, ETC. - All or any of the rights
conferred upon the holder of any Warrant Certificate by the terms of such
Warrant Certificate or of this Indenture may be enforced by the holder of such
Warrant Certificate by appropriate legal proceedings but without prejudice to
the right which is hereby conferred upon the Warrant Agent to proceed in its own
name to enforce each and all of the provisions herein contained for the benefit
of the Warrantholder.
7.02 IMMUNITY OF SHAREHOLDERS, ETC. - By the acceptance of the
Warrant Certificate and as part of the consideration for the issue of the
Special Warrants, the Warrantholders and the Warrant Agent hereby waive and
release any right, cause of action or remedy now or hereafter existing in any
jurisdiction against any past, present or future incorporator, Shareholder,
Director, officer, employee or agent of the Company for the issue of Common
Shares pursuant to any Special Warrant.
7.03 LIMITATION OF LIABILITY. - The obligations hereunder are not
personally binding upon, nor shall resort hereunder be had to, the private
property of any of the past, present or future Directors or Shareholders of the
Company or any successor
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corporation or any of the past, present or future officers, employees or agents
of the Company or any successor corporation, but only the property of the
Company or any successor corporation shall be bound in respect hereof.
ARTICLE EIGHT
MEETINGS OF WARRANTHOLDERS
8.01 RIGHT TO CONVENE MEETINGS. - The Warrant Agent may at any time
and from time to time and shall on receipt of a written request of the Company
or of a Warrantholders' Request and upon being indemnified to its reasonable
satisfaction by the Company or, as the case may be, by the Warrantholders
signing such Warrantholders' Request against the costs, charges, expenses and
liabilities which may be incurred by the Warrant Agent in connection with the
calling and holding of such meeting, convene a meeting of the Warrantholders. In
the event of the Warrant Agent failing within ten (10) days after receipt of
such written request by the Company or Warrantholders' Request and indemnity
given as aforesaid to give notice to convene a meeting, the Company or such
Warrantholders, as the case may be, may convene such meeting. Every such meeting
shall be held at such place as may reasonably be approved or determined by the
Warrant Agent.
8.02 NOTICE. - At least fifteen (15) days' notice of any meeting of
Warrantholders shall be given to the Warrantholders in the manner provided in
Article Three and a copy thereof shall be sent by post to the Warrant Agent
unless the meeting has been called by it and to the Company unless the meeting
has been called by it. Such notice shall state the time when and the place where
the meeting is to be held and shall state briefly the general nature of the
business to be transacted thereat. It shall not be necessary for any such notice
to set out the terms of any resolution to be proposed or any of the provisions
of this Article Eight. The notice convening any such meeting may be signed by an
appropriate officer of the Warrant Agent or of the Company or the person or
persons designated by such Warrantholders, as the case may be.
8.03 CHAIRMAN. - An individual (who need not be a Warrantholder)
nominated in writing by the Warrant Agent shall be chairman of the meeting and
if no individual is so nominated, or if the individual so nominated is not
present within fifteen (15) minutes from the time fixed for the holding of the
meeting, or if such person is unable or unwilling to act as chairman, the
Warrantholders present in person or by proxy shall choose some individual to be
chairman.
8.04 QUORUM. - Subject to the provisions of Section 8.12, at any
meeting of the Warrantholders a quorum shall consist of Warrantholders present
in person or by proxy and holding at least ten per cent (10%) of all the Special
Warrants outstanding as of the date of the meeting, provided that at least two
persons entitled to vote thereat are
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personally present. If a quorum of the Warrantholders shall not be present
within thirty (30) minutes from the time fixed for holding any meeting, the
meeting, if summoned by the Warrantholders or on a Warrantholders' Request,
shall be dissolved; but in any other case the meeting shall be adjourned to the
same day in the next following week (unless such day is a non-business day in
which case it shall be adjourned to the next following business day thereafter)
at the same time and place. At the reconvened meeting the Warrantholders present
in person or by proxy shall form a quorum and may transact the business for
which the meeting was originally called notwithstanding that they may not hold
at least ten per cent (10%) of all the then outstanding Special Warrants.
8.05 POWER TO ADJOURN. - Subject to the provisions of Section 8.04,
the chairman of any meeting at which a quorum of the Warrantholders is present
may, with the consent of the meeting, adjourn any such meeting and no notice of
such adjournment need be given except such notice, if any, as the meeting may
prescribe.
8.06 SHOW OF HANDS. - Every question submitted to a meeting shall
be decided in the first place by a majority of the votes given on a show of
hands except that votes on extraordinary resolutions shall be given in the
manner hereinafter provided. At any such meeting, unless a poll is duly demanded
as herein provided, a declaration by the chairman that a resolution has been
carried or carried unanimously or by a particular majority or lost or not
carried by a particular majority shall be conclusive evidence of the fact. Any
Warrantholder present in person or by proxy can demand a poll at any meeting in
accordance with the provisions of Section 8.07.
8.07 POLL. - On every extraordinary resolution, or on any other
question submitted to a meeting and after a vote by show of hands in respect of
such question, if requested by the chairman or by one of or more of the
Warrantholders acting in person or by proxy and holding at least five per cent
(5%) of all the Special Warrants then outstanding, a poll shall be taken in such
manner as the chairman shall direct. Questions other than extraordinary
resolutions shall be decided by a majority of the votes cast on the poll.
8.08 VOTING. - On a show of hands every person who is present and
entitled to vote, whether as a Warrantholder or as a proxy for one or more
absent Warrantholders or both, shall have one vote. On a poll, each
Warrantholder present in person or represented by a proxy duly appointed by
instrument in writing shall be entitled to one vote in respect of each Special
Warrant then held by him. A proxy need not be a Warrantholder. The chairman of
any meeting shall be entitled both on a show of hands and on a poll, to vote in
respect of the Special Warrants, if any, held or represented by him.
<PAGE> 29
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8.09 REGULATIONS. - The Warrant Agent or the Company with the
approval of the Warrant Agent may from time to time make regulations and from
time to time vary such regulations as it shall from time to time think fit:
(a) for the deposit of instruments appointing proxies at such
place and time as the Warrant Agent, the Company or the
Warrantholder calling the meeting, as the case may be, may
direct in the notice calling the meeting;
(b) for the deposit of instruments appointing proxies at some
approved place or places other than the place at which the
meeting is to be held and enabling particulars of such
instruments appointing proxies to be mailed, cabled,
telecopied or telegraphed before the meeting to the Company or
to the Warrant Agent at the place where the same is to be held
and for the voting of proxies so deposited as though the
instruments themselves were produced at the meeting;
(c) for the form of the instrument of proxy; and
(d) generally, for the calling of meetings of Warrantholders and
for the conduct of business thereat.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as such
regulations may provide, the only persons who shall be recognized at any meeting
as the holders of any Warrant Certificates, or as entitled to vote or, subject
to Section 8.10, be present at the meeting in respect thereof, shall be the
registered holders of the Special Warrants, and their legal advisers may attend
such meeting, but shall have no vote as such.
8.10 COMPANY AND WARRANT AGENT MAY BE REPRESENTED. - The Company
and the Warrant Agent, by their respective officers or directors, and the legal
advisers of the Company and the Warrant Agent may attend any meeting of the
Warrantholders, but shall have no vote as such.
8.11 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION. - In addition
to all other powers conferred upon them by any other provisions of this
Indenture or by law, the Warrantholders at a meeting shall have the following
powers exercisable from time to time by extraordinary resolution:
(a) power to consent and agree to any modification, abrogation,
alteration, compromise or arrangement of the rights of
Warrantholders or the Warrant Agent (in its capacity as
trustee hereunder or on behalf of the Warrantholders) with the
Company, whether such rights arise under this Indenture or the
Warrant Certificates or otherwise;
<PAGE> 30
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(b) power to direct or authorize the Warrant Agent (i) to enforce
any of the covenants of the Company contained in this
Indenture or the Warrant Certificates, (ii) to enforce any of
the rights of the Warrantholders in any manner specified in
such extraordinary resolution or (iii) to refrain from
enforcing any such covenant or right;
(c) power to waive and direct the Warrant Agent to waive any
default on the part of the Company in complying with any
provision of this Indenture or the Warrant Certificates,
either unconditionally or upon any conditions specified in
such extraordinary resolution;
(d) power to restrain any Warrantholder from taking or instituting
any suit, action or proceeding against the Company (i) for the
enforcement of any of the covenants of the Company contained
in this Indenture or the Warrant Certificates or (ii) to
enforce any of the rights of the Warrantholders;
(e) power to direct any Warrantholder who, as such, has brought
any suit, action or proceeding to stay or discontinue or
otherwise deal with the same upon payment of the costs,
charges and expenses reasonably and properly incurred by such
Warrantholder in connection therewith;
(f) power to appoint any persons (whether Warrantholders or not)
as a committee to represent the interests of Warrantholders
and to confer upon such committee any powers or discretions
which the Warrantholders could themselves exercise by
extraordinary resolution or otherwise; and
(g) power to remove the Warrant Agent and to appoint a new trustee
in accordance with Section 10.07.
8.12 EXTRAORDINARY RESOLUTION. -
(1) The expression "extraordinary resolution" when used in this Indenture
means, subject as hereinafter in this Section 8.12 and in Sections 8.15
and 8.16 provided, a resolution proposed at a meeting of Warrantholders
duly called for that purpose and held in accordance with the provisions
of this Article Eight at which there are present in person or by proxy
Warrantholders holding at least fifty-one per cent (51%) of all the
Special Warrants outstanding as of the date of the meeting and passed
by the affirmative votes of Warrantholders holding not less than
sixty-six and two-thirds per cent (66-2/3%) of all the Special Warrants
outstanding as of the date of the meeting represented at the meeting
and voted in the poll upon such resolution.
<PAGE> 31
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(2) If, at any such meeting called for the purpose of passing an
extraordinary resolution, Warrantholders holding fifty-one per cent
(51%) of all the then outstanding Special Warrants are not present in
person or by proxy within thirty (30) minutes from the time fixed for
holding the meeting, then the meeting, if called by Warrantholders or
on a Warrantholders' Request, shall be dissolved; but in any other case
it shall stand adjourned to such day, being not less than fifteen (15)
or more than sixty (60) days later, and to such place and time as may
be determined by the chairman. Not less than ten days' notice shall be
given of the time and place of such adjourned meeting in the manner
provided in Article Three. Such notice shall state that at the
adjourned meeting the Warrantholders present in person or by proxy
shall form a quorum but it shall not be necessary to set forth the
purposes for which the meeting was originally called or any other
particulars. At the adjourned meeting the Warrantholders present in
person or by proxy shall form a quorum notwithstanding the provisions
of Subsection 8.12(1) and may transact the business for which the
meeting was originally called and a resolution proposed at such
adjourned meeting and passed by the requisite vote as provided in
Subsection 8.12(1) shall be an extraordinary resolution within the
meaning of this Indenture, notwithstanding that Warrantholders holding
fifty-one per cent (51%) of all the then outstanding Special Warrants
are not present in person or by proxy at such adjourned meeting.
(3) Votes on an extraordinary resolution shall always be given on a poll
and no demand for a poll on an extraordinary resolution shall be
necessary.
8.13 POWERS CUMULATIVE. - It is hereby declared and agreed that any
one or more of the powers in this Indenture, stated to be exercisable by the
Warrantholders by extraordinary resolution or otherwise, may be exercised from
time to time and the exercise of any one or more of such powers from time to
time shall not be deemed to exhaust the right of the Warrantholders to exercise
such power or powers then or thereafter from time to time.
8.14 MINUTES. - Minutes of all resolutions and proceedings at every
meeting of Warrantholders shall be made and duly entered in books to be from
time to time provided for that purpose by the Warrant Agent at the expense of
the Company, and any such minutes, if signed by the chairman of the meeting at
which such resolutions were passed or proceedings had, or by the chairman of the
next succeeding meeting of the Warrantholders, shall be prima facie evidence of
the matters therein stated and, until the contrary is proved, every such
meeting, in respect of the proceedings of which minutes shall have been made,
shall be deemed to have been duly called and held, and all resolutions passed
thereat or proceedings taken, to have been passed and taken.
<PAGE> 32
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8.15 INSTRUMENTS IN WRITING. - All actions which may be taken and
all powers that may be exercised by the Warrantholders at a meeting held as
provided in this Article Eight may also be taken and exercised by Warrantholders
holding sixty-six and two thirds per cent (66-2/3%) of all the then outstanding
Special Warrants, by an instrument in writing signed in one or more counterparts
by such Warrantholders in person or by attorney duly appointed in writing and
the expression "extraordinary resolution" when used in this Indenture shall
include an instrument so signed.
8.16 BINDING EFFECT OF RESOLUTIONS. - Every resolution and every
extraordinary resolution passed in accordance with the provisions of this
Article Eight at a meeting of Warrantholders shall be binding upon all the
Warrantholders, whether present or absent at such meeting, and every instrument
in writing signed by Warrantholders in accordance with the provisions of Section
8.15 shall be binding upon all the Warrantholders, whether signatories thereto
or not, and each and every Warrantholder and the Warrant Agent (subject to the
provisions for indemnity herein contained) shall be bound to give effect
accordingly to every such resolution, extraordinary resolution and instrument in
writing.
8.17 HOLDINGS BY COMPANY AND WARRANT AGENT DISREGARDED. - In
determining whether Warrantholders are present at a meeting of Warrantholders
for the purpose of determining a quorum or have concurred in any consent,
resolution, extraordinary resolution, Warrantholders' Request, waiver, or other
action under this Indenture, Warrant Certificates owned by the Company and any
subsidiary of the Company shall be deemed not to be outstanding and shall be
disregarded. The Company shall from time to time and forthwith upon the Warrant
Agent's written request file with the Warrant Agent a certificate of the Company
setting forth as at the date of such certificate the number of Special Warrants
owned by the Company and any subsidiary of the Company.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
9.01 PROVISION FOR SUPPLEMENTAL INDENTURES FOR CERTAIN PURPOSES. -
From time to time the Company (when authorized by action by the Directors) and
the Warrant Agent may, subject to the provisions of this Indenture and they
shall, when so directed by the provisions of this Indenture, execute and deliver
by their proper officers, indentures or instruments supplemental hereto, which
thereafter shall form part hereof, for any one or more or all of the following
purposes:
(a) setting forth adjustments pursuant to the provisions of
Section 4.08 and in the pro rata apportionments subject
however to the rights of Warrantholders not being impaired or
prejudiced thereby otherwise than as provided herein;
<PAGE> 33
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(b) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of counsel, are
necessary or advisable in the premises, provided that the same
are not, in the opinion of the Warrant Agent, prejudicial to
the interests of the Warrantholders;
(c) giving effect to any extraordinary resolution passed as
provided in Article Eight;
(d) making such provisions not inconsistent with this Indenture as
may be necessary or desirable with respect to matters or
questions arising hereunder or for the purpose of obtaining a
listing or quotation of the Special Warrants on any stock
exchange, provided that such provisions are not, in the
opinion of the Warrant Agent, prejudicial to the interests of
the Warrantholders;
(e) adding to or altering the provisions hereof in respect of the
registration and transfer of Special Warrants, making
provision for the exchange of Warrant Certificates, or making
any modification in the form of the Warrant Certificates which
does not affect the substance thereof;
(f) modifying any of the provisions of this Indenture or relieving
the Company from any of the obligations, conditions or
restrictions herein contained, provided that no such
modification or relief shall be or become operative or
effective in such manner as to impair any of the rights of the
Warrantholders or of the Warrant Agent and provided further
that the Warrant Agent may in its sole discretion decline to
enter into any such supplemental indenture which in its
opinion may not afford adequate protection to the Warrant
Agent when the same shall become operative; and
(g) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective provisions, errors or omissions herein,
provided that, in the opinion of the Warrant Agent, the rights
of the Warrant Agent and of the Warrantholders are in no way
prejudiced thereby.
9.02 SUCCESSOR COMPANY. - In the case of a consolidation,
amalgamation, merger or transfer of the undertaking or assets of the Company as
an entirety or substantially as an entirety to another corporation (the
"Successor Company"), the Successor Company resulting from such consolidation,
amalgamation, merger or transfer (if not the Company) shall expressly assume, by
supplemental indenture satisfactory in form to the Warrant Agent and executed
and delivered to the Warrant Agent, the due and punctual performance and
observance of each and every covenant
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and obligation contained in this Indenture to be performed by the Company, as
the case may be.
ARTICLE TEN
CONCERNING THE WARRANT AGENT
10.01 TRUST INDENTURE LEGISLATION. -
(1) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Applicable
Legislation, such mandatory requirement shall prevail.
(2) The Company and the Warrant Agent agree that each will at all times in
relation to this Indenture and any action to be taken hereunder observe
and comply with and be entitled to the benefits of Applicable
Legislation.
10.02 RIGHTS AND DUTIES OF WARRANT AGENT. -
(1) In the exercise of the rights and duties prescribed or conferred by the
terms of this Indenture, the Warrant Agent shall exercise that degree
of care, diligence and skill that a reasonably prudent trustee would
exercise in comparable circumstances. No provision of this Indenture
shall be construed to relieve the Warrant Agent from liability for its
own negligent action, its own negligent failure to act, or its own
willful misconduct or bad faith.
(2) Subject to Subsection 10.02(1), the Warrant Agent shall not be bound to
do or take any act or action for the enforcement of any of the
obligations of the Company under this Indenture unless and until it
will have received a Warrantholder's Request defining the action which
the Warrant Agent is required to take and then the obligation of the
Warrant Agent to commence or continue any act, action or proceeding for
the purpose of enforcing any rights of the Warrant Agent or the
Warrantholders hereunder shall be conditional upon the Warrantholders
furnishing, when required by notice by the Warrant Agent, sufficient
funds to commence or continue such act, action or proceeding and
indemnity reasonably satisfactory to the Warrant Agent to protect and
hold harmless the Warrant Agent against the costs, charges, expenses
and liabilities to be incurred thereby and any loss or damage it may
suffer by reason thereof. None of the provisions contained in this
Indenture shall require the Warrant Agent to expend or risk its own
funds or otherwise incur financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers unless
indemnified as aforesaid.
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(3) The Warrant Agent may, before commencing or at any time during the
continuance of any such act, action or proceeding, require the
Warrantholders, at whose instance it is acting, to deposit with the
Warrant Agent the Warrant Certificates held by them, for which Warrant
Certificates the Warrant Agent shall issue receipts.
(4) Every provision of this Indenture that by its terms relieves the
Warrant Agent of liability or entitles it to rely upon any evidence
submitted to it is subject to the provisions of Applicable Legislation
and of this Section 10.02.
10.03 EVIDENCE. -
(1) Whenever it is provided in this Indenture that the Company shall
deposit with the Warrant Agent resolutions, certificates, reports,
opinions, requests, orders or other documents, it is intended that the
truth, accuracy and good faith on the effective date thereof of the
facts and opinions stated in all documents so deposited shall, in each
and every such case, be conditions precedent to the right of the
Company to have the Warrant Agent take the action to be based thereon.
The Warrant Agent may rely and shall be protected in acting upon any
such documents deposited with it in purported compliance with any such
provision or for any other purpose hereof, but may, in its discretion,
require further evidence before acting or relying thereon.
(2) The Warrant Agent may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, letter, telecopy, telegram, cablegram
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by or on behalf of the proper party or
parties.
(3) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Company shall furnish to the Warrant
Agent such additional evidence of compliance with any provision hereof,
and in such form, as may be prescribed by Applicable Legislation or as
the Warrant Agent may reasonably require by written notice to the
Company.
(4) Whenever Applicable Legislation requires that evidence referred to in
Subsection 10.03(3) be in the form of a statutory declaration, the
Warrant Agent may accept such statutory declaration in lieu of a
certificate of the Company required by any provisions hereof. Any such
statutory declaration may be made by one or more of the President, the
Vice-President, the Secretary, the Treasurer, any Assistant Secretary
or any Assistant Treasurer of the Company.
(5) Proof of execution of an instrument in writing by any Warrantholder may
be made by the certificate of a notary public, or other officer with
similar powers,
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that the person signing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution or
in any other manner which the Warrant Agent may consider adequate.
10.04 EXPERTS AND ADVISERS. -
(1) The Warrant Agent may employ or retain, at the expense of the Company,
such counsel, accountants, or other experts or advisers as it may
reasonably require, such discretion being exercised reasonably, for the
purpose of discharging its duties hereunder and shall not be
responsible for any misconduct on the part of any of them.
(2) The Warrant Agent may act and shall be protected in acting in good
faith on the opinion or advice of or information obtained from any
counsel, accountant or other expert or adviser, whether retained or
employed by the Company, or by the Warrant Agent, in relation to any
matter arising in relation to this Indenture.
10.05 WARRANT AGENT NOT REQUIRED TO GIVE SECURITY. - The Warrant Agent shall
not be required to give any bond or security in respect of the execution of the
trusts and powers of this Indenture or otherwise in respect of the premises.
10.06 PROTECTION OF WARRANT AGENT. - By way of supplement to the provisions
of any law for the time being relating to trustees, it is expressly declared and
agreed as follows:
(a) the Warrant Agent shall not be liable for or by reason of any
statement of fact or recital in this Indenture or in the
Warrant Certificates (except the representation contained in
Section 10.08 and in the certificate of the Warrant Agent on
the Warrant Certificates) or required to verify the same, but
all such statements or recitals are and shall be deemed to be
made by the Company;
(b) the Warrant Agent shall not be bound to give notice to any
person or persons of the execution hereof;
(c) the Warrant Agent shall not incur any liability or
responsibility whatever or be in any way responsible for the
consequence of any breach on the part of the Company of any of
the representations, warranties or covenants herein contained
or of any acts of Directors, officers, employees, agents or
servants of the Company;
(d) nothing herein contained shall impose any obligation on the
Warrant Agent to see to or to require evidence of the
registration or filing (or
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renewal thereof) of this Indenture or any instrument ancillary
or supplemental hereto;
(e) the Warrant Agent will at all times be indemnified and saved
harmless by the Company from and against all claims, demands,
losses, actions, causes of action, costs, charges, expenses,
damages and liabilities whatsoever arising in connection with
this Warrant Indenture, including, without limitation, those
arising out of or related to actions taken or omitted to be
taken by the Warrant Agent contemplated hereby, legal fees and
disbursements on a solicitor and client basis and costs and
expenses incurred in connection with the enforcement of this
indemnity, which the Warrant Agent may suffer or incur,
whether at law or in equity, in any way caused by or arising,
directly or indirectly, in respect of any act, deed, matter or
thing whatsoever made, done, acquiesced in or omitted in or
about or in relation to the execution of its duties as Warrant
Agent. The foregoing provisions of this Section 10.06 do not
apply to the extent that in any circumstances there has been a
failure by the Warrant Agent or its employees or agents to act
honestly and in good faith or to discharge the Warrant Agent's
obligations under Section 10.01. This indemnity and any
limitations thereto as set forth herein, will survive the
termination or discharge of this Warrant Indenture and the
resignation of the Warrant Agent;
(f) the Warrant Agent shall not be bound to give any notice or do
or take any act, action or proceeding by virtue of the powers
conferred on it hereby unless and until it shall have been
required so to do under the terms hereof; nor shall the
Warrant Agent be required to take notice of any default
hereunder, unless and until notified in writing of such
default, which notice shall distinctly specify the default
desired to be brought to the attention of the Warrant Agent,
and in the absence of any such notice the Warrant Agent may
for all purposes of this Indenture conclusively assume that no
default has been made in the observance or performance of any
of the representations, warranties, covenants, agreements or
conditions contained herein. Any such notice shall in no way
limit any discretion herein given to the Warrant Agent to
determine whether or not the Warrant Agent shall take action
with respect to any default;
(g) the Warrant Agent shall incur no liability with respect to the
delivery or non-delivery of any certificates whether delivered
by hand, mail or any other means; and
(h) the Warrant Agent shall have no obligation to ensure
compliance with any laws applicable to the issue, transfer or
exercise of any Special Warrants or Common Shares.
<PAGE> 38
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10.07 REPLACEMENT OF WARRANT AGENT; SUCCESSOR BY AMALGAMATION. -
(1) The Warrant Agent may resign its trust and be discharged from all
further duties and liabilities hereunder, subject to this Subsection
10.07(1), by giving to the Company not less than sixty (60) days' prior
notice in writing or such shorter prior notice as the Company may
accept as sufficient. The Warrantholders, by extraordinary resolution,
shall have power at any time to remove the Warrant Agent and to appoint
a new trustee. In the event of the Warrant Agent resigning or being
removed as aforesaid or being dissolved, becoming bankrupt, going into
liquidation or otherwise becoming incapable of acting hereunder, the
Company shall forthwith appoint a new trustee unless such extraordinary
resolution has appointed a new trustee; failing such appointment by the
Company, the retiring Warrant Agent or any Warrantholder may apply to a
justice of the Ontario Court of Justice (General Division), on such
notice as such justice may direct for the appointment of a new trustee;
but any new trustee so appointed by the Company or by the Court shall
be subject to removal as aforesaid by the Warrantholders. Any new
trustee appointed under any provision of this Subsection 10.07(1) shall
be a corporation authorized to carry on the business of a trust company
in the Province of Ontario and British Columbia and, if required by the
Applicable Legislation of any other province in Canada, in such other
provinces. On any such appointment the new trustee shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as trustee without any further assurance,
conveyance, act or deed; but there shall be immediately executed, at
the expense of the Company, all such conveyances or other instruments
as may, in the opinion of counsel, be necessary or advisable for the
purpose of assuring the same to the new trustee, provided that,
following any resignation or removal of the Warrant Agent and
appointment of a successor trustee, the successor trustee shall have
executed an appropriate instrument accepting such appointment and, at
the request of the Company, the predecessor Warrant Agent shall execute
and deliver to the successor trustee an appropriate instrument
transferring to such successor trustee all rights and powers of the
Warrant Agent hereunder so ceasing to act.
(2) Upon the appointment of a successor trustee, the Company shall promptly
notify the Warrantholders thereof in the manner provided for in Article
Three hereof.
(3) Any corporation into or with which the Warrant Agent may be merged or
consolidated or amalgamated, or any corporation resulting therefrom to
which the Warrant Agent shall be a party, or any corporation succeeding
to the trust business of the Warrant Agent shall be the successor to
the Warrant Agent hereunder without any further act on its part or any
of the parties hereto, provided that, such corporation would be
eligible for appointment as a successor trustee under Subsection
10.07(1) above.
<PAGE> 39
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10.08 CONFLICT OF INTEREST. -
(1) The Warrant Agent represents to the Company that at the time of
execution and delivery hereof no material conflict of interest exists
in the Warrant Agent's role as a fiduciary hereunder and agrees that in
the event of a material conflict of interest arising hereafter it will,
within ninety (90) days after ascertaining that it has such material
conflict of interest, either eliminate the same or assign its trust
hereunder to a successor trustee approved by the Company and meeting
the requirements set forth in Subsection 10.07(1).
(2) Subject to Subsection 10.08(1), the Warrant Agent or a successor
trustee, in its personal or any other capacity, may buy, lend upon and
deal in securities of the Company and generally may contract and enter
into financial transactions with the Company or any subsidiary of the
Company without being liable to account for any profit made thereby.
10.09 ACCEPTANCE OF TRUST. - The Warrant Agent hereby accepts the trusts in
this Indenture declared and provided for and agrees to perform the same upon the
terms and conditions hereinbefore set forth unless and until discharged
therefrom.
10.10 ACTIONS BY WARRANT AGENT TO PROTECT INTEREST. - The Warrant Agent shall
have power to institute and to maintain such actions and proceedings as it may
consider necessary or expedient to preserve, protect or enforce its interest and
the interests of the Warrantholders.
10.11 DOCUMENTS, MONEYS, ETC. HELD BY WARRANT AGENT. - Any securities,
documents of title or other instruments that may at any time be held by the
Warrant Agent subject to the trusts hereof may be placed in the deposit vaults
of the Warrant Agent or of any bank being listed in Schedule I of the Bank Act
(S.C. 1991, c. 46, as amended) or deposited for safekeeping with any such bank.
Unless herein otherwise expressly provided, any moneys so held pending the
application or withdrawal thereof under any provisions of this Indenture, may be
deposited in the name of the Warrant Agent in any such bank at the rate of
interest (if any) then current on similar deposits or, with the consent of the
Company, may be deposited in the deposit department of the Warrant Agent or any
other loan or trust company or chartered bank authorized to accept deposits
under the laws of Canada or a province thereof. All interest or other income
received by the Warrant Agent in respect of such deposits and investments shall,
subject to the provisions of Article Twelve hereof, belong to the Company.
10.12 WARRANT AGENT NOT TO BE APPOINTED RECEIVER. - The Warrant Agent and any
person related to the Warrant Agent shall not be appointed a receiver or
receiver and manager or liquidator of all or any part of the assets or
undertaking of the Company.
<PAGE> 40
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10.13 WARRANT AGENT TO EXERCISE SPECIAL WARRANTS. - The Warrant Agent shall
automatically exercise the Special Warrants on behalf of the holders thereof at
the Deemed Exercise Time upon the terms and conditions specified in Subsection
4.06(1).
ARTICLE ELEVEN
FORM OF WARRANT CERTIFICATES
11.01 FORM OF WARRANT CERTIFICATES. - The following is the form of the
Warrant Certificate referred to in Article Two:
[FOR SPECIAL WARRANTS ISSUED IN THE UNITED STATES OR TO U.S. PERSONS ONLY,
INCLUDE THE FOLLOWING:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE
WITH ANY STATE SECURITIES LAWS OR (D) WITH THE PRIOR WRITTEN CONSENT OF THE
CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."]
[FOR SPECIAL WARRANTS ISSUED TO NON-U.S. PERSONS, INCLUDE THE FOLLOWING
THESE SECURITIES AND SECURITIES WHICH MAY BE ACQUIRED HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE
"U.S. SECURITIES ACT") AND MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT.]
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO
VALUE UNLESS EXERCISED (IF PERMITTED TO BE EXERCISED IN ACCORDANCE WITH THE
TERMS HEREOF) ON THE EARLIER OF (THE "EXPIRY TIME") (I) THE TIME AT WHICH (THE
"DEEMED EXERCISE TIME") THE COMPANY COMPLETES THE AMALGAMATION WITH THORNBURY
CAPITAL CORPORATION, SUBJECT ONLY TO THE FILING OF PRE-APPROVED ARTICLES OF
AMALGAMATION WITH THE DIRECTOR UNDER THE BUSINESS CORPORATIONS ACT (ONTARIO),
THE COMPANY CLOSES THE ACQUISITION IN ESCROW, SUBJECT ONLY TO PAYMENT, OF
SUBSTANTIALLY ALL OF THE URANIUM PRODUCING ASSETS AND BUSINESS OF ENERGY FUELS,
LTD., ENERGY FUELS EXPLORATION COMPANY AND ENERGY FUELS NUCLEAR, INC. AND THE
<PAGE> 41
-41-
COMPANY OBTAINS A CONDITIONAL LISTING OF THE COMMON SHARES OF THE AMALGAMATED
COMPANY ON THE TORONTO STOCK EXCHANGE (COLLECTIVELY, THE "ESCROW RELEASE
CONDITIONS") AND (II) JUNE 24, 1997 (THE "AUTOMATIC RETRACTION TIME"). IN THE
EVENT THAT A HOLDER HAS NOT EXERCISED THE SPECIAL WARRANTS BY THE EXPIRY TIME
AND ALL OF THE ESCROW RELEASE CONDITIONS HAVE BEEN SATISFIED, THE SPECIAL
WARRANTS HELD BY SUCH HOLDER SHALL BE EXERCISED BY MONTREAL TRUST COMPANY OF
CANADA ON BEHALF OF SUCH HOLDER AT THE DEEMED EXERCISE TIME WITHOUT ANY FURTHER
ACTION ON THE PART OF THE HOLDER OR THE COMPANY. ANY SPECIAL WARRANTS NOT
EXERCISED PRIOR TO THE DEEMED EXERCISE TIME SHALL BE DEEMED TO HAVE BEEN
AUTOMATICALLY EXERCISED BY MONTREAL TRUST COMPANY OF CANADA ON BEHALF OF HOLDERS
OF SPECIAL WARRANTS, PROVIDED THAT ALL OF THE ESCROW RELEASE CONDITIONS HAVE
BEEN SATISFIED.
INTERNATIONAL URANIUM CORPORATION
(INCORPORATED UNDER THE LAWS OF ONTARIO)
SPECIAL WARRANTS
CERTIFICATE NUMBER OF
NUMBER___________ SPECIAL WARRANTS________
Special Warrants to Acquire Common Shares
THIS CERTIFIES THAT, for value received,______________________________
(the "Holder") is the registered holder of_______________________ Special
Warrants and is entitled, upon the terms and conditions set out herein, to
acquire for no additional consideration, one (1) common share (a "Common Share")
in the capital of International Uranium Corporation (the "Company") for each
such Special Warrant held, subject to adjustment.
Special Warrants shall be exercisable for Common Shares by the Holder at any
time prior to the Expiry Time by surrendering this certificate to Montreal Trust
Company of Canada (the "Warrant Agent") at 151 Front Street West, Stock and Bond
Transfer Department, 8th Floor, Toronto, Ontario, M5J 2N1, Attention:
Reorganization Department, together with a duly completed and executed notice of
exercise in the form attached hereto (the "Notice of Exercise"). At any time
prior to the Expiry Time the Special Warrants represented by this certificate
shall be exercisable by the Holder, in whole only, and the Company shall cause
the Warrant Agent, upon receipt by the Warrant Agent of an executed Notice of
Exercise to issue certificates representing the Common Shares issuable upon the
exercise of the Special Warrants represented hereby to be mailed to the Holder
as recorded on the register maintained by the
<PAGE> 42
-42-
Warrant Agent and the Special Warrants represented by this certificate shall,
upon such delivery, be void and of no value or effect. The Holder shall be
deemed to have become the holder of record of such Common Shares immediately
prior to the close of business on the date of receipt by the Warrant Agent of
the Notice of Exercise.
All Special Warrants and Common Shares acquired upon the exercise of the Special
Warrants are subject to restrictions on resale until:
(a) the appropriate "hold period" has expired;
(b) a further statutory exemption may be relied upon by the
Holder;
(c) the securities sought to be resold are qualified for
distribution under a prospectus; or
(d) an appropriate discretionary order is obtained pursuant to
applicable securities legislation.
If the Escrow Release Conditions have not been satisfied by the Automatic
Retraction Time, the Warrant Agent shall automatically repurchase the
unexercised Special Warrants at such time on behalf of the Company, and the
holder of such unexercised Special Warrants shall be entitled to receive for
each Special Warrant an amount equal to $1.25 per Special Warrant so purchased
together with the Holder's pro rata share of the interest on the Escrowed Funds
(as defined in the Special Warrant Indenture dated the date hereof (the "Warrant
Indenture")). Such payment shall be made by way of cheque payable in the City of
Toronto, and upon delivery of such cheque the Special Warrants shall be void and
of no value.
Notwithstanding any adjustments provided for herein or otherwise, the Company
shall not be required upon the exercise of any Special Warrants, to issue
fractional Common Shares in satisfaction of its obligations hereunder. To the
extent that the Holder would otherwise be entitled to acquire a fraction of a
Common Share, such right may be exercised in respect of such fraction only in
combination with other rights which in the aggregate entitle the Holder to
acquire a whole number of Common Shares.
Nothing in this certificate or in the holding of a Special Warrant evidenced
hereby shall be construed as conferring upon the Holder any right or interest
whatsoever as a shareholder of the Company or entitle the Holder to any right or
interest in respect of any Common Shares, except as herein expressly provided.
All Special Warrants shall rank pari passu, notwithstanding the actual date of
the issue thereof.
<PAGE> 43
-43-
The Warrant Agent on behalf of the Company shall cause a register to be kept in
which shall be entered the names and addresses of all holders of the Special
Warrants and the number of Special Warrants held by them. No transfer of Special
Warrants shall be valid unless made by the Holder or its executors,
administrators or other legal representatives or its attorney duly appointed by
an instrument in writing in form and execution satisfactory to the Company and
the Warrant Agent on the register to be kept at the offices of the Warrant Agent
in the City of Toronto upon compliance with such reasonable requirements as the
Company and Warrant Agent may prescribe, including compliance with all
applicable securities legislation and the conditions prescribed in the Warrant
Indenture between the Warrant Agent and the Company, and recorded on the
register of holders of Special Warrants maintained by the Warrant Agent, nor
until stamp or governmental or other charges arising by reason of such transfer
have been paid. The transferee of a Special Warrant shall, after a form of
transfer acceptable to the Company and Warrant Agent is duly completed and the
Special Warrant is lodged with the Warrant Agent and upon compliance with all
other reasonable requirements of the Company and the Warrant Agent or law, be
entitled to have its name entered on the register as the owner of such Special
Warrant, free from all equities or rights of set-off or counterclaim between the
Company and the transferor or any previous holder of such Special Warrant, save
in respect of equities of which the Company is required to take notice by
statute or by order of a court of competent jurisdiction. The Company and the
Warrant Agent may treat the registered holder of any Special Warrant certificate
as the absolute owner of the Special Warrants represented thereby for all
purposes, and the Company and the Warrant Agent shall not be affected by any
notice or knowledge to the contrary except where the Company and Warrant Agent
is required to take notice by statute or by order of a court of competent
jurisdiction.
The number of Common Shares to be issued upon exercise of the right of exercise
evidenced hereby shall be subject to adjustment from time to time in the events
and in the manner specified in the Warrant Indenture. The Holder is advised to
carefully review such indenture for the particulars thereof.
The Warrant Agent shall not be required to deliver certificates representing
Common Shares issuable upon the exercise hereof when the Common Share transfer
books of the Company are properly closed, prior to any meeting of shareholders
or for the payment of dividends or for any other purpose and in the event of the
exercise of any Special Warrant in accordance with the provisions hereof during
any such period delivery of certificates may be postponed for not exceeding five
(5) business days after the date of the re-opening of said Common Shares
transfer books, provided however that any such postponement of delivery of
certificates shall be without prejudice to the right of the Holder to receive
such certificates after the Common Share transfer books shall have been
reopened.
Subject as herein provided, all or any of the rights conferred upon the Holder
may be enforced by the Holder by appropriate legal proceedings. No recourse
under or upon
<PAGE> 44
-44-
any obligation, covenant or agreement herein contained shall be had against any
shareholder, officer or director of the Company, either directly or through the
Company, it being expressly agreed and declared that the obligations under the
Special Warrants represented by this certificate are solely corporate
obligations of the Company and that no personal liability whatever shall attach
to or be incurred by the shareholders, officers, or directors of the Company or
any of them in respect thereof, any and all rights and claims against every such
shareholder, officer or director being hereby expressly waived as a condition of
and as a consideration for the issue of the Special Warrants represented by this
certificate.
If this Special Warrant certificate is stolen, lost, mutilated or destroyed the
Company may, on such terms as it may in its discretion impose, respectively
issue and countersign a new Special Warrant certificate of like denomination,
tenor and date as the certificate so stolen, lost, mutilated or destroyed.
This certificate and the Special Warrants represented hereby shall be governed
by, performed, construed and enforced in accordance with the Warrant Indenture
and the laws of the Province of Ontario and the laws of Canada applicable
therein.
Time shall be of the essence hereof.
IN WITNESS WHEREOF the Company has caused this Special Warrant
certificate to be signed by the signature of its duly authorized officer as of
this _________ day of __________________, 1997.
INTERNATIONAL URANIUM CORPORATION
Per:
-----------------------------------------
[Authorized Signing Officer]
Countersigned and Registered
Montreal Trust Company of Canada, as Warrant Agent
By:
-------------------------------------------
[Authorized Signing Officer]
Date:
<PAGE> 45
-45-
11.02 TRANSFER OF WARRANTS
The following is the form of transfer for the Warrants:
TRANSFER OF SPECIAL WARRANTS
ANY TRANSFER OF SPECIAL WARRANTS WILL REQUIRE COMPLIANCE WITH APPLICABLE
SECURITIES LEGISLATION. THE WARRANTHOLDER AND ANY TRANSFEREE ARE URGED TO
CONTACT LEGAL COUNSEL BEFORE EFFECTING ANY SUCH TRANSFER.
Neither the Special Warrants represented by this certificate nor the
securities issuable upon exercise hereof have been or will be registered under
the United States Securities Act of 1933, as amended (the "U.S. Securities
Act"). Subject to certain limited exceptions, the Special Warrants represented
by this certificate may not be transferred to, or for the account or benefit of,
a person in the United States (as such term is defined in Regulation S under the
U.S. Securities Act).
FOR VALUE RECEIVED the undersigned, hereby sells, assigns and transfers
unto
(name and address)
FURTHERMORE, the undersigned certifies (one (only) of the following
must be checked):
[ ] at the time of transfer it is within the United States, and
such sale, assignment and transfer is being made to a person
in the United States pursuant to an exemption from
registration under the U.S. Securities Act and an opinion of
counsel has been delivered to the Company.
[ ] such sale assignment and transfer is being made, and the
offer of the securities being sold, assigned and transferred
was made, to a person not in the United States.
Special Warrants of International Uranium Corporation registered in the name of
the undersigned on the records of Montreal Trust Company of Canada represented
by the Special Warrant Certificate attached and irrevocably appoints
____________________ attorney of the undersigned to transfer the said securities
on the books or register with full power of substitution.
<PAGE> 46
-46-
DATED THE _______ DAY OF _____________________, 1997
- ------------------------------- ------------------------------------
SIGNATURE GUARANTEED SIGNATURE OF SPECIAL WARRANT
HOLDER
------------------------------------
PRINT FULL NAME
<PAGE> 47
-47-
INSTRUCTIONS:
1. Signature of the Warrantholder must be the signature of the person
appearing on the face of this Warrant Certificate.
2. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a fiduciary or representative capacity, the Warrant
Certificate must be accompanied by evidence of authority to sign
satisfactory to the Warrant Agent and the Company.
3. The signature on the Transfer Form must be guaranteed by a Canadian
bank or trust company or by a member of a stock exchange whose
signature is known to the Warrant Agent.
4. WARRANTS SHALL ONLY BE TRANSFERABLE IN ACCORDANCE WITH APPLICABLE LAWS
AND REGULATIONS, THE RULES AND POLICIES OF ANY APPLICABLE STOCK
EXCHANGE AND ANY UNDERTAKING WHICH MAY HAVE BEEN GIVEN BY THE
WARRANTHOLDER. THE WARRANTHOLDER AND ANY TRANSFEREE ARE URGED TO
CONTACT LEGAL COUNSEL BEFORE EFFECTING ANY SUCH TRANSFER.
The undersigned transferee of ______________________ Special Warrants
of International Uranium Corporation hereby (i) acknowledges that such Special
Warrants are subject to the terms and conditions and provisions of an Indenture
dated March 26, 1997, and (ii) confirms and certifies that the transfer is made
in compliance with all applicable securities laws and regulations, the rules and
policies of any applicable stock exchange and any undertaking given to any
applicable stock exchange.
NAME OF TRANSFEREE (WARRANTHOLDER)
BY:
----------------------------------------
OFFICE OR TITLE
-------------------------------------------
ADDRESS OF TRANSFEREE (WARRANTHOLDER)
-------------------------------------------
<PAGE> 48
-48-
EXERCISE FORM
TO: MONTREAL TRUST COMPANY OF CANADA
151 FRONT STREET WEST
SUITE 800
TORONTO, ONTARIO
M5J 2N1
ATTENTION: REORGANIZATION DEPARTMENT
AND TO: INTERNATIONAL URANIUM CORPORATION (THE "COMPANY")
The undersigned hereby exercises the right to acquire
_______________ Common Shares as defined in and according to the terms and
conditions of the Special Warrant certificate dated _________________, 1997 of
the Company registered in the name of the undersigned.
Such Common Shares are to be issued in the name of the
undersigned noted on the register of holders of Special Warrants maintained by
Montreal Trust Company of Canada.
Number of Special Warrants exchanged
DATED THIS ______ DAY OF _________________, 1997
- ------------------------------- ------------------------------------
WITNESS SIGNATURE OF SPECIAL WARRANT
HOLDER
------------------------------------
PRINT FULL NAME AND ADDRESS
------------------------------------
------------------------------------
------------------------------------
Please check box if Common Shares are to be held at the office of Montreal Trust
Company of Canada where the accompanying Special Warrant Certificate is
surrendered, failing which, Common Shares will be mailed to address set forth
above.
[ ]
<PAGE> 49
-49-
ARTICLE TWELVE
ESCROW ARRANGEMENTS
12.01 NET PROCEEDS AND INVESTMENT THEREOF. - The Warrant Agent acknowledges
receipt of the net proceeds of the offering of Special Warrants (after deducting
the Agents' Commission) and agrees to hold the same in trust on behalf of the
persons who have an interest therein pursuant hereto, and to disburse and deal
with the same as part of the Escrowed Funds all on the terms hereof. Pending
disbursement of the Escrowed Funds, the Warrant Agent agrees to hold, invest and
reinvest the same in Government of Canada Treasury Bills or as otherwise
directed by the Company from time to time. All such investments shall be
retained by the Warrant Agent in safekeeping at its principal office in Toronto
and shall be held in trust by the Warrant Agent on behalf of the persons who
have an interest therein pursuant hereto.
12.02 DISBURSEMENT OF ESCROWED FUNDS. - Subject to Section 12.04, the Warrant
Agent shall realize on the investments referred to in Section 12.01 and disburse
all or part of the Escrowed Funds in the following circumstances:
(a) if a holder exercises Special Warrants prior to the Expiry
Time, the Warrant Agent shall disburse to the Company from the
Escrowed Funds an amount equal to the subscription price of
the Special Warrants so exercised, net of any applicable
Agents' Commission, together with the interest accrued
thereon;
(b) if the Deemed Exercise Time has occurred and the Warrant Agent
has received the Escrow Certificate issued by the Company and
the Agents, the Warrant Agent shall as soon as practicable
thereafter disburse the Escrowed Funds (including, for greater
certainty, the interest accrued thereon) to the Company or as
the Company may direct; and
(c) if the Automatic Retraction Time has occurred and the Warrant
Agent has not received the Escrow Certificate, the Warrant
Agent shall disburse the Subscription Funds, together with the
pro rata share of the interest accrued on the Escrowed Funds,
all in accordance with Subsection 4.06(2).
12.03 ADDITIONAL PAYMENTS BY COMPANY. - In the event that the Warrant Agent
determines that the Escrowed Funds will not be sufficient to allow the Warrant
Agent to pay any amount or amounts pursuant to Section 4.06 or this Article
Twelve, the Warrant Agent shall give written notice of such determination to the
Company and the Company shall within one business day of the date upon which
such notice is given, pay to the Warrant Agent such amount as will be sufficient
to allow the Warrant Agent to pay any amount or amounts payable in accordance
with Section 4.06 or this Article Twelve. For greater certainty and without
limiting the generality of the foregoing, the Company shall
<PAGE> 50
-50-
contribute to the Escrowed Funds any amounts required to cover any currency
exchange risks and all transaction costs, in the event that the Escrow Release
Conditions (including without limitation the closing of the Acquisition on the
terms contemplated herein) is not completed as contemplated and the Escrowed
Funds are returned to the Warrant Agent for disbursement to the holders in
accordance with their respective retraction rights provided for in Subsection
4.06(2).
12.04 DELIVERY TO THIRD PARTY ESCROW AGENT. - Notwithstanding any other
provision hereof, the Warrant Agent shall, upon receipt of a joint direction
from the Company and the Agents, realize on all or part of the investments
referred to in Section 12.01 and deliver all or part of the Escrowed Funds to a
third party escrow agent pursuant to and in accordance with the instructions set
forth in such direction for the purpose of facilitating the completion of the
closing of the Acquisition.
ARTICLE THIRTEEN
REGISTER OF WARRANTHOLDERS
13.01 REGISTER OF SPECIAL WARRANTS. - The Warrant Agent shall prepare and
maintain at its principal stock transfer office in Toronto, Ontario or at any
other place designated by the Warrant Agent and agreed to by the Company, a
Warrant Register in which the Warrant Agent shall record the number of Special
Warrants issued hereunder and including:
(a) an alphabetical listing of the names of all Warrantholders;
(b) the date and particulars of the issue of Special Warrants
hereunder; and
(c) the date and other particulars of each transfer of Special
Warrants.
13.02 LOCATION OF WARRANT REGISTER. - The Warrant Register shall be kept at
the main principal stock transfer office of the Warrant Agent or at such other
place or places as the Warrant Agent and the Company may agree upon.
13.03 VALIDITY OF REGISTRATION. - A registration of a transfer of a Special
Warrant in the Warrant Register shall be a complete and valid registration for
all purposes.
ARTICLE FOURTEEN
GENERAL
14.01 NOTICE TO THE COMPANY AND THE WARRANT AGENT. -
(1) Unless herein otherwise expressly provided, any notice to be given
hereunder to the Company or to the Warrant Agent shall be deemed to be
validly given if delivered or if sent by registered letter, postage
prepaid:
<PAGE> 51
-51-
(a) If to the Company:
International Uranium Corporation
Suite 1320
885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
Attention: President
Fax: (604) 689-4250
with a copy to:
Cassels Brock & Blackwell
Barristers and Solicitors
40 King Street West, Suite 2100
Toronto, Ontario
M5H 3C2
Attention: John H. Craig
Fax: (416) 360-8877
(b) If to the Warrant Agent:
Montreal Trust Company of Canada
151 Front Street West, Suite 605
Toronto, Ontario
M5J 2N1
Attention: Manager, Corporate Trust Department
Fax: (416) 981-9777
and any such notice delivered in accordance with the foregoing shall be
deemed to have been received on the date of delivery or, if mailed, on
the fourth business day following the date of the postmark on such
notice.
(2) The Company or the Warrant Agent, as the case may be, may from time to
time notify the others in the manner provided in Subsection 14.01(1) of
a change of address which, from the effective date of such notice and
until changed by like notice, shall be the address of the Company or
the Warrant Agent, as the case may be, for all purposes of this
Indenture.
<PAGE> 52
-52-
(3) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrant Agent or to the Company hereunder could reasonably be
considered unlikely to reach its destination, such notice shall be
valid and effective only if it is delivered to an officer of the party
to which it is addressed or if it is delivered to such party at the
appropriate address provided in Subsection 14.01(1) by cable, telegram,
telex or other means of prepaid, transmitted, recorded communication.
14.02 TIME OF THE ESSENCE. - Time shall be of the essence in this Indenture.
14.03 COUNTERPARTS. - The Indenture may be executed in several counterparts,
each of which when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument and
notwithstanding their date of execution shall be deemed to be dated as of the
day and date first above written.
14.04 SATISFACTION AND DISCHARGE OF INDENTURE. - Upon the earlier of (i) the
date by which there shall have been delivered to the Warrant Agent for exercise
or cancellation all Warrant Certificates theretofore certified hereunder or (ii)
the date the Warrant Agent has disbursed all of the Escrowed Funds in accordance
with Subsection 4.06(2) and Section 12.02, this Indenture shall cease to be of
further effect and the Warrant Agent, on demand of and at the cost and expense
of the Company and upon delivery to the Warrant Agent of a certificate of the
Chairman, President or any Vice-President of the Company stating that all
conditions precedent to the satisfaction and discharge of this Indenture have
been complied with and upon payment to the Warrant Agent of the expenses, fees
and other remuneration payable to the Warrant Agent, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, except
those provisions dealing with the indemnification of the Warrant Agent.
14.05 PROVISIONS OF INDENTURE AND WARRANT CERTIFICATES FOR THE SOLE BENEFIT
OF PARTIES AND WARRANTHOLDERS. Nothing in this Indenture or the Warrant
Certificates, expressed or implied, shall give or be construed to give to any
person other than the parties hereto and the holders of the Warrant
Certificates, as the case may be, any legal or equitable right, remedy or claim
under this Indenture, or under any covenant or provision therein contained, all
such covenants and provisions being for the sole benefit of the parties hereto
and the Warrantholders.
IN WITNESS WHEREOF the parties have executed this Indenture as
of the date noted above.
INTERNATIONAL URANIUM CORPORATION
Per:
------------------------------------
[Authorized Signing Officer]
<PAGE> 53
-53-
MONTREAL TRUST COMPANY OF CANADA
Per:
------------------------------------
[Authorized Signing Officer]
Per:
------------------------------------
[Authorized Signing Officer]
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(d) - ESCROW AGREEMENT
- --------------------------------------------------------------------------------
ESCROW AGREEMENT
THIS AGREEMENT made this _____ day of May, 1997.
AMONG:
THE UNDERSIGNED SHAREHOLDERS IN INTERNATIONAL URANIUM
CORPORATION
(hereinafter jointly and severally called the
"Security Holders")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA
(hereinafter called the "Escrow Agent")
OF THE SECOND PART
- and -
INTERNATIONAL URANIUM CORPORATION
(hereinafter called the "Issuer")
OF THE THIRD PART
WHEREAS the Security Holders presently own securities of the
Issuer;
AND WHEREAS in furtherance of complying with the requirements
of The Toronto Stock Exchange (the "Exchange"), the Security Holders are
desirous of depositing in escrow certain securities of the Issuer owned by them;
AND WHEREAS the Escrow Agent has agreed to undertake and
perform its duties according to the terms and conditions hereof;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
of the aforesaid agreements, and of the sum of one dollar ($1.00) now paid by
the parties hereto, each to the other (receipt of which sum the parties do
hereby respectively acknowledge each to the other) the Security Holders jointly
and severally
<PAGE> 2
-2-
covenant and agree with the Issuer and with the Escrow Agent and the Issuer and
the Escrow Agent covenant and agree each with the other and with the Security
Holders jointly and severally as follows:
1. Each of the Security Holders hereby places and deposits in
escrow those common shares of the Issuer owned by him which are described or
referred to in Schedule "A" hereto (the "Regulatory Shares") with the Escrow
Agent and hereby undertakes and agrees forthwith to deliver those certificates
(including any replacement securities or certificates if and when such are
issued or allotted) to the Escrow Agent for deposit in escrow.
2. The parties hereby agree that the securities and the
beneficial ownership of or any interest in them and the certificates
representing them (including any replacement certificates) shall not be sold,
pledged, assigned, hypothecated, alienated, released from escrow, transferred
within escrow, or otherwise in any manner dealt with, without the express
consent, order or direction in writing of the Exchange being first had and
obtained, in the case of the Regulatory Shares, or except as may be required by
reason of the bankruptcy of any Security Holder, in which cases the Escrow Agent
shall hold the said certificates subject to this agreement, for whatever person,
firm or corporation shall be legally entitled to be or become the registered
owner thereof. It is understood that the Exchange consents to the release from
escrow of one-fifth of the Regulatory Shares on an automatic basis on each of
the first, second, third, fourth and fifth anniversary dates (or if not a
business day, the next business day following that date) of the listing date.
The Regulatory Shares shall be released from escrow to each of the Security
Holders pro rata to the number of Regulatory Shares placed in escrow by such
Security Holder, and the Escrow Agent shall notify the Exchange upon the
completion of each such release.
3. The Escrow Agent shall deliver, by courier delivery, the
certificates evidencing the Regulatory Shares to the Security Holder at the
address for such Security Holder appearing on the register for the common shares
of the Issuer unless such Security Holder otherwise directs the Escrow Agent in
writing not less than ten (10) days prior to any release from escrow.
4. The Security Holders hereby direct the Escrow Agent to retain
their respective securities and the certificates (including any replacement
securities or certificates) representing the same and not to do or cause
anything to be done to release the same from escrow or to allow any transfer,
hypothecation or alienation thereof except with and as directed by the written
consent, order or direction of the Exchange or in accordance with paragraph 2
hereof. The Escrow Agent hereby accepts the responsibilities placed on it hereby
and agrees to perform the same in accordance with the terms hereof and the
written consents, orders or directions of the Exchange.
<PAGE> 3
-3-
5. If during the period in which any of the said securities are
retained in escrow pursuant hereto, any dividend is received by the Escrow Agent
in respect of the escrowed securities, any such dividend shall be forthwith paid
or transferred to the respective Security Holders entitled thereto.
6. All voting rights attached to the Regulatory Shares shall at
all times be exercised by the respective registered owners thereof.
7. The parties hereby agree that the Exchange may, in certain
circumstances, including but not limited to the suspension from trading or
delisting of the Issuer by the Exchange, require that all or any of the
Regulatory Shares then in escrow be tendered to the Issuer by way of gift or for
cancellation. Any such Regulatory Shares shall remain in escrow subject to the
terms and conditions of this agreement until the securities are fully and
effectually cancelled or otherwise transferred for the benefit of the Issuer.
Where the Regulatory Shares cannot be cancelled, they shall be held for the
benefit of the Issuer by the Escrow Agent and remain in escrow subject to the
terms and conditions of this agreement but they shall not be voted and any
dividends shall be donated back for the benefit of the Issuer.
8. (i) The Escrow Agent shall not have any duties or responsibilities
except those set forth in this agreement and shall not incur
any liability in acting on any signature, notice, request,
waiver, consent, receipt or other paper or documents believed
by the Escrow Agent to be genuine.
(ii) The Escrow Agent may act or refrain from acting in respect of
any matter referred to in this agreement in full reliance on
and by and with the advice of counsel or other professional
advisors which may be selected by it, and shall be fully
protected in so acting or refraining from acting on the advice
of counsel or advisors. The reasonable costs of such counsel
and of the Escrow Agent shall be paid by the Issuer.
(iii) The Escrow Agent shall be required to release the Regulatory
Shares only as specified in paragraph 2 hereunder, and no
further authorization or independent verification shall be
necessary.
(iv) The Security Holders and the Issuer hereby jointly and
severally agree to and do hereby release and indemnify and
save harmless the Escrow Agent from and against all claims,
suits, demands, costs, damages and expenses which may be
occasioned by reason of the Escrow Agent's compliance in good
faith with the terms hereof.
(v) In the event of any disagreement arising regarding the terms
of the agreement, the Escrow Agent shall be entitled, at its
option, to refuse to comply with any and all demands
whatsoever until the dispute is settled
<PAGE> 4
-4-
either by agreement amongst the parties or by a court of
competent jurisdiction.
(vi) The Escrow Agent shall not be required to defend any legal
proceedings which may be instituted against it in respect of
or arising out of anything herein contained unless requested
to do so in writing by a party hereto and indemnified and
funded to its reasonable satisfaction against the cost and
expense of such defence, provided that such legal proceeding
does not arise as a result of an allegation of fraud or
negligence on the part of the Escrow Agent or its employees.
9. The Issuer hereby acknowledges the terms and conditions of
this agreement and agrees to take all reasonable steps to facilitate its
performance, including the payment of all reasonable fees and expenses of the
Escrow Agent in relation hereto.
10. If the Escrow Agent should wish to resign, it shall give at
least sixty (60) days' notice to the Issuer, which may, with the written consent
of the Exchange, by writing appoint another Escrow Agent in its place and such
appointment shall be binding on the Security Holders and the new Escrow Agent
shall assume and be bound by the obligations of the Escrow Agent hereunder.
11. The written consent, order or direction of the Exchange as to
a release from escrow of all or part of the said securities shall terminate this
agreement only in respect to those securities so released. For greater
certainty, this clause does not apply to securities transferred within escrow.
12. If the Issuer is delisted by the Exchange, thereafter any
consent, order or direction of the Exchange herein required in relation to the
Regulatory Shares will, instead, require the consent, order or direction of the
Ontario Securities Commission and the Ontario Securities Commission may require
that escrowed Regulatory Shares be tendered to the Issuer by way of gift or for
cancellation pursuant to paragraph 7 hereof.
13. The Escrow Agent may employ or retain such counsel as it may
reasonably require for the purpose of discharging its duties hereunder, and the
reasonable fees and disbursements of such counsel shall be for the account of
the Issuer.
14. Any notice or other document to be given to any of the parties
hereto or herein referred to pursuant to or arising out of this agreement may be
given by mailing the same by prepaid registered mail or by personal or facsimile
delivery, at the following address:
(a) if to the Issuer:
<PAGE> 5
-5-
International Uranium Corporation.
Suite 1320
885 West Georgia Street
Vancouver, British Columbia
V6C 3E8
Attention: Secretary
Telecopier: (604) 689-4250
with a copy to:
Cassels Brock & Blackwell
Suite 2100, Scotia Plaza
40 King Street West
Toronto, Ontario
M5H 3C2
Attention: John H. Craig
Telecopier: (416) 360-8877
(b) if to the Escrow Agent:
Montreal Trust Company of Canada
4th Floor
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Manager, Client Services
Telecopier: (604) 683-3694
(c) if to the Exchange:
The Toronto Stock Exchange
2 First Canadian Place
4th Floor
Toronto, Ontario
M5X 1G2
Attention: Eleanor Fritz
Telecopier: 947-4547
<PAGE> 6
-6-
(d) if to the Security Holders, to the address therefor shown in
the registers maintained by the Issuer's registrar and
transfer agent from time to time or as otherwise shown in the
Issuer's records,
or to such other address as the parties may advise the other parties in writing.
Any such notice shall be deemed to have been received by the party to whom it
has been sent at that address, if delivered or sent by facsimile, on the date of
delivery or facsimile transmission and, if mailed, on the second business date
after the date of mailing.
15. This agreement may only be varied by the prior written consent
of the parties hereto and the Exchange (with the consent or approval of the
Escrow Agent not being unreasonably withheld or delayed).
16. Business day, as used herein, means a day on which the
Exchange is open for trading.
17. This agreement may be executed in several parts in the same
form and such parts as so executed shall together form one original agreement
and such parts if more than one shall be read together and construed as if all
the signing parties hereto had executed one copy of this agreement.
18. Wherever the singular or masculine are used throughout this
agreement, the same shall be construed as being the plural or feminine or neuter
where the context so requires.
19. This agreement shall enure to the benefit of and be binding
upon the parties hereto, their and each of their heirs, executors,
administrators, successors and assigns.
20. This agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and shall be treated in all
respects as an Ontario contract.
IN WITNESS WHEREOF the parties hereto have executed these
presents the date noted above.
- ------------------------------ --------------------------------
Witness Adolf H. Lundin
- ------------------------------ --------------------------------
Witness Lukas H. Lundin
<PAGE> 7
-7-
MONTREAL TRUST COMPANY OF CANADA
By:
--------------------------------
By:
--------------------------------
INTERNATIONAL URANIUM CORPORATION
By:
--------------------------------
By:
--------------------------------
<PAGE> 8
SCHEDULE "A" - ESCROW AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NAME OF SECURITY HOLDER BENEFICIAL OWNER NO. OF REGULATORY SHARES CERTIFICATE NUMBER
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Adolf H. Lundin u 4,500,000
Adolf H. Lundin u 4,500,000
Adolf H. Lundin u 4,500,000
Adolf H. Lundin u 4,500,000
Adolf H. Lundin u 4,500,000
Lukas H. Lundin u 50,000
Lukas H. Lundin u 50,000
Lukas H. Lundin u 50,000
Lukas H. Lundin u 50,000
Lukas H. Lundin u 50,000
==================
TOTAL: 22,750,000
==================
</TABLE>
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(e) - INCENTIVE STOCK OPTION PLAN
- --------------------------------------------------------------------------------
APPENDIX "1"
INTERNATIONAL URANIUM CORPORATION
SHARE OPTION PLAN
ARTICLE 1
PURPOSE OF PLAN
1.1 The purpose of the Plan is to attract, retain and motivate persons as
directors, officers, key employees and consultants of the Corporation and its
Subsidiaries and to advance the interests of the Corporation by providing such
persons with the opportunity, through share options, to acquire an increased
proprietary interest in the Corporation.
ARTICLE 2
DEFINED TERMS
Where used herein, the following terms shall have the following
meanings, respectively:
2.1 "BOARD" means the board of directors of the Corporation or, if established
and duly authorized to act, the Executive Committee or another Committee
appointed for such purpose by the board of directors of the Corporation;
2.2 "BUSINESS DAY" means any day, other than a Saturday or a Sunday, on which
the Exchange is open for trading;
2.3 "CODE" means the U.S. Internal Revenue Code of 1986, as amended;
2.4 "CONSULTANT" means an individual (including an individual whose services are
contracted through a personal holding corporation) with whom the Corporation or
any Subsidiary has a contract for substantial services;
2.5 "CORPORATION" means INTERNATIONAL URANIUM CORPORATION and includes any
successor corporation thereto;
2.6 "ELIGIBLE PERSON" means any director, officer, employee (part-time or
full-time) or Consultant of the Corporation or any Subsidiary or any employee of
any management company providing services to the Corporation;
2.7 "EXCHANGE" means The Toronto Stock Exchange and, where the context permits,
any other exchange on which the Shares are or may be listed from time to time;
2.8 "INCENTIVE STOCK OPTION" means an Option to purchase Shares granted under
Article 5 with the intention that it qualify as an "incentive stock option" as
that term is defined in Section 422 of the Code;
2.9 "INSIDER" means:
(a) an insider as defined under Section 1(1) of the Securities Act (Ontario),
other than a person who falls within that definition solely by virtue of
being a director or senior officer of a Subsidiary; and
<PAGE> 2
-2-
(b) an associate as defined under Section 1(1) of the Securities Act (Ontario)
of any person who is an insider by virtue of (a) above;
2.10 "MARKET PRICE" at any date in respect of the Shares shall be the greatest
closing price of such Shares on any Exchange on the last trading day preceding
the date on which the Option is approved by the Board (or, if such Shares are
not then listed and posted for trading on the Exchange, on such stock exchange
in Canada on which the Shares are listed and posted for trading as may be
selected for such purpose by the Board). In the event that such Shares are not
listed and posted for trading on any stock exchange, the Market Price shall be
the fair market value of such Shares as determined by the Board in its sole
discretion;
2.11 "NONQUALIFIED STOCK OPTION" means an Option to purchase Shares granted
under Article 5 other than an Incentive Stock Option;
2.12 "OPTION" means an option to purchase Shares granted under the Plan;
2.13 "OPTION PRICE" means the price per Share at which Shares may be purchased
under the Option, as the same may be adjusted from time to time in accordance
with Article 8;
2.14 "OPTIONEE" means an Eligible Person to whom an Option has been granted;
2.15 "PERSON" means an individual, a corporation, a partnership, an
unincorporated association or organization, a trust, a government or department
or agency thereof and the heirs, executors, administrators or other legal
representatives of an individual and an associate or affiliate of any thereof as
such terms are defined in the Business Corporations Act, Ontario;
2.16 "PLAN" means the INTERNATIONAL URANIUM CORPORATION Share Option Plan, as
the same may be amended or varied from time to time;
2.17 "SHARE COMPENSATION ARRANGEMENT" means any stock option, stock option plan,
employee stock purchase plan or any other compensation or incentive mechanism
involving the issuance or potential issuance of Shares, including a share
purchase from treasury which is financially assisted by the Corporation by way
of a loan, guarantee or otherwise;
2.18 "SHARES" means the common shares of the Corporation or, in the event of an
adjustment contemplated by Article 8, such other shares or securities to which
an Optionee may be entitled upon the exercise of an Option as a result of such
adjustment; and
2.19 "SUBSIDIARY" means any corporation which is a subsidiary as such term is
defined in subsection 1(2) of the Business Corporations Act, Ontario (as such
provision is from time to time amended, varied or re-enacted) of the
Corporation.
ARTICLE 3
ADMINISTRATION OF THE PLAN
3.1 The Plan shall be administered in accordance with the rules and policies of
the Exchange in respect of employee stock option plans by the Board. The Board
shall receive recommendations of management and shall determine and designate
from time to time those directors, officers, employees and Consultants of the
Corporation or its Subsidiaries and those employees of management companies
providing services to the Corporation to whom an Option should be granted and
the number of Shares, which will be optioned from time to time to any individual
and the terms and conditions of the grant.
<PAGE> 3
-3-
3.2 The Board shall have the power, where consistent with the general purpose
and intent of the Plan and subject to the specific provisions of the Plan:
(a) to establish policies and to adopt, prescribe, amend or vary rules and
regulations for carrying out the purposes, provisions and administration of
the Plan and make all other determinations necessary or advisable for its
administration;
(b) to interpret and construe the Plan and to determine all questions arising
out of the Plan and any Option granted pursuant to the Plan and any such
interpretation, construction or determination made by the Board shall be
final, binding and conclusive for all purposes;
(c) to determine which Eligible Persons are granted Options and to grant
Options;
(c) to determine the number of Shares covered by each Option;
(d) to determine the Option Price;
(e) to determine the time or times when Options will be granted and exercisable;
(f) to determine if the Shares which are subject to an Option will be subject to
any restrictions upon the exercise of such Option; and
(g) to prescribe the form of the instruments relating to the grant, exercise and
other terms of Options which initially shall be substantially in the form
annexed hereto as Schedule "AA".
ARTICLE 4
SHARES SUBJECT TO THE PLAN
4.1 Options may be granted in respect of authorized and unissued Shares provided
that, subject to increase by the Board, the receipt of the approval of the
Exchange and the approval of shareholders of the Corporation, the maximum
aggregate number of Shares reserved by the Corporation for issuance and which
may be purchased upon the exercise of all Options granted under this Plan shall
not exceed 6,700,000 Shares. Shares in respect of which Options are not
exercised shall be available for subsequent Options under the Plan. No
fractional Shares may be purchased or issued under the Plan.
ARTICLE 5
ELIGIBILITY; GRANT; TERMS OF OPTIONS
5.1 Options may be granted to Eligible Persons and may consist of Incentive
Stock Options and/or Nonqualified Stock Options. Notwithstanding the foregoing,
only employees of the Corporation or one of its Subsidiaries that is also a
"subsidiary corporation" (as defined in Section 422 of the Code) may be granted
Incentive Stock Options.
5.2 Options may be granted by the Corporation pursuant to the recommendations of
the Board from time to time provided and to the extent that such decisions are
approved by the Board.
5.3 Subject to the provisions of this Plan, the number of Shares subject to each
Option, the Option Price, the expiration date of each Option, the extent to
which each Option is exercisable from time to time during the term of the Option
and other terms and conditions relating to each such Option shall be determined
by the Board. At no time shall the period during which an Option shall be
exercisable exceed 10 years.
<PAGE> 4
-4-
5.4 In the event that no specific determination is made by the Board with
respect to any of the following matters, each Option shall, subject to any other
specific provisions of the Plan, contain the following terms and conditions:
(a) the period during which an Option shall be exercisable shall be 10 years
from the date the Option is granted to the Optionee;
(b) the Optionee may take up not more than 33 1/3% of the Shares covered by the
Option during each 12 month period from the date of the grant of the Option;
provided, however, that if the number of Shares taken up under the Option
during any such 12 month period is less than 33 1/3% of the Shares covered
by the Option, the Optionee shall have the right, at any time or from time
to time during the remainder of the term of the Option, to purchase such
number of Shares subject to the Option which were purchasable, but not
purchased by him, during such 12 month period; and
(c) to the extent that the Option Price of Shares (determined on the date of
grant) with respect to which Incentive Stock Options are exercisable for the
first time during any calendar year (under the Plan and all other stock
option plans of the Corporation) exceeds US$100,000, such portion in excess
of US$100,000 shall be treated as a Nonqualified Stock Option.
5.5 The Option Price of Shares which are the subject of any Option shall in no
circumstances be lower than the Market Price of the Shares at the date of the
grant of the Option.
5.6 The maximum number of Shares which may be reserved for issuance to any one
Optionee under this Plan or under any other Share Compensation Arrangement shall
not exceed 5% of the Shares outstanding at the date of the grant (on a
non-diluted basis).
5.7 The maximum number of Shares which may be reserved for issuance to Insiders
under the Plan or under any other Share Compensation Arrangement shall be 10% of
the Shares outstanding at the date of the grant (on a non-diluted basis).
5.8 The maximum number of Shares which may be issued to any one Insider and such
Insider's associates under the Plan and any other Share Compensation Arrangement
in any 12 month period shall be 5% of the Shares outstanding at the date of the
issuance (on a non-diluted basis). The maximum number of Shares which may be
issued to all Insiders under the Plan and any other Share Compensation
Arrangement in any 12 month period shall be 10% of the Shares outstanding at the
date of the issuance (on a non-diluted basis).
5.9 Any entitlement to acquire Shares granted pursuant to the Plan or any other
Share Compensation Arrangement prior to the Optionee becoming an Insider shall
be excluded for the purposes of the limits set out in 5.7 and 5.8 above.
5.10 An Option is personal to the Optionee and is non-assignable.
5.11 All references in the Plan to "the Shares outstanding at the date of the
issuance" shall mean that number of Shares determined on the basis of the number
of Shares that are outstanding immediately prior to the share issuance in
question, excluding Shares issued pursuant to any Share Compensation Arrangement
over the preceding one year period.
ARTICLE 6
EXERCISE OF OPTIONS
6.1 Subject to the provisions of the Plan, an Option may be exercised from time
to time by delivery to the Corporation at its registered office of a written
notice of exercise addressed to the Secretary of the
<PAGE> 5
-5-
Corporation specifying the number of Shares with respect to which the Option is
being exercised and accompanied by payment in full of the Option Price of the
Shares to be purchased. Certificates for such Shares shall be issued and
delivered to the Optionee within a reasonable period of time following the
receipt of such notice and payment.
6.2 The exercise price for Shares purchased under an Option shall be paid in
full to the Corporation by delivery of consideration in an amount equal to the
Option Price. Such consideration must be paid in cash or by cheque or, unless
the Board in its sole discretion determines otherwise, either at the time the
Option is granted or at any time before it is exercised, a combination of cash
and/or cheque (if any). The Corporation may permit an Optionee to elect to pay
the Option Price by authorizing a third party to sell Shares (or a sufficient
portion of such Shares) acquired upon exercise of the Option and remit to the
Corporation a sufficient portion of the sale proceeds to pay the entire Option
Price and any tax withholding resulting from such exercise. In addition, the
Option Price for Shares purchased under an Option may be paid, either singly or
in combination with one or more of the alternative forms of payment authorized
by this Section 6.2, by such other consideration as the Board may permit.
Notwithstanding the foregoing, if the Board decides to grant stock appreciation
rights, such rights shall be subject to the applicable approvals provided for in
Section 9.1.
6.3 Notwithstanding any of the provisions contained in the Plan or in any
Option, the Corporation's obligation to issue Shares to an Optionee pursuant to
the exercise of an Option shall be subject to:
(a) completion of such registration or other qualification of such Shares or
obtaining approval of such governmental or regulatory authority as counsel
to the Corporation shall reasonably determine to be necessary or advisable
in connection with the authorization, issuance or sale thereof;
(b) the listing of such Shares on the Exchange, if applicable; and
(c) the receipt from the Optionee of such representations, agreements and
undertakings, including as to future dealings in such Shares, as the
Corporation or its counsel reasonably determines to be necessary or
advisable in order to safeguard against the violation of the securities laws
of any jurisdiction.
In this connection the Corporation shall, to the extent necessary, take all
reasonable steps to obtain such approvals, registrations and qualifications as
may be necessary for the issuance of such Shares in compliance with applicable
securities laws and for the listing of such Shares on the Exchange.
ARTICLE 7
TERMINATION OF EMPLOYMENT; DEATH
7.1 Subject to Section 7.2 and any express resolution passed by the Board with
respect to an Option, an Option, and all rights to purchase pursuant thereto,
shall expire and terminate 30 days following the date upon which the Optionee
ceases to be a director, officer or a part-time or full-time employee of the
Corporation or of any Subsidiary. The entitlement of a Consultant to Options
including the termination thereof shall be in accordance with the terms of the
consulting agreement entered into between the Corporation or the Subsidiary and
the Consultant, provided that in no event shall the Options of any Consultant
continue to be outstanding 12 months following the date upon which the
consulting agreement between the Consultant and the Corporation or the
Subsidiary is terminated.
7.2 If, before the expiry of an Option in accordance with the terms thereof, the
employment of the Optionee with the Corporation or with any Subsidiary shall
terminate, in either case by reason of the death of the Optionee, such Option
may, subject to the terms thereof and any other terms of the Plan, be exercised
by the legal representative(s) of the estate of the Optionee at any time during
the first year
<PAGE> 6
-6-
following the death of the Optionee (but prior to the expiry of the Option in
accordance with the terms thereof) but only to the extent that the Optionee was
entitled to exercise such Option at the date of the termination of the
Optionee's employment.
7.3 Options shall not be affected by any change of employment of the Optionee or
by the Optionee ceasing to be a director where the Optionee continues to be
employed by the Corporation or any Subsidiary or continues to be a director or
officer of, the Corporation or any Subsidiary.
ARTICLE 8
CHANGE IN CONTROL AND CERTAIN ADJUSTMENTS
8.1 Notwithstanding any other provision of this Plan in the event that the
Corporation receives an offer (the "Offer") for:
(a) the acquisition by any Person of Shares or rights or options to acquire
Shares of the Corporation or securities which are convertible into Shares of
the Corporation or any combination thereof such that after the completion of
such acquisition such Person would be entitled to exercise 30% or more of
the votes entitled to be cast at a meeting of the shareholders; or
(b) the sale by the Corporation of all or substantially all of the property or
assets of the Corporation;
then notwithstanding that at the effective time of the Offer the Optionee may
not be entitled to all the Shares granted by the Option, the Optionee shall be
entitled to exercise the Options to the full amount of the Shares remaining at
that time from the date of the Offer to the date of the close of any such
transaction. If such transaction is not completed within 90 days of the date of
the Offer and the Optionee has not so exercised that portion of the Option
relating to Shares to which the Optionee would not otherwise be entitled, this
provision shall cease to apply to the Offer.
8.2 Appropriate adjustments with respect to Options granted or to be granted, in
the number of Shares optioned and in the Option Price, shall be made by the
Board to give effect to adjustments in the number of Shares of the Corporation
resulting from subdivisions, consolidations or reclassifications of the Shares
of the Corporation, the payment of stock dividends or cash dividends by the
Corporation (other than dividends in the ordinary course), the distribution of
securities, property or assets by way of dividend or otherwise (other than
dividends in the ordinary course), or other relevant changes in the capital
stock of the Corporation or the amalgamation or merger of the Corporation with
or into any other entity, subsequent to the approval of the Plan by the Board.
The appropriate adjustment in any particular circumstance shall be conclusively
determined by the Board in its sole discretion, subject to approval by the
Shareholders of the Corporation and to acceptance by the Exchange respectively,
if applicable.
ARTICLE 9
AMENDMENT OR DISCONTINUANCE OF PLAN
9.1 The Board may amend or discontinue the Plan at any time upon receipt of
requisite shareholder approval, to the extent required by any applicable laws or
regulations (including without limitation, Section 422 of the Code), or
requisite regulatory approval (including without limitation, the approval of the
Exchange), if applicable, provided, however, that no such amendment may (i)
increase the maximum number of Shares that may be optioned under the Plan or
change the manner of determining the minimum Option Price without the requisite
approval (if applicable) or (ii) alter or impair any of the terms of any Option
previously granted to an Optionee under the Plan without the consent of the
Optionee. Any amendments to the terms of an Option shall also require applicable
regulatory approval, including without limitation, the approval of the Exchange.
<PAGE> 7
-7-
9.2 Any change or adjustment to an outstanding Incentive Stock Option shall not,
without the consent of the Optionee, be made in a manner so as to constitute a
"modification" that would cause such Incentive Stock Option to fail to continue
to qualify as an Incentive Stock Option.
9.3 The Plan will have no fixed expiration date; provided, however, that no
Incentive Stock Options may be granted more than 10 years after the earlier of
the Plan's adoption by the Board and approval by the shareholders of the
Corporation.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 The holder of an Option shall not have any rights as a shareholder of the
Corporation with respect to any of the Shares covered by such Option until such
holder shall have exercised such Option in accordance with the terms of the Plan
(including tendering payment in full of the Option Price of the Shares in
respect of which the Option is being exercised) and the issuance of Shares by
the Corporation.
10.2 Nothing in the Plan or any Option shall confer upon an Optionee any right
to continue in the employ of the Corporation or any Subsidiary or affect in any
way the right of the Corporation or any Subsidiary to terminate the Optionee's
employment at any time; nor shall anything in the Plan or any Option be deemed
or construed to constitute an agreement, or an expression of intent, on the part
of the Corporation or any Subsidiary to extend the employment of any Optionee
beyond the time which the Optionee would normally be retired pursuant to the
provisions of any present or future retirement plan of the Corporation or any
Subsidiary, or beyond the time at which the Optionee would otherwise be retired
pursuant to the provisions of any contract of employment with the Corporation or
any Subsidiary.
10.3 To the extent required by law or regulatory policy or necessary to allow
Shares issued on exercise of an Option to be free of resale restrictions, the
Corporation shall report the grant, exercise or termination of the Option to the
Exchange and the appropriate securities regulatory authorities.
10.4 The Corporation may require the Optionee to pay to the Corporation the
amount of any withholding taxes that the Corporation is required to withhold
with respect to the grant or exercise of any Option. Subject to the Plan and
applicable law, the Board may, in its sole discretion, permit the Optionee to
satisfy withholding obligations in whole or in part, by paying cash or by
electing to have the Corporation withhold Shares in such amounts as are
equivalent to the Market Price in order to satisfy the withholding obligation.
The Corporation shall have the right to withhold from any Shares issuable
pursuant to an Option or from any cash amounts otherwise due or to become due
from the Corporation to the Optionee an amount equal to such taxes, and such
withheld Shares shall be cancelled if required by any applicable law or
regulatory authority. The Corporation may also deduct from any Option any other
amounts due from the Optionee to the Corporation. For the purposes of this
Section 10.4, all references to the Corporation shall be deemed to include
references to a Subsidiary where the context permits.
ARTICLE 11
SHAREHOLDER AND REGULATORY APPROVAL
11.1 The Plan shall be subject to the approval of the shareholders of the
Corporation to be given by a resolution passed at a meeting of the shareholders
of the Corporation in accordance with the Business Corporations Act, Ontario,
and to acceptance by the Exchange, if applicable. Any Options granted prior to
such approval and acceptance shall be conditional upon such approval and
acceptance being given, and no such Options may be exercised unless such
approval and acceptance is given.
<PAGE> 8
-8-
Amended by the Corporation's Board of Directors on February 4, 1998 and
amendments approved by the Corporation's shareholders on March 23, 1998.
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(f) - FORM INCENTIVE STOCK OPTION (2 YR)
- --------------------------------------------------------------------------------
MEMORANDUM OF AGREEMENT MADE EFFECTIVE THIS 9TH DAY OF MAY, 1997.
BETWEEN: INTERNATIONAL URANIUM CORPORATION, A CORPORATION AMALGAMATED UNDER
THE LAWS OF THE PROVINCE OF ONTARIO AND HAVING OFFICES AT SUITE 1320 -
885 WEST GEORGIA STREET, IN THE CITY OF VANCOUVER, PROVINCE OF BRITISH
COLUMBIA;
(HEREINAFTER CALLED THE "COMPANY")
OF THE FIRST PART
AND: ;
--------------------------------------------
(HEREINAFTER CALLED THE "OPTIONEE")
OF THE SECOND PART
WHEREAS the Company has instituted the International Uranium
Corporation Share Option Plan dated the 9th day of May, 1997, as amended
effective the 4th day of February, 1998 (the "PLAN");
AND WHEREAS in the event that Options were granted to the Optionee on
an effective date occurring prior to February 4, 1998, the parties hereto
confirm that such Options shall be evidenced by this Agreement and shall be
governed by the terms hereof and of the Plan;
AND WHEREAS the Board has determined that it is in the best interests
of the Company to grant the Optionee who is of the Company the option
hereinafter provided;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and other good and valuable consideration (the receipt whereof is
hereby acknowledged) the parties hereto agree as follows:
1. The terms of the Option granted hereunder are as set forth in this
Agreement and in the Plan. This Agreement and the Option granted hereunder shall
in all respects be governed by the provisions of the Plan, a copy of which is
attached hereto as Appendix "1". All capitalized terms used but not defined in
this Agreement shall have the respective meanings given to them in the Plan. All
other capitalized terms shall have the respective meanings given to them in this
Agreement. The Optionee hereby acknowledges that the Optionee has read and
accepts the terms and conditions of the Plan.
<PAGE> 2
-2-
2. In this Agreement, the following terms shall be defined as follows:
(a) "ELECTION TO PURCHASE" means a notice in writing addressed to
the Company at its address first recited, which notice shall
specify therein the number of Optioned Shares in respect of
which the Option is being exercised;
(b) "EXPIRY DATE" means May 8, 2000;
(c) "OPTION" means the irrevocable right and option to purchase,
from time to time, all or any part of the Optioned Shares
granted to the Optionee by the Company pursuant to Paragraph 3
hereof;
(d) "OPTION PRICE" means the purchase price per Optioned Share
pursuant to Paragraph 3 hereof, as the same may be adjusted in
accordance with the Plan;
(e) "OPTIONED SHARE" or "OPTIONED SHARES" means the common shares
of the Company, subject to the Option.
3. The Company hereby grants to the Optionee as an incentive and in
consideration of the Optionee's services but not in lieu of salary, the Option
to purchase a total of () Optioned Shares at an Option Price of Canadian One
Dollar and Twenty-five Cents (C$1.25) per Optioned Share at any time before 4:30
o'clock p.m., Vancouver time, on the Expiry Date. The Option granted hereunder
shall vest as to one-half of the Optioned Shares on the date of grant, i.e. on
May 9, 1997, and as to the remaining one-half of the Optioned Shares one (1)
year following the date of grant and up to the Expiry Date, i.e. at any time
between May 9, 1998 and May 8, 2000; provided however, that any Shares not taken
up by the Optionee on May 9, 1998 may be carried forward and taken up during the
remaining 12 months of the Option.
4. The Option, to the extent that it has not been exercised shall, at
4:30 o'clock p.m., Vancouver time, on the Expiry Date, forthwith expire and
terminate and be of no further force and effect whatsoever.
5. In the event of the death of the Optionee on or prior to the Expiry
Date, the Option, to the extent that it has not been exercised, shall expire at
4:30 o'clock p.m., Vancouver time, on the last day of the twelfth (12th) month
following the day on which the Optionee dies and, in the event the Option is in
whole or in part unexercised on the day the Optionee dies, then it is understood
by the parties that the Option may be exercised on the Optionee's behalf by the
Optionee's legal personal representative(s) of the estate of the Optionee but
only to the extent that the Optionee was entitled to exercise such Option at the
date of the Optionee's death and only prior to the Expiry Date.
<PAGE> 3
-3-
6. In the event the Optionee ceases to be a part-time or full-time
employee, director or officer of the Company, or of any Subsidiary of the
Company as the case may be, prior to the Expiry Date the Option, to the extent
that it has not been exercised shall, at 4:30 o'clock p.m., Vancouver time, on
the thirtieth (30th) day following the day on which the Optionee ceases to be a
part-time or full-time employee, officer or director, terminate and be of no
further force or effect whatsoever. If the Optionee is a Consultant, the
Optionee's entitlement to the Option, including the termination thereof, shall
be in accordance with the terms of the consulting agreement entered into between
the Company or any Subsidiary and the Optionee, provided that in no event shall
the Option continue to be outstanding 12 months following the date upon which
such consulting agreement is terminated.
7.1 Subject to the provisions hereof and the Plan, the Option shall be
exercisable from time to time, in whole or in part, by delivery of a written
notice of exercise to the Company at the address set forth herein, accompanied
by such payment as permitted in subparagraph 7.2 hereof for the number of
Optioned Shares to be purchased as specified in such notice. Such notice shall
be in the form of an Election to Purchase, substantially in the form attached to
this Agreement as Appendix "2".
7.2 Notwithstanding any of the provisions contained in the Plan or in
this Agreement, the Company's obligations to issue Optioned Shares to the
Optionee pursuant to the exercise of the Option shall be subject to:
(a) completion of such registration or other qualification of such
Optioned Shares or obtaining approval of such governmental or
regulatory authority as counsel to the Company shall
reasonably determine to be necessary or advisable in
connection with the authorization, issuance or sale thereof;
(b) the listing of the Optioned Shares on the Exchange, if
applicable; and
(c) the receipt from the Optionee of such representations,
agreements and undertakings, including as to future dealings
in the Optioned Shares, as the Company or its counsel
determines to be necessary or advisable in order to safeguard
against the violation of the securities laws of any
jurisdiction.
In this connection, the Company shall, to the extent necessary, take
all reasonable steps to obtain such approvals, registrations and qualifications
as may be necessary for the issuance of the Optioned Shares in compliance with
applicable securities laws and for the listing of the Optioned Shares on the
Exchange.
Unless the Board at any time determines otherwise, the Option may be
exercised by the delivery of cash or cheque or other consideration acceptable to
the Company, in an amount equal to the Option Price. The Company may also permit
an Optionee to elect to pay the Option Price by authorizing a third party to
sell Shares (or
<PAGE> 4
-4-
a sufficient portion of such Shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the entire
Option Price and any tax withholding resulting from such exercise.
7.3 Upon the exercise of all or any part of the Option, the Company shall
forthwith cause the registrar and transfer agent of the Company to deliver to
the Optionee or the Optionee's personal representative within a reasonable time
following the receipt by the Company of the Election to Purchase a
certificate(s) representing, in the aggregate, the number of Optioned Shares
specified in the Election to Purchase and in respect of which the Company has
received payment.
8. Nothing herein contained shall obligate the Optionee to purchase any
Optioned Shares except those Optioned Shares in respect of which the Optionee
shall have exercised the Option in the manner hereinbefore provided.
9. The Optionee shall not have any rights as a shareholder of the Company
with respect to the Optioned Shares until the Optionee shall have exercised the
Option in accordance with the provisions of Paragraph 7 hereof and the Plan
(including tendering of payment in full of the Option Price of the Optioned
Shares in respect of which the Option is being exercised) and the issuance of
Optioned Shares by the Company.
10.1 If the Optionee is a resident in the United States of America, the
Optionee recognizes and understands that Optioned Shares issued upon the
exercise of the Option will be acquired in reliance upon an exemption from the
registration requirements of the Securities Act of 1933, as amended (the "1933
ACT") pursuant to Section 3(b) and Rule 701 thereof, and hereby acknowledges and
represents that:
(a) The Optionee believes that the Optionee, either alone or with
the assistance of the Optionee's professional advisors, has
such knowledge and experience in financial and business
matters that the Optionee is capable of evaluating the merits
and risks of the Optionee's purchase of the Optioned Shares;
(b) The Optionee has sufficient financial resources to be able to
bear the risk of the Optionee's investment in the Optioned
Shares;
(c) The Optionee will be acquiring the Optioned Shares for
investment purposes only and without a current intention of
reselling or redistributing the same upon the occurrence or
non-occurrence of a predetermined event and understands that
the Optioned Shares being issued to him have not been, and may
not ever be, registered under the 1933 Act and, therefore,
cannot be sold unless subsequently registered under the 1933
Act or an exemption from registration is available;
<PAGE> 5
-5-
(d) The Optionee has either spoken or met with, or been given
reasonable opportunity to speak with or meet with,
representatives of the Company for the purpose of asking
questions of, and receiving answers and information from, such
representatives concerning the undersigned's investment in the
Optioned Shares.
(e) The Optionee understands that the Company will rely upon the
representations set forth herein to claim exempt status under
the 1933 Act.
10.2 Certificates representing Optioned Shares issued upon exercise of the
Option by an Optionee who is a resident of the United States shall have endorsed
thereon the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
(THE "SECURITIES ACT") OR STATE SECURITIES LAWS. THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS OR (D) PURSUANT TO ANOTHER EXEMPTION
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, AS EVIDENCED BY AN OPINION OF COUNSEL OF RECOGNIZED
STANDING IN FORM ACCEPTABLE TO THE COMPANY."
10.3 For employees of a U.S. Subsidiary, this Option is intended to
qualify as an Incentive Stock Option to the extent permitted by Section 422 of
the Code. If any portion of this Option fails to qualify as an Incentive Stock
Option under Section 422 of the Code, such portion will constitute a
Nonqualified Stock Option. To the extent that this Option constitutes an
Incentive Stock Option, the following additional terms shall apply:
(a) OPTION PRICE: The Option Price will be at least 100% of such
Option's Market Price, determined as of February 4, 1998,
being the date of amendment of the Plan and the effective
grant date (the "ISO Grant Date") of the Incentive Option. If
the Optionee owns more than 10% of the total voting power of
all classes of the Company's Shares, then the Option Price per
Share of an Incentive Stock Option shall not be less than 110%
of the Market Price of the Shares on the ISO Grant Date and
the Option term shall not exceed five years. The determination
of 10% ownership hereunder shall be made in accordance with
Section 422 of the Code.
<PAGE> 6
-6-
(b) ISO QUALIFICATION: To the extent that the aggregate fair
market value of the Shares with respect to which this Option
is exercisable for the first time by the Optionee during any
calendar year (under this Option and all other Incentive Stock
Options held by the Optionee) exceeds US$100,000, the excess
portion will be treated as a Nonqualified Stock Option, unless
the United States Internal Revenue Service changes the rules
and regulations governing the US$100,000 limit for Incentive
Stock Options.
(c) TERMINATION: Employment shall not be deemed to continue beyond
the first 30 days of a leave of absence unless the Optionee's
reemployment rights are guaranteed by statute or contract. A
transfer of employment or services between or among the
Company and its subsidiaries shall not be considered a
termination of employment or services.
(d) U.S. TAXATION OF OPTIONS. In order to obtain certain tax
benefits afforded to Incentive Stock Options under Section 422
of the Code, the Optionee must hold the Shares issued upon the
exercise of an Incentive Stock Option for two years after the
ISO Grant Date and one year from the date of exercise. The
Optionee may be subject to the alternative minimum tax at the
time of exercise. The Board may require the Optionee to give
the Company prompt notice of any disposition of Shares
acquired by the exercise of an Incentive Stock Option prior to
the expiration of such holding periods.
10.4 To the extent that the Optionee is, at the time of exercise of the
Option, subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "1934 ACT") with respect to the Company, then Shares obtained upon the
exercise of the Option by such Optionee may not be sold by such person until six
months after the ISO Grant Date.
10.5 Notwithstanding the foregoing Paragraphs 10.1 and 10.2, if at the
time of exercise of the Option the Company is subject to Section 12(b) or 12(g)
of the 1934 Act and has filed with the Securities and Exchange Commission a
registration statement on Form S-8 covering the issuance of the Optioned Shares,
then the representations set forth in Paragraph 10.1 and the legend set forth in
Paragraph 10.2 shall not apply.
11. Nothing in the Plan or the Option shall confer upon any Optionee any
right to continue in the employ of the Company or any Subsidiary of the Company
or affect in any way the right of the Company or any Subsidiary to terminate the
Optionee's employment at any time; nor shall anything in the Plan or the Option
be deemed or construed to constitute an agreement, or an expression of intent,
on the part of the Company or any Subsidiary to extend the employment of any
Optionee beyond the time which the Optionee would normally be retired pursuant
to the provisions of any
<PAGE> 7
-7-
present or future retirement plan of the Company or any Subsidiary, or beyond
the time at which the Optionee would otherwise be retired pursuant to the
provisions of any contract of employment with the Company or any Subsidiary.
12. No director or officer of the Company shall be liable or be held to
account for any action taken or made in good faith under the Plan or the Option
granted pursuant hereto.
13. Time shall be of the essence of this Agreement.
14. This Agreement shall enure to the benefit of and be binding upon the
Company, its successors and assigns, and the Optionee and the Optionee's heirs,
executors, administrators and personal representatives to the extent provided in
Paragraph 5 hereof.
15. Subject to Paragraph 5, this Agreement shall not be assignable or
transferable by the Optionee or the Optionee's heirs, executors, administrators
and personal representatives, and the Option may be exercised only by the
Optionee or the Optionee's heirs, executors, administrators and personal
representatives.
16. If at any time during the continuance of this Agreement the parties
hereto shall deem it necessary or expedient to make any alteration or addition
to this Agreement they may do so by means of a written agreement between them
which shall be supplemental hereto and form part hereof and which shall be
subject to any applicable approval by the requisite regulatory authorities
having jurisdiction.
17. The Optionee, by the execution of this Agreement, shall be deemed to
have (i) accepted the Option described in this Agreement and the Plan, (ii)
acknowledged receipt of a copy of this Agreement and a copy of the Plan and
(iii) read and understood the Agreement and the Plan.
18. Wherever the plural or masculine are used throughout this Agreement,
the same shall be construed as meaning singular or feminine or neuter or the
body politic or corporate where the context of the parties thereto require.
19. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in Canadian funds.
20. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
21. This Agreement may be executed in several parts in the same form and
such parts as so executed shall together constitute one original agreement and
such parts, if more than one, shall be read together and construed as if all the
signing parties hereto had executed one copy of this Agreement.
<PAGE> 8
-8-
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto on the 6th day of April, 1998, with effect as at and from the day and
year first above written.
INTERNATIONAL URANIUM CORPORATION
PER: (C/S)
-------
SIGNED, SEALED AND DELIVERED )
BY IN THE PRESENCE )
OF: )
)
- ------------------------------ )
) ------------------------------
- ------------------------------ )
)
- ------------------------------------------- ADDRESS
TAXPAYER I.D. NUMBER (IF APPLICABLE) --------------------------
---------------------------------
---------------------------------
- ------------------------------------------- ---------------------------------
TAXPAYER SOCIAL INSURANCE NUMBER
(IF APPLICABLE)
<PAGE> 1
-1-
ATTACHMENT - ITEM 19(b)3(g) - FORM INCENTIVE STOCK OPTION (3 YR)
- --------------------------------------------------------------------------------
MEMORANDUM OF AGREEMENT MADE EFFECTIVE THIS 9TH DAY OF MAY, 1997.
BETWEEN: INTERNATIONAL URANIUM CORPORATION, A CORPORATION AMALGAMATED UNDER
THE LAWS OF THE PROVINCE OF ONTARIO AND HAVING OFFICES AT SUITE 1320
- 885 WEST GEORGIA STREET, IN THE CITY OF VANCOUVER, PROVINCE OF
BRITISH COLUMBIA;
(HEREINAFTER CALLED THE "COMPANY")
OF THE FIRST PART
AND: ;
------------------------------------------
(HEREINAFTER CALLED THE "OPTIONEE")
OF THE SECOND PART
WHEREAS the Company has instituted the International Uranium
Corporation Share Option Plan dated the 9th day of May, 1997, as amended
effective the 4th day of February, 1998 (the "PLAN");
AND WHEREAS in the event that Options were granted to the Optionee on
an effective date occurring prior to February 4, 1998, the parties hereto
confirm that such Options shall be evidenced by this Agreement and shall be
governed by the terms hereof and of the Plan;
AND WHEREAS the Board has determined that it is in the best interests
of the Company to grant the Optionee who is of the Company the option
hereinafter provided;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and other good and valuable consideration (the receipt whereof is
hereby acknowledged) the parties hereto agree as follows:
1. The terms of the Option granted hereunder are as set forth in this
Agreement and in the Plan. This Agreement and the Option granted hereunder shall
in all respects be governed by the provisions of the Plan, a copy of which is
attached hereto as Appendix "1". All capitalized terms used but not defined in
this Agreement shall have the respective meanings given to them in the Plan. All
other capitalized terms shall have the respective meanings given to them in this
Agreement. The Optionee hereby
<PAGE> 2
-2-
acknowledges that the Optionee has read and accepts the terms and conditions of
the Plan.
2. In this Agreement, the following terms shall be defined as follows:
(a) "ELECTION TO PURCHASE" means a notice in writing addressed to
the Company at its address first recited, which notice shall
specify therein the number of Optioned Shares in respect of
which the Option is being exercised;
(b) "EXPIRY DATE" means May 8, 2000;
(c) "OPTION" means the irrevocable right and option to purchase,
from time to time, all or any part of the Optioned Shares
granted to the Optionee by the Company pursuant to Paragraph 3
hereof;
(d) "OPTION PRICE" means the purchase price per Optioned Share
pursuant to Paragraph 3 hereof, as the same may be adjusted in
accordance with the Plan;
(e) "OPTIONED SHARE" or "OPTIONED SHARES" means the common shares of
the Company, subject to the Option.
3. The Company hereby grants to the Optionee as an incentive and in
consideration of the Optionee's services but not in lieu of salary, the Option
to purchase a total of () Optioned Shares at an Option Price of Canadian One
Dollar and Twenty-five Cents (C$1.25) per Optioned Share at any time before 4:30
o'clock p.m., Vancouver time, on the Expiry Date. The Option granted hereunder
shall vest as to one-third of the Optioned Shares on the date of grant, i.e. on
May 9, 1997, as to a further one-third of the Optioned Shares during the
12-month period one (1) year following the date of grant, i.e. at any time
between May 9, 1998 and May 8, 1999, and as to the remaining one-third of the
Optioned Shares two (2) years following the date of grant and up to the Expiry
Date, i.e. at any time between May 9, 1999 and May 8, 2000; provided however,
that if the number of Shares taken up under the Option during any such 12-month
period is less than one-third of the Optioned Shares covered by the Option, the
Optionee shall have the right, at any time or from time to time during the
remainder of the term of the Option, to purchase such number of Shares subject
to the Option that were purchasable, but not taken up by the Optionee during
such 12-month period.
4. The Option, to the extent that it has not been exercised shall, at
4:30 o'clock p.m., Vancouver time, on the Expiry Date, forthwith expire and
terminate and be of no further force and effect whatsoever.
5. In the event of the death of the Optionee on or prior to the Expiry
Date, the Option, to the extent that it has not been exercised, shall expire at
4:30 o'clock p.m.,
<PAGE> 3
-3-
Vancouver time, on the last day of the twelfth (12th) month following the day on
which the Optionee dies and, in the event the Option is in whole or in part
unexercised on the day the Optionee dies, then it is understood by the parties
that the Option may be exercised on the Optionee's behalf by the Optionee's
legal personal representative(s) of the estate of the Optionee but only to the
extent that the Optionee was entitled to exercise such Option at the date of the
Optionee's death and only prior to the Expiry Date.
6. In the event the Optionee ceases to be a part-time or full-time
employee, director or officer of the Company, or of any Subsidiary of the
Company as the case may be, prior to the Expiry Date the Option, to the extent
that it has not been exercised shall, at 4:30 o'clock p.m., Vancouver time, on
the thirtieth (30th) day following the day on which the Optionee ceases to be a
part-time or full-time employee, officer or director, terminate and be of no
further force or effect whatsoever. If the Optionee is a Consultant, the
Optionee's entitlement to the Option, including the termination thereof, shall
be in accordance with the terms of the consulting agreement entered into between
the Company or any Subsidiary and the Optionee, provided that in no event shall
the Option continue to be outstanding 12 months following the date upon which
such consulting agreement is terminated.
7.1 Subject to the provisions hereof and the Plan, the Option shall be
exercisable from time to time, in whole or in part, by delivery of a written
notice of exercise to the Company at the address set forth herein, accompanied
by such payment as permitted in subparagraph 7.2 hereof for the number of
Optioned Shares to be purchased as specified in such notice. Such notice shall
be in the form of an Election to Purchase, substantially in the form attached to
this Agreement as Appendix "2".
7.2 Notwithstanding any of the provisions contained in the Plan or in this
Agreement, the Company's obligations to issue Optioned Shares to the Optionee
pursuant to the exercise of the Option shall be subject to:
(a) completion of such registration or other qualification of such
Optioned Shares or obtaining approval of such governmental or
regulatory authority as counsel to the Company shall reasonably
determine to be necessary or advisable in connection with the
authorization, issuance or sale thereof;
(b) the listing of the Optioned Shares on the Exchange, if
applicable; and
(c) the receipt from the Optionee of such representations,
agreements and undertakings, including as to future dealings in
the Optioned Shares, as the Company or its counsel determines to
be necessary or advisable in order to safeguard against the
violation of the securities laws of any jurisdiction.
<PAGE> 4
-4-
In this connection, the Company shall, to the extent necessary, take
all reasonable steps to obtain such approvals, registrations and qualifications
as may be necessary for the issuance of the Optioned Shares in compliance with
applicable securities laws and for the listing of the Optioned Shares on the
Exchange.
Unless the Board at any time determines otherwise, the Option may be
exercised by the delivery of cash or cheque or other consideration acceptable to
the Company, in an amount equal to the Option Price. The Company may also permit
an Optionee to elect to pay the Option Price by authorizing a third party to
sell Shares (or a sufficient portion of such Shares) acquired upon exercise of
the Option and remit to the Company a sufficient portion of the sale proceeds to
pay the entire Option Price and any tax withholding resulting from such
exercise.
7.3 Upon the exercise of all or any part of the Option, the Company shall
forthwith cause the registrar and transfer agent of the Company to deliver to
the Optionee or the Optionee's personal representative within a reasonable time
following the receipt by the Company of the Election to Purchase a
certificate(s) representing, in the aggregate, the number of Optioned Shares
specified in the Election to Purchase and in respect of which the Company has
received payment.
8. Nothing herein contained shall obligate the Optionee to purchase any
Optioned Shares except those Optioned Shares in respect of which the Optionee
shall have exercised the Option in the manner hereinbefore provided.
9. The Optionee shall not have any rights as a shareholder of the Company
with respect to the Optioned Shares until the Optionee shall have exercised the
Option in accordance with the provisions of Paragraph 7 hereof and the Plan
(including tendering of payment in full of the Option Price of the Optioned
Shares in respect of which the Option is being exercised) and the issuance of
Optioned Shares by the Company.
10.1 If the Optionee is a resident in the United States of America, the
Optionee recognizes and understands that Optioned Shares issued upon the
exercise of the Option will be acquired in reliance upon an exemption from the
registration requirements of the Securities Act of 1933, as amended (the "1933
ACT") pursuant to Section 3(b) and Rule 701 thereof, and hereby acknowledges and
represents that:
(a) The Optionee believes that the Optionee, either alone or with
the assistance of the Optionee's professional advisors, has such
knowledge and experience in financial and business matters that
the Optionee is capable of evaluating the merits and risks of
the Optionee's purchase of the Optioned Shares;
(b) The Optionee has sufficient financial resources to be able to
bear the risk of the Optionee's investment in the Optioned
Shares;
<PAGE> 5
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(c) The Optionee will be acquiring the Optioned Shares for
investment purposes only and without a current intention of
reselling or redistributing the same upon the occurrence or
non-occurrence of a predetermined event and understands that the
Optioned Shares being issued to him have not been, and may not
ever be, registered under the 1933 Act and, therefore, cannot be
sold unless subsequently registered under the 1933 Act or an
exemption from registration is available;
(d) The Optionee has either spoken or met with, or been given
reasonable opportunity to speak with or meet with,
representatives of the Company for the purpose of asking
questions of, and receiving answers and information from, such
representatives concerning the undersigned's investment in the
Optioned Shares.
(e) The Optionee understands that the Company will rely upon the
representations set forth herein to claim exempt status under
the 1933 Act.
10.2 Certificates representing Optioned Shares issued upon exercise of the
Option by an Optionee who is a resident of the United States shall have endorsed
thereon the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT") OR STATE SECURITIES LAWS. THE HOLDER HEREOF,
BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS OR (D) PURSUANT TO ANOTHER EXEMPTION UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AS EVIDENCED BY AN
OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM ACCEPTABLE TO
THE COMPANY."
10.3 For employees of a U.S. Subsidiary, this Option is intended to qualify
as an Incentive Stock Option to the extent permitted by Section 422 of the Code.
If any portion of this Option fails to qualify as an Incentive Stock Option
under Section 422 of the Code, such portion will constitute a Nonqualified Stock
Option. To the extent that this Option constitutes an Incentive Stock Option,
the following additional terms shall apply:
(a) OPTION PRICE: The Option Price will be at least 100% of such
Option's Market Price, determined as of February 4, 1998, being
the date of
<PAGE> 6
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amendment of the Plan and the effective grant date (the "ISO
Grant Date") of the Incentive Option. If the Optionee owns more
than 10% of the total voting power of all classes of the
Company's Shares, then the Option Price per Share of an
Incentive Stock Option shall not be less than 110% of the Market
Price of the Shares on the ISO Grant Date and the Option term
shall not exceed five years. The determination of 10% ownership
hereunder shall be made in accordance with Section 422 of the
Code.
(b) ISO QUALIFICATION: To the extent that the aggregate fair market
value of the Shares with respect to which this Option is
exercisable for the first time by the Optionee during any
calendar year (under this Option and all other Incentive Stock
Options held by the Optionee) exceeds US$100,000, the excess
portion will be treated as a Nonqualified Stock Option, unless
the United States Internal Revenue Service changes the rules and
regulations governing the US$100,000 limit for Incentive Stock
Options.
(c) TERMINATION: Employment shall not be deemed to continue beyond
the first 30 days of a leave of absence unless the Optionee's
reemployment rights are guaranteed by statute or contract. A
transfer of employment or services between or among the Company
and its subsidiaries shall not be considered a termination of
employment or services.
(d) U.S. TAXATION OF OPTIONS. In order to obtain certain tax
benefits afforded to Incentive Stock Options under Section 422
of the Code, the Optionee must hold the Shares issued upon the
exercise of an Incentive Stock Option for two years after the
ISO Grant Date and one year from the date of exercise. The
Optionee may be subject to the alternative minimum tax at the
time of exercise. The Board may require the Optionee to give the
Company prompt notice of any disposition of Shares acquired by
the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
10.4 To the extent that the Optionee is, at the time of exercise of the
Option, subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "1934 ACT") with respect to the Company, then Shares obtained upon the
exercise of the Option by such Optionee may not be sold by such person until six
months after the ISO Grant Date.
10.5 Notwithstanding the foregoing Paragraphs 10.1 and 10.2, if at the time
of exercise of the Option the Company is subject to Section 12(b) or 12(g) of
the 1934 Act and has filed with the Securities and Exchange Commission a
registration statement on Form S-8 covering the issuance of the Optioned Shares,
then the representations set forth in Paragraph 10.1 and the legend set forth in
Paragraph 10.2 shall not apply.
<PAGE> 7
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11. Nothing in the Plan or the Option shall confer upon any Optionee any
right to continue in the employ of the Company or any Subsidiary of the Company
or affect in any way the right of the Company or any Subsidiary to terminate the
Optionee's employment at any time; nor shall anything in the Plan or the Option
be deemed or construed to constitute an agreement, or an expression of intent,
on the part of the Company or any Subsidiary to extend the employment of any
Optionee beyond the time which the Optionee would normally be retired pursuant
to the provisions of any present or future retirement plan of the Company or any
Subsidiary, or beyond the time at which the Optionee would otherwise be retired
pursuant to the provisions of any contract of employment with the Company or any
Subsidiary.
12. No director or officer of the Company shall be liable or be held to
account for any action taken or made in good faith under the Plan or the Option
granted pursuant hereto.
13. Time shall be of the essence of this Agreement.
14. This Agreement shall enure to the benefit of and be binding upon the
Company, its successors and assigns, and the Optionee and the Optionee's heirs,
executors, administrators and personal representatives to the extent provided in
Paragraph 5 hereof.
15. Subject to Paragraph 5, this Agreement shall not be assignable or
transferable by the Optionee or the Optionee's heirs, executors, administrators
and personal representatives, and the Option may be exercised only by the
Optionee or the Optionee's heirs, executors, administrators and personal
representatives.
16. If at any time during the continuance of this Agreement the parties
hereto shall deem it necessary or expedient to make any alteration or addition
to this Agreement they may do so by means of a written agreement between them
which shall be supplemental hereto and form part hereof and which shall be
subject to any applicable approval by the requisite regulatory authorities
having jurisdiction.
17. The Optionee, by the execution of this Agreement, shall be deemed to
have (i) accepted the Option described in this Agreement and the Plan,(ii)
acknowledged receipt of a copy of this Agreement and a copy of the Plan and(iii)
read and understood the Agreement and the Plan.
18. Wherever the plural or masculine are used throughout this Agreement,
the same shall be construed as meaning singular or feminine or neuter or the
body politic or corporate where the context of the parties thereto require.
19. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in Canadian funds.
<PAGE> 8
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20. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
21. This Agreement may be executed in several parts in the same form and
such parts as so executed shall together constitute one original agreement and
such parts, if more than one, shall be read together and construed as if all the
signing parties hereto had executed one copy of this Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto on the 6th day of April, 1998, with effect as at and from the day and
year first above written.
INTERNATIONAL URANIUM CORPORATION
PER: (C/S)
------
SIGNED, SEALED AND DELIVERED )
BY IN THE PRESENCE OF: )
)
)
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) -------------------------------------
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)
ADDRESS
- ---------------------------------- -----------------------------------
TAXPAYER I.D. NUMBER (IF APPLICABLE)
-----------------------------------
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TAXPAYER SOCIAL INSURANCE NUMBER
(IF APPLICABLE)
<PAGE> 1
ATTACHMENT ITEM 19(b)3(h) ASSET PURCHASE AGREEMENT
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made, as of the 19th day of December, 1996,
BETWEEN:
ENERGY FUELS, LTD., a limited partnership organized under the
laws of the State of Colorado, with an office at Suite 900 -
1515 Arapahoe Street, Denver, Colorado 80202
(hereinafter called "EFL" or a "Vendor")
ENERGY FUELS EXPLORATION CO., a corporation incorporated
under the laws of the State of Colorado, with an office at
Suite 900 - 1515 Arapahoe Street, Denver, Colorado 80202
(hereinafter called "EFEX" or a "Vendor")
ENERGY FUELS NUCLEAR, INC, a corporation incorporated under
the laws of the State of Colorado with an office at Suite 900
- 1515 Arapahoe Street, Denver, Colorado 80202
(hereinafter called "EFN" or a "Vendor" and, together with
EFL and EFEX, collectively the "Vendors")
AND:
INTERNATIONAL URANIUM HOLDINGS CORPORATION, a corporation
incorporated under the laws of the State of Delaware with an
office at 1320 - 885 West Georgia Street, Vancouver, British
Columbia, Canada, V6C 3E8
(hereinafter called the "Purchaser").
WHEREAS:
A. The Vendors own, lease or have an interest in, either
directly or indirectly, certain uranium properties and mines located in
Colorado, Arizona, Utah, Wyoming, South Dakota and
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<PAGE> 2
Mongolia, a uranium processing mill in Utah, a joint venture with certain
Russian entities, certain uranium purchase and sale contracts and related
assets and businesses;
B. EFL and EFEX each filed a petition for relief under Chapter
11 of the United States Bankruptcy Code on February 23, 1995 in the United
States Bankruptcy Court for the District of Colorado, and each currently
remains in possession of its assets as a debtor-in-possession; and
C. The Vendors wish to sell, and the Purchaser or its nominee or
nominees wish to purchase, such assets from the Vendors on the terms and
conditions set out below,
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements of the respective parties hereto as hereinafter set
forth, the parties hereto covenant and agree as follows:
SECTION 1 - DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement including the recitals hereof
and the schedules attached hereto, the following words and expressions have the
following meanings:
(a) "AFFILIATE" has the meaning set out in Rule 405 promulgated
under the United States Securities Act of 1933 as amended;
(b) "AGREEMENT" means this document, including the recitals
hereto and all schedules referred to herein and attached
hereto, all as may be amended from time to time by a signed
agreement in writing between the Vendors and the Purchaser;
(c) "ARGUNEXCO JOINT VENTURE" means the joint venture for the
mining, processing and marketing of uranium ore and uranium
oxides between EFEX, the Priargunsky Gorno-Himichesky
Kombinat, the Chitea Region Property Committee and
Techsnabexport;
(d) "ARIZONA 1 MINE" means the Arizona 1 Mine located in the
Arizona Strip area of Arizona, together with all associated
Lands, Permits and Licenses, Mineral Rights, any ore
stockpiles, Equipment, Buildings and Other Assets;
(e) "ARIZONA STRIP EXPLORATION PROPERTIES" means certain uranium
exploration properties located in the Arizona Strip area in
Arizona, together with all associated Lands, Permits and
Licenses, Mineral Rights, Equipment, Buildings and Other
Assets;
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<PAGE> 3
(f) "ASP" means Arizona Strip Partners L.P., a limited
partnership organized under the laws of the State of
Delaware;
(g) "ASP ASSETS" means all of the assets and business of ASP
(other than Excluded Assets), including, without limitation:
(i) the Canyon Mine;
(ii) the Arizona Strip Exploration Properties; and
(iii) the Hermit Mine;
(h) "ASSUMED OBLIGATIONS" means all obligations and Liabilities
of the Vendors and the Subsidiaries under, arising from or
imposed with respect to:
(i) all Contracts (other than Excluded Assets);
(ii) all Permits and Licenses;
(iii) all Environmental and Reclamation Obligations;
(iv) the Permitted Encumbrances; and
(v) the Surety Bonds;
and without limiting the generality of the foregoing:
(i) all amounts owing by ASP under the note payable
to Mace Trust relating to the purchase of the
Lands for the Fredonia Field Office; and
(ii) all amounts owing by H-B in connection with the
purchase of the Lands included as part of the
Mill;
but the Purchaser and its nominees shall not assume any other
Liabilities or obligations of any of the Vendors or the
Subsidiaries including, without limitation, the Revolving
Loan, the Term Loan and the Option Agreement. For greater
clarification, such Assumed Obligations do not include:
(i) any obligations or Liabilities arising from or
related to the Colorado State School of Mines
situation or the Day Loma Property;
(ii) any wages, salaries, benefits or other
Liability to any of the Employees and any
benefit, bonus, profit-sharing, retirement
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<PAGE> 4
income, termination, severance, dental, medical
disability, health, pension or other plans,
programs, policies or other arrangements in
place for the benefit or advantage of the
Employees;
(iii) any Liability of the Vendors to any state,
federal, county or other taxing authority
relating to or arising from the Purchased
Assets or the Business incurred, accrued or
arising prior to Closing;
(iv) any obligations or Liability to KKL, KKG, NOK
or P-H (other than the Swiss Royalty) under or
in connection with the Dissolution Agreement
and all related documents (including, without
limitation, the Release and Indemnity Agreement
dated June 12, 1996); and
(v) any Liability or obligation arising from or
relating to the Dial Litigation or the Bradford
Litigation;
(i) "AZ1" means Arizona 1 Partners, Limited Partners, a limited
partnership organized under the laws of the State of
Delaware;
(j) "AZ1 ASSETS" means all of the assets and business of AZ1
(other than Excluded Assets) including, without limitation,
the Arizona 1 Mine;
(k) "BANKRUPTCY CASE" means the bankruptcy proceedings being
jointly administered before the United States Bankruptcy
Court for the District of Colorado whereby EFL and EFEX are
the Debtors and known as case numbers 95-11645-CEM and
95-11648- CEM;
(l) "BANKRUPTCY CODE" means Title 11 of the United States Code,
11 U.S.C. '101, et seq., as it may be amended from time to
time during the Bankruptcy Case;
(m) "BANKRUPTCY COURT" means the United States Bankruptcy Court
for the District of Colorado and any other court of competent
jurisdiction;
(n) "BANKRUPTCY RULES" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, as applicable to the
Bankruptcy Case, promulgated under 28 U.S.C. '2075 of the
United States Code and the local rules for the Bankruptcy
Court and the District Court for the District of Colorado;
(o) "BONDING SECURITY" means the collateral for the Surety Bonds,
as more particularly described in Schedule "J" hereto;
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<PAGE> 5
(p) "BOOKS AND RECORDS" means all books, records, files,
documents and other written information relating to the
Purchased Assets or the Business which are situated at any of
the offices of the Vendors or the Subsidiaries or any of the
Field Offices including, without limitation, the following:
(i) the Information Materials;
(ii) personnel records of existing employees; and
(iii) correspondence files relating to the Purchased
Assets and Business;
but excluding information from accounting, tax and litigation
files provided such information is retained and made
available to Purchaser as required under section 11.7;
(q) "BOOK VALUE" means the amount of all assets as recorded on
the Purchaser's books less the amount of all liabilities
recorded on the Purchaser's books (excluding from such
liabilities any and all subordinated debt owed by the
Purchaser to any Affiliate), which assets and liabilities
shall be recorded in accordance with United States generally
accepted accounting principles;
(r) "BRADFORD LITIGATION" means the case known as Bradford et al
v. Sayre et al pending before the United States District
Court for the District of Utah, Civil Action No. 2:96CV
0563G;
(s) "BRIDGE LOAN" means the bridge loan of up to $2,000,000 to
EFL by International Uranium Corporation in accordance with
those terms and conditions set forth in the letter attached
hereto as Schedule "W";
(t) "BUILDINGS" means the mining and processing facilities,
storage facilities, offices and all other buildings,
structures, infrastructure and fixtures situated on the Lands
or on any of the Mineral Rights, including all fixtures and
improvements forming part thereof, but excluding the Excluded
Assets;
(u) "BULLFROG PROPERTY" means the Bullfrog property located in
Utah approximately 130 road miles west of the Mill, together
with all associated Lands, Permits and Licenses, Mineral
Rights, Equipment, Buildings and Other Assets;
(v) "BUSINESS" means all business carried on by any of the
Vendors or the Subsidiaries in connection with the Purchased
Assets including, without limitation, the uranium and
vanadium exploration, mining, milling,
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<PAGE> 6
purchasing and selling business currently carried on by the
Vendors and the Subsidiaries in connection with the Purchased
Assets;
(w) "BUSINESS DAY" means any day other than a Saturday, Sunday or
any statutory holiday in the State of Colorado;
(x) "CAMECO AGREEMENT" means the agreement between Cameco
Corporation and EFEX dated April 25, 1989 for the purchase by
EFEX of U308 from Cameco including the letter agreement dated
March 20, 1996 between EFEX and Cameco but excluding the
supplemental agreement dated September 23, 1996;
(y) "CAMECO MATCHING SALES AGREEMENTS" means the sales agreements
entered into or which may be entered into between EFEX and
purchasers of uranium from time to time which match EFEX's
purchase obligations under the Cameco Agreement after January
1, 1997;
(z) "CANYON MINE" means the Canyon Mine located near the south
rim of the Grand Canyon in Arizona, together with all
associated Lands, Permits and Licenses, Mineral Rights, any
ore stockpiles, Equipment, Buildings and Other Assets;
(aa) "CASH COLLATERAL" means the Bonding Security that is in the
form of cash;
(ab) "CHARTER DOCUMENTS" means Articles, Articles of
Incorporation, Memorandum, Memorandum of Association,
Articles of Association, By-laws or any similar charter or
organizational document of a corporate or other entity;
(ac) "CLAIM" means any and all debts, claims, actions, lawsuits,
causes of action, demands, notices and obligations of
whatsoever nature and howsoever incurred;
(ad) "CLOSING" means the completion of the sale of the Purchased
Assets and Business to the Purchaser or its nominee or
nominees pursuant to paragraph 8.2 herein;
(ae) "CLOSING DATE" means the date specified in paragraph 8.1 as
the date for completion of the Closing;
(af) "COLORADO PROPERTIES" means all of the mines and mineral
properties in the Colorado plateau area of Colorado and Utah
including, without limitation, the Sunday, Carnation, St.
Jude, West Sunday, Snowball, Pandora, Beaver, Hecla JV, La
Sal, Rim and Humbug Mines; the Redd Block 4, any rights H-B
has in the Cam 19 and 20 properties, and the Topaz, Van 4,
Monogram, Jo Dandy,
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<PAGE> 7
Burro Canyon, Paradox D, Thunderbolt, Deer Creek (East), East
Canyon, Marysvale Area, and the CSR-10 properties; and the
Egnar Plains and Dolores properties, together with all
associated Lands, Permits and Licenses, Mineral Rights, ore
stockpiles, Equipment, Buildings and Other Assets;
(ag) "COMMITTEE" means the Official Joint Creditors' Committee For
The Jointly Administered Bankruptcy Estates of CSI
Enterprises, et al.;
(ah) "CONTRACTS" means all those licenses, leases, franchises,
contracts, agreements, engagements or commitments, whether
written or oral, relating to the Purchased Assets or the
Business to which any of the Vendors or any of the
Subsidiaries is a party and which are listed on Schedule
"D";
(ai) "CRP" means Cheyenne River Partners, L.P., a limited
partnership organized under the laws of the State of
Delaware;
(aj) "CRP ASSETS" means all of the assets and business of CRP
(other than the Excluded Assets) including, without
limitation:
(i) the Reno Creek Project;
(ii) the Dewey Burdock Property; and
(iii) the Gillette Field Office;
(ak) "DEWEY-BURDOCK PROPERTY" means the Dewey-Burdock in-situ
leach uranium prospect located along the southwest flank of
the Black Hills, near the South Dakota/Wyoming border,
together with all associated Lands, Permits and Licenses,
Mineral Rights, Equipment, Buildings and Other Assets;
(al) "DIAL LITIGATION" means the case known as Sharon Dial et al
v. Energy Fuels Mining Joint Venture et al, pending before
the Third Judicial District Court, Salt Lake County, State of
Utah, Civil No. 960902608PI;
(am) "DISSOLUTION AGREEMENT" means the agreement made, as of the
12th day of June 1995, among EFL, EFEX, KKG, KKL, NOK and
P-H, and related agreements and instruments under which the
parties agreed, among other things, to refurbish the Mill and
to process certain stockpiled uranium ore, and upon the Mill
Run Completion Date, as defined therein, KKG, KKL, NOK and
P-H agreed to the distribution of Residual Partnership Assets
as defined therein, to EFL subject to the distribution by the
Subsidiaries to KKL, NOK and KKG of the Swiss Royalty, as
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<PAGE> 8
approved by the Bankruptcy Court pursuant to an order dated
May 30, 1995;
(an) "DOVE CREEK FIELD OFFICE" means all Lands, Permits and
Licenses, Buildings, Equipment, and Other Assets comprising
or associated with the Dove Creek field office in Colorado;
(ao) "EARNEST MONEY ESCROW AGREEMENT" means that certain escrow
agreement dated November 4, 1996 by and among Rio Frio
Holdings, Inc. as assigned to the Purchaser, the Vendors and
Colorado National Bank refered to in paragraph 3.1;
(ap) "EFFECTIVE DATE" has the meaning set out in paragraph 2.3
hereof;
(aq) "EFFECTIVE TIME" means 12:01 a.m. mountain standard time on
the Effective Date;
(ar) "EFEX ROYALTY" means a royalty payable to EFEX or any other
party on U308 pursuant to the terms and conditions of the
Master Conveyance and Royalty Agreement dated October 1, 1984
between EFEX and ASP;
(as) "EMPLOYEES" means all employees of the Vendors and the
Subsidiaries who are employed in the Business at the
Effective Date, which as at the date hereof are the
individuals listed in Schedule "A" hereto;
(at) "EMPLOYEE RECEIVABLES" means all amounts, if any, owing to
any of the Vendors or Subsidiaries by Employees who agree to
become employed by the Purchaser or its nominee, that are
outstanding at the Effective Date including, without
limitation, housing loans made by any of the Vendors or
Subsidiaries to such Employees;
(au) "ENCUMBRANCES" means and includes, whether or not registered
or recorded, any and all:
(i) mortgages, assignments of rent, liens,
licenses, leases, charges, security interests,
hypothecations and pledges, whether fixed or
floating, against property (whether real,
personal, mixed, tangible or intangible), or
conditional sales contracts or title retention
agreements or equipment trusts or financing
leases relating thereto, or any subordination
to any right or claim of others in respect
thereof;
(ii) Claims, interests and estates against or in
property (whether real, personal, mixed,
tangible or intangible) including easements,
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<PAGE> 9
rights-of-way, servitudes or other similar
rights in property granted to or reserved or
taken by any person or any governmental body or
authority;
(iii) any option or other right to acquire, or
acquire any interest in, any property;
(iv) any royalties; and
(v) other liens, charges or encumbrances of
whatsoever nature and kind against property
(whether real, personal, mixed, tangible or
intangible);
(av) "ENVIRONMENTAL AND RECLAMATION OBLIGATIONS" means all
Environmental Contamination and reclamation obligations
arising in, on or under any of the Purchased Assets, whether
or not such Environmental Contamination has migrated off of
the Purchased Assets by wind, water flow, gravity or other
natural forces ("Natural Forces"). For greater
clarification, Environmental and Reclamation Obligations
include, without limitation, the reclamation and
decommissioning obligations associated with the Mill and
reclamation obligations and related Liabilities associated
with the U.S. Mining and Exploration Properties. For greater
clarification, Environmental and Reclamation Obligations do
not include: (i) any Environmental Contamination and
Liabilities relating to or arising from any use, handling,
storage, treatment, transportation or disposal of Hazardous
Materials by other than Natural Forces which is not in, on or
under any of the Purchased Assets; or (ii) Environmental
Contamination or Liabilities related to or arising from the
Colorado State School of Mines situation or the Day Loma
Property;
(aw) "ENVIRONMENTAL CONTAMINATION" means the discharge, emission,
leaking, spilling, pumping, pouring, injecting, escaping,
dumping, leaching, release or disposal into the environment
at any time prior to the Effective Time including, without
limitation, land, air and water, of Hazardous Materials or
other materials so as to result in a violation of any
Environmental Laws;
(ax) "ENVIRONMENTAL LAWS" means federal, state and local laws,
statutes, ordinances, regulations and rules, or any permits
and orders of any governmental or regulatory authority and
common law in force from time to time prior to the Effective
Time with respect to environmental protection and Hazardous
Materials;
(ay) "EQUIPMENT" means all Supplies and all machinery, equipment,
automobiles, trucks, bulldozers, shovels,
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<PAGE> 10
trailers, tractors, office equipment, computer hardware and
software, yard equipment, furniture, furnishings and tools of
all kinds owned by any of the Vendors (and related to the
Purchased Assets or the Business) or owned by any of the
Subsidiaries, whether or not situated on the Lands or on any
Mineral Rights on the Closing Date, and used or intended for
use in connection with the Purchased Assets or the Business,
including, without limitation, the machinery, equipment and
other property described in Schedule "B" hereto but excluding
the Excluded Assets;
(az) "EQUIPMENT COSTS" means:
(i) for the purposes of the Mill property, the cost of
the property as shown on the Vendors' books, which
is 30% of the cost of the property;
(ii) for the purposes of Equipment acquired from Umetco,
the Vendors' estimate of value; and
(iii) for all other Equipment, the amount shown on the
Vendors' books;
(ba) "ESCROW AGENT" means Colorado National Bank;
(bb) "ESCROW AGREEMENT" means the escrow agreement referred to in
paragraph 3.5 and scheduled hereto as Schedule "C";
(bc) "EXCLUDED ASSETS" means all of the Vendors' and the
Subsidiaries' right, title and interest in, to and under:
(i) any cash or receivable held by any of the Vendors or
the Subsidiaries (other than the Cash Collateral and
all receivables, U308, cash and cash proceeds
derived, directly or indirectly, from the Processing
Contract);
(ii) any agreements, that are not Contracts, under which
any of the Vendors or the Subsidiaries have the
right or obligation to supply U308 to any Vendor or
Affiliate of a Vendor or any third parties;
(iii) the matched sales agreement dated November 29, 1994
between EFEX and Peco Energy Company;
(iv) the Option Agreement;
(v) the URI Agreement;
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<PAGE> 11
(vi) any agreements not necessary for the reasonable
operation of any of the Purchased Assets or Business
that are not listed on Schedule "D";
(vii) the Mill Run Inventories and all other uranium
inventories owned by the Vendors, the Subsidiaries
or the Swiss Utilities (other than U308 derived from
the performance of the Processing Contract and the
proceeds thereof);
(viii) such other assets of the Vendors and the
Subsidiaries that are not identified as Purchased
Assets;
(ix) any intercompany accounts payable or receivable by
or between any of the Vendors and the Subsidiaries,
provided further that the Purchaser shall not be
responsible for any outstanding intercompany
accounts payable of any of the Vendors or the
Subsidiaries;
(x) the Employee Receivables;
(xi) Vendors' equity interest in JRA Sports and Nuclear
Developers, Ltd.;
(xii) the Pathfinder J.V.;
(xiii) the property or properties commonly referred to as
the Day Loma property and any entity that holds any
of such properties; and
(xiv) the Pete and RePete properties;
(bd) "EXISTING ROYALTIES" means the lessors' royalties, overriding
royalties, reversionary interests and similar burdens granted
in accordance with normal and customary practice listed in
Schedule "E" hereto, which for greater certainty, shall not
include: (i) royalties held by entities owned or controlled,
directly or indirectly, by Oren Benton or which otherwise are
insiders (as that term is defined in the United States
Bankruptcy Code) of Oren Benton; (ii) royalties granted to
collateralize any outstanding obligation of any kind to any
entity or (iii) any recoupment claim or royalty owed by any of
the Vendors or Subsidiaries to Nuclear Developers, Ltd.;
(be) "FIELD OFFICES" means the Grand Junction Field Office, the
Fredonia Field Office, the Gillette Field Office, the Dove
Creek Field Office and the Nucla Field Office;
(bf) "FOUNDING AGREEMENT" means the agreement dated January 15,
1994 between EFEX, the state owned Russian geological concern
Geologorazvedka and the Ministry of
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<PAGE> 12
Geology and Mineral Resources of Mongolia through its
designated representative URAN, relating to the establishment
of a joint venture company to pursue the exploration of
uranium in the Gobi region of Mongolia;
(bg) "FREDONIA FIELD OFFICE" means all Lands, Permits and
Licenses, Buildings, Equipment and Other Assets comprising or
associated with the Fredonia Field Office;
(bh) "GILLETTE FIELD OFFICE" means all Lands, Permits and
Licenses, Buildings, Equipment and Other Assets comprising or
associated with the field office in Gillette, Wyoming;
(bi) "GOBI REGION MINERAL AGREEMENT" means the mineral agreement
dated January 15, 1994 among EFEX, the Ministry of Geology
and Mineral Resources of Mongolia and the state owned Russian
geological concern Geologorazvedka relating to the
exploration for uranium in the Gobi region of Mongolia;
(bj) "GOODWILL" means the goodwill attributable to the Business;
(bk) "GRAND JUNCTION FIELD OFFICE" means all Lands, Permits and
Licenses, Buildings, Equipment and Other Assets comprising or
associated with the Grand Junction Field Office;
(bl) "H-B" means Hanksville-Blanding Limited Partnership, a
limited partnership organized under the laws of the State of
Delaware;
(bm) "H-B ASSETS" means all of the assets and business of H-B
(other than Excluded Assets) including, without limitation:
(i) the Mill;
(ii) the UMETCO Note;
(iii) the Pinenut Mine;
(iv) the Bullfrog Property;
(v) the Colorado Properties;
(vi) the Pigeon Mine;
(vii) the Three Hack Canyon Mines;
(viii) the Grand Junction Field Office;
(ix) the Fredonia Field Office;
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<PAGE> 13
(x) the Dove Creek Field Office;
(xi) the Nucla Field Office;
(xii) the Processing Contract and all revenues and U3O8
derived from the performance of the Processing
Contract, whether or not accrued or paid to the
Vendors before or after the Effective Date, other
than U3O8 used to pay the transportation costs
directly associated with the Processing Contract;
and
(xiii) the Waste Processing Contracts;
(bn) "HAZARDOUS MATERIALS" means any hazardous, toxic or
radioactive substance, material or waste, asbestos, urea
formaldehyde, petroleum hydrocarbons, pollutants,
contaminants and other substances, materials and wastes of
any kind, including, without limitation, special wastes,
compounds known as chlorobiphenyls, and any substance,
material or waste the use, storage, manufacture, treatment,
generation, transport, or disposal of which is prohibited,
controlled, regulated or licensed under Environmental Laws;
(bo) "HERMIT MINE" means the Hermit mine located in the Arizona
Strip area of Arizona, together with all associated Lands,
Permits and Licenses, Mineral Rights, Equipment, Buildings
and Other Assets;
(bp) "HOLDBACK" means the amount of $1,500,000 deposited with the
Escrow Agent under the Escrow Agreement, pursuant to
paragraph 3.3(b) below;
(bq) "HOLDBACK CLAIM" means any claim by the Purchaser against any
of the Vendors for any alleged breach of a representation,
warranty, covenant or other obligation under this Agreement
including, without limitation, a claim of indemnification as
set forth in paragraph 11.2 below;
(br) "INFORMATION MATERIALS" means all the drawings, plans,
reports, records, agreements, exploration results and other
documents and materials relating to the Purchased Assets or
the Business owned by the Vendors or the Subsidiaries or
otherwise situated at any of the offices of the Vendors or
the Subsidiaries or any of the Field Offices at the date
hereof, together with such additional similar documents and
materials as may be added thereto before the Closing Date;
(bs) "INTELLECTUAL PROPERTY" means all trade or brand names,
business names, trade marks, trade mark registrations and
applications, service marks, service mark registrations
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<PAGE> 14
and applications, logos, design marks, copyrights, copyright
registrations and applications, patents, patent
registrations and applications and other patent rights
(including any patents issued on such applications or
rights), trade secrets, proprietary information and know-
how, equipment and parts lists and descriptions, instruction
manuals, inventions, inventors' notes, research data,
unpatented blue prints, drawings and designs, formulae,
processes, technology and other intellectual property,
together with all rights under licenses, registered user
agreements, technology transfer agreements and other
agreements or instruments relating to any of the foregoing,
that are owned by: (i) any of the Vendors and related to the
Purchased Assets or Business; or (ii) any of the
Subsidiaries;
(bt) "INTERIM STATEMENT OF ADJUSTMENTS" means the Interim
Statement of Adjustments described in paragraph 3.7(d) below;
(bu) "INTERNAL REVENUE CODE" means the United States Internal
Revenue Code of 1986, as amended;
(bv) "JAPANESE CONTRACTS" means the Agreement for the Sale and
Purchase of Uranium Concentrates dated August 19, 1991 by and
between EFEX and Kyushu Electric Power Company, the Agreement
for the Sale and Purchase of Uranium Concentrates dated June
24, 1991 by and between EFEX and Chubu Electric Power Company
and the Agency Agreement dated June 15, 1989 by and between
Sumitomo Corporation and EFEX (but specifically excluding any
other contracts with Sumitomo);
(bw) "JOINTLY ADMINISTERED BANKRUPTCY CASES" means the jointly
administered bankruptcy proceedings of EFL, EFEX, Oren
Benton, Nuexco Trading Corporation, CSI Enterprises, Inc. and
Energy Fuels Mining Joint Venture;
(bx) "KANAB NORTH MINE" means the Kanab North mine located in the
Arizona Strip area of Arizona, together with all associated
Lands, Permits and Licenses, Mineral Rights, Equipment,
Buildings and Other Assets;
(by) "KKG" means KERNKRAFTWERK GOESGEN-DAENIKEN AG, a Swiss
corporation;
(bz) "KKL" means KERNKRAFTWERK LEIBSTADT AG, a Swiss corporation;
(ca) "KNP" means Kanab North Partners, Limited Partnership, a
limited partnership organized under the laws of the State of
Delaware;
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<PAGE> 15
(cb) "KNP ASSETS" means all of the assets and business of KNP
(other than Excluded Assets) including, without limitation:
(i) the Kanab North Mine; and
(ii) the KNP Exploration Properties;
(cc) "KNP EXPLORATION PROPERTIES" means certain mineral
exploration properties, together with all associated Lands,
Permits and Licenses, Mineral Rights, Equipment, Buildings
and Other Assets;
(cd) "LANDS" means the fee simple lands (other than patented
mining claims) and premises described in Schedule "F" hereto
and all plants, improvements, appurtenances and fixtures
situated thereon or forming part thereof including, without
limitation:
(i) the Buildings situated thereon; and
(ii) all reserves or uranium in situ within, upon or
under such lands;
but does not include the Excluded Assets.
(ce) "LIABILITY" means any:
(i) right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured;
or
(ii) right to an equitable remedy or breach of
performance if such breach gives rise to a right to
payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or
unsecured;
(cf) "LIMESTONE PROJECT" means the Limestone project, including
the Tad claims, as well as the Shupe property near Moab,
Utah, together with all associated Lands, Permits and
Licenses, Mineral Rights, Equipment and Other Assets;
(cg) "LIQUIDATION" means the dissolution and completion of winding
up of each of H-B, CRP,ASP, AZ1 and KNP in accordance with
the Dissolution Agreement and related agreements and
instruments prior to the Closing;
(ch) "MATERIAL CONTRACTS" means all executory agreements, other
than the Existing Royalties or Excluded Assets,
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<PAGE> 16
which are material to the Vendors or the Subsidiaries. For
the purposes of this Agreement, a contract shall be Material
if:
(i) performance of any right or obligation by any party
to such contract (other than a contract with a
customer in the ordinary course of business) may
occur over a period of time greater than one year,
or
(ii) if an expenditure, receipt or transfer or other
disposition of property or Liability with a value of
greater than $50,000 may arise under such contract
(other than a contract with a customer in the
ordinary course of business), or
(iii) if such contract has been entered into outside of
the ordinary course of business;
(ci) "MILL" means the White Mesa Mill, a fully permitted 2,000-ton
per day uranium mill with an associated vanadium recovery
process facility and tailings system, near Blanding, Utah,
together with all associated Lands, Permits and Licenses,
Mineral Rights, ore stockpiles, Equipment, Buildings and
Other Assets;
(cj) "MILL BOND" means the bond required under applicable law to
be maintained in connection with the Mill, currently posted
by Umetco and Union Carbide Corporation;
(ck) "MILL RUN COMPLETION DATE" has the meaning set forth in the
Dissolution Agreement;
(cl) "MILL RUN INVENTORIES" means the inventories of U3O8 acquired
by EFL as a result of the 1995 Mill Run;
(cm) "MINERAL RIGHTS" means all water, water wells, water rights,
mining claims (patented or unpatented), mining leases,
mineral interests, surface interests, surface agreements,
easements, reserves or any other mineral interest including,
without limitation, the Mineral Rights set out in Schedule
"G" hereto;
(cn) "MONGOLIAN EXPENDITURES" means the expenditures made by EFEX
up to the Closing to meet its obligations under the Mongolian
Joint Venture, such expenditures to be made in accordance
with and not to exceed the 1996 budget approved by the
Mongolian Joint Venture, a copy of which is attached as
Schedule "H" hereto, and any future budget for the calendar
year 1997 that is approved by the Mongolian Joint Venture
prior to Closing with the consent of Purchaser as set forth
in Section 6.1(b);
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<PAGE> 17
(co) "MONGOLIAN JOINT VENTURE" means Gurvan Saihan, BBHK, a
Mongolian limited liability company, together with the Gobi
Region Mineral Agreement and the Founding Agreement;
(cp) "MONGOLIAN JOINT VENTURE INTEREST" means EFEX's interest in
the Mongolian Joint Venture and any related rights and assets
associated therewith that are owned by EFEX;
(cq) "NOK" means NORDOSTSCHWEIZERISCHE KRAFTWERKE AG, a Swiss
corporation;
(cr) "NUCLA FIELD OFFICE" means all Lands, Permits and Licenses,
Buildings, Equipment and Other Assets comprising or
associated with the Nucla field office in Colorado;
(cs) "OPTION AGREEMENT" means the agreement dated May 1, 1990
between EFL on behalf of and as the sole general partner of
H- B, and on behalf of and as one of the general partners of
ASP, of the first part, and KKL of the second part, under
which, among other things, EFL, on behalf of H-B and ASP,
granted to KKL the right and option to participate in the
development, mining and milling of up to two uranium bearing
ore bodies within a specified area of interest;
(ct) "OTHER ASSETS" means all of the Vendors' and Subsidiaries'
right, title and interest in and to all other assets, not
otherwise specifically mentioned or defined in this
Agreement, used by or relating to the Purchased Assets or the
Business, but excluding the Excluded Assets;
(cu) "P-H" means P-H Holding, Inc., a Delaware corporation;
(cv) "PATHFINDER J.V." means the joint venture between ASP and
Pathfinder Mines under which ASP has or had a 50% joint
venture interest, and Pathfinder Mines has or had a 50% joint
venture interest;
(cw) "PERMITTED CAPITAL EXPENDITURES" means the Mongolian
Expenditures and the Processing Contract Expenditures;
(cx) "PERMITS AND LICENSES" means all licenses, consents, permits,
authorities, approvals, certificates, rights of way,
registrations and other rights relating to the operation,
ownership or leasing of the Purchased Assets or the operation
of the Business, all of which are described in Schedule "I"
hereto, including, without limitation, all of the permits and
licenses relating to the Mill and all of the mines, all
highway access and crossing permits and right of way and
easement crossing agreements relating thereto and also
including, without
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<PAGE> 18
limitation, the environmental permits, water licenses, mining
permits and reclamation permits;
(cy) "PERMITTED ENCUMBRANCES" means:
(i) the Swiss Royalty;
(ii) the Bonding Security;
(iii) the Existing Royalties;
(iv) the EFEX Royalty;
(v) [this section intentionally left blank]
(vi) those liens and security interests, if any, conveyed
to secure all amounts owing by ASP under the note
payable to Mace Trust relating to the purchase of
the lands for the Fredonia Field Office;
(vii) those liens and security interests, if any, conveyed
to secure all amounts owing by H-B in connection
with the purchase of the lands included as part of
the White Mesa Mill;
(viii) the conventional rights of reassignment upon the
surrender or expiration of any lease;
(ix) easements, rights-of-way, servitudes, permits,
surface leases and other rights in respect of
surface operations, provided that they do not
interfere materially with the operation of the
Business or the use of the Purchased Assets in
connection with the Business;
(x) those encumbrances in the nature of customary
defects expected to be encountered in the area
involved and customarily acceptable to prudent
operators and interest owners in that area,
including defects that have been cured by possession
under applicable statutes of limitation, defects in
the early chain of title such as failure to recite
marital status in documents, omission of heirship or
succession proceedings, lack of survey or failure to
record releases of liens, or mortgages that have
expired of their own terms or which through the
passage of time or statute are no longer
enforceable, or other defects that either as a
practical matter have not resulted and are not
likely to result in a material claim or are
considered waivable under local bar association-
approved title
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<PAGE> 19
standards or customary title practices in the area;
and
(xi) any security for the Bridge Loan;
(cz) "PERSON" means an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated
organization or a federal, state or local government agency
or instrumentality;
(da) "PIGEON MINE" means the reclaimed Pigeon Mine located in the
Arizona Strip area of Arizona, together with all associated
Lands, Permits and Licenses, Mineral Rights, Equipment,
Buildings, ore stockpiles and Other Assets;
(db) "PINENUT MINE" means the Pinenut Mine located in the Arizona
Strip area of Arizona, together with all associated Lands,
Permits and Licenses, Mineral Rights, Equipment, Buildings,
ore stockpiles and Other Assets;
(dc) "PREPAID EXPENSES" means all prepaid expenses of the Vendors
and the Subsidiaries relating to the Business or the
ownership, leasing or operation of the Purchased Assets that
are paid by the Vendors or the Subsidiaries prior to Closing
but which relate to the ownership or leasing of the Purchased
Assets or the carrying on of the Business subsequent to
Closing, including without limitation any amounts actually
spent on the Mongolian Joint Venture Interest prior to
Closing that are in satisfaction of budgeted items that apply
after Closing and prepaid royalties;
(dd) "PROCESSING CONTRACT" means the processing contract dated
September 1, 1995 between EFN acting on behalf of H-B and
Converdyn acting on behalf of Allied Signal Inc., relating to
the processing of uranium bearing calcium fluoride;
(de) "PROCESSING CONTRACT EXPENDITURES" means all the costs and
expenditures required to be made,or that have been made, by
the Vendors or the Subsidiaries to perform their obligations
under the Processing Contract up until Closing, excluding any
Mill and headquarters overhead;
(df) "PROCESSING CONTRACT U308 AND PROCEEDS" means all U308 and
other proceeds or revenues derived by the Vendors or the
Subsidiaries from the performance of the Processing Contract
up until Closing;
(dg) "PROCESSING CONTRACT PRICE ADJUSTMENT AMOUNT" means the
direct costs and expenditures required to be made, or that
have been made, by the Vendors and the Subsidiaries to
perform their obligations under the Processing
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<PAGE> 20
Contract but excluding any Mill and headquarters overhead and
the value of U3O8 (as valued at the date of payment) used to
pay the transportation costs directly associated with the
Processing Contract. For greater certainty, the Processing
Contract Price Adjustment Amount is approximately $1,200,000;
(dh) "PURCHASE PRICE" means the aggregate of the amounts payable
by the Purchaser to the Vendors for the Purchased Assets, as
set forth in paragraph 3.2;
(di) "PURCHASED ASSETS" means collectively:
(i) the U.S. Mining and Exploration Properties;
(ii) the Argunexco Joint Venture;
(iii) the Bonding Security;
(iv) the Books and Records;
(v) the Buildings;
(vi) the Cameco Agreement (but only with respect to post
1996 deliveries);
(vii) the Cameco Matching Sales Agreements (but only with
respect to post 1996 deliveries);
(viii) the Contracts;
(ix) the EFEX Royalty;
(x) the Equipment;
(xi) the Field Offices;
(xii) the Goodwill;
(xiii) the Information Materials;
(xiv) the Intellectual Property;
(xv) the Japanese Contracts (but only with respect to
post 1996 deliveries);
(xvi) the Lands;
(xvii) the Mill;
(xviii) the Mineral Rights;
(xix) the Mongolian Joint Venture Interest;
(xx) the Other Assets;
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<PAGE> 21
(xxi) the Permits and Licenses;
(xxii) the Prepaid Expenses;
(xxiii) the Processing Contract U308 and Proceeds;
(xxiv) the Supplies;
(xxv) the Surety Bonds;
(xxvi) the UMETCO Note;
(xxvii) the Warranties;
(xxviii) the Waste Processing Contracts;
(xxix) all intangibles and other assets comprised in the
Business that are not otherwise described herein;
and
(xxx) all ASP Assets, AZI Assets, CRP Assets, H-B Assets
and KNP Assets not referred to elsewhere in this
definition including, without limitation, any
contract entered into by any of the Vendors or the
Subsidiaries after September 15, 1996 but prior to
the Closing and which contract is approved by
Purchaser;
but does not include any of the Excluded Assets:
(dj) "RENO CREEK PROJECT" means the Reno Creek project located in
the Powder River Basin of Wyoming and consisting of
approximately 8,000 acres of uranium mineral leases and
claims containing U308 reserves recoverable by in-situ
leaching methods, together with all associated Lands, Permits
and Licenses, Mineral Rights, Equipment, Buildings and all
Other Assets;
(dk) "REVOLVING LOAN" means the revolving loan not to exceed the
amount of $8,000,000 plus interest provided by KKG, KKL and
NOK in connection with the 1995 Mill Run, secured by the
Revolving Loan Security and to be paid out of the
Subsidiaries' Inventories;
(dl) "REVOLVING LOAN SECURITY" means the security for the
Revolving Loan, being a first lien and security interest on
certain assets of EFL, H-B, CRP, ASP, AZ1 and KNP;
(dm) "SUBSIDIARIES" means, collectively, H-B, ASP, CRP, AZ1 and
KNP;
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<PAGE> 22
(dn) "SUPPLIES" means the Vendors' and Subsidiaries' ownership
interest in all operating stores, fuel and lubricants,
processing materials, spare parts and supplies, whether or
not recorded on the books of the Vendors or Subsidiaries as
inventory and whether or not situated on the Lands or Mineral
Rights on the Closing Date, used or intended for use in
connection with the Purchased Assets or Business, but does
not include any Excluded Assets;
(do) "SURETY BONDS" means the surety bonds to secure the estimated
environmental and reclamation costs of the Mill and the other
Purchased Assets, as more fully detailed in Schedule "J"
hereto;
(dp) "SWISS ROYALTY" means the royalty to be distributed by the
Subsidiaries, upon the Mill Run Completion Date and
Liquidation, to KKL, KKG and NOK, pursuant to the Dissolution
Agreement of 9% of yellowcake and 5% of all other minerals
produced in the future from any of the mining properties of
H- B, ASP, CRP, and AZ1 , documented by royalty deeds
following generally the format shown in the royalty deed
attached as Schedule "P", with the form of the executed
royalty deeds to be approved by the Purchaser. For greater
clarification, other than the royalty and other obligations
set forth in the Swiss Royalty deeds, the Swiss Royalty does
not include any obligation or liability under the Dissolution
Agreement and related documents (including, without
limitation, the Release and Indemnity Agreement dated June
12, 1995);
(dq) "SWISS UTILITIES" means KKG, KKL, NOK and P-H;
(dr) "TAX OR TAXES" means all taxes, charges, fees, levies, or
other assessments including, without limitation, all federal,
state, local or foreign income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp,
occupation, property (real or personal), production, windfall
profits, premium, environmental (including taxes under
Section 59A of the Internal Revenue Code), capital stock,
disability, registration, alternative or added-on minimum, or
other taxes, customs duties, fees, assessments or charges of
any kind whatsoever including, without limitation, all
interest and penalties thereon, and additions to tax or
additional amounts, whether disputed or not, imposed by any
taxing authority, domestic or foreign.
(ds) "TERM LOAN" means the term loan in the amount of $1,000,000
plus interest provided by KKL, KKG and NOK to the
Subsidiaries to fund the Subsidiaries' ongoing efforts to
maintain and market their assets, secured by the Term Loan
Security;
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<PAGE> 23
(dt) "TERM LOAN SECURITY" means the security for the Term Loan,
being a first lien and security interest on all assets of
H-B, CRP, ASP, AZ1 and KNP;
(du) "THREE HACK CANYON MINES" means the reclaimed three Hack
Canyon mines in the Arizona Strip area of Arizona, together
with all associated Lands, Permits and Licenses, Mineral
Rights, Equipment, Buildings and Other Assets;
(dv) "UMETCO NOTE" means a note receivable from Union Carbide
Chemicals and Plastics Company, Inc., the parent corporation
of Umetco Minerals Corporation ("Umetco"), in the principal
amount of $14,500,000 plus accrued interest, which note shall
accrue interest at the then current reference rate of
interest as published by Chemical Bank and be due and payable
in accordance with the terms and conditions set forth in
paragraph 7.1(o);
(dw) "UMETCO AGREEMENT" means the Acquisition Agreement dated May
17, 1994 under which EFL, as general partner for H-B,
acquired, among other things, Umetco's interest in the Mill
and certain properties;
(dx) "UMETCO SECURITY AGREEMENT" means the security agreement
granted to Umetco to secure H-B's obligations under that
certain Acquisition Agreement dated May 17, 1994;
(dy) "URI AGREEMENT" means the agreement, dated November 18, 1994,
between Uranium Resources, Inc. ("URI") and EFL, pursuant to
which EFL agreed to sell to URI a 45% general partnership
interest in CRP in consideration of the issuance by URI to
EFL of 360,000 shares of URI, at a closing date to be agreed
upon;
(dz) "US MINING AND EXPLORATION PROPERTIES" means:
(i) the Arizona 1 Mine;
(ii) the Arizona Strip Exploration Properties;
(iii) the Bullfrog Property;
(iv) the Canyon Mine;
(v) the Colorado Properties;
(vi) the Dewey-Burdock Property;
(vii) the Hermit Mine;
(viii) the Kanab North Mine;
(ix) the KNP Exploration Properties;
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<PAGE> 24
(x) the Limestone Project;
(xi) the Pigeon Mine;
(xii) the Pinenut Mine;
(xiii) the Reno Creek Project; and
(xiv) the Three Hack Canyon Mines;
(ea) "U308" means dry uranium concentrate which meets current
uranium concentrate specifications;
(eb) "WARRANTIES" means the Vendors' or any of the Subsidiaries'
right, title and interest in, to and under all warranties,
guarantees or indemnities granted to or issued in favor of
any of the Vendors or any of the Subsidiaries by third
parties in connection with the sale or supply to any of the
Vendors or Subsidiaries of tangible assets that form part of
the Purchased Assets;
(ec) "WASTE PROCESSING CONTRACTS" means H-B's interest in all
waste processing contracts with Crow Butte, URI and IEC; and
(ed) "1995 MILL RUN" means the Mill run contemplated in the
Dissolution Agreement.
1.2 NUMBER AND GENDER. All words contained in this Agreement
shall be read as the singular or the plural and as the masculine, feminine or
neuter gender, as may be applicable in the particular context and as shall
result in the particular clause being given the most reasonable interpretation.
1.3 REFERENCES WITHIN AGREEMENT. The words "herein", "hereby",
"hereunder", "hereof", "hereto", and words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or clause of
this Agreement. References to sections, paragraphs or clauses refer to the
sections, paragraphs and clauses of this Agreement unless otherwise stated.
1.4 MEANING OF "TO THE BEST OF THE KNOWLEDGE OF THE VENDORS." In
this Agreement, the phrase "to the best of the knowledge of the Vendors" means
the actual knowledge at any time of the Vendors as determined by the actual
knowledge at any time of any current or former officers, directors or employees
of any of the Vendors. Any representation to the best of the knowledge of the
Vendors shall be made by the Vendors solely and shall not be deemed to have
been made by any current or former officers, directors or employees in their
individual capacity. The sole recovery for any breach of such representation
and warranty shall be limited to the Holdback.
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<PAGE> 25
1.5 CURRENCY. All sums of money expressed in this Agreement are
expressed in legal tender of the United States of America.
1.6 INDEX, HEADINGS AND CAPTIONS. The index of this Agreement
and the headings and captions of sections and paragraphs contained in this
Agreement are all inserted for convenience of reference only and are not to be
considered when interpreting this Agreement.
1.7 APPLICABLE LAW. Except as otherwise provided herein, and
subject to the applicable provisions of the Bankruptcy Code, this Agreement
shall be governed by and construed in accordance with the laws applicable to
contracts made and to be performed entirely within the State of Colorado. Each
party hereby submits to the jurisdiction of courts of competent jurisdiction in
the State of Colorado.
1.8 ENTIRE AGREEMENT. This Agreement, together with all
schedules and exhibits hereto, contains the whole agreement between the parties
in respect of the subject matters hereof, and there are no warranties,
representations, terms, conditions or collateral agreements, express, implied
or statutory, other than as expressly set forth in this Agreement. This
Agreement supersedes all previous invitations, proposals, letters,
correspondence, negotiations, promises, agreements, covenants, conditions,
representations, warranties and understandings, whether oral or written,
between the parties hereto.
1.9 SCHEDULES. The following schedules are attached hereto and
form part of this Agreement:
<TABLE>
<CAPTION>
Schedule Description
-------- -----------
<S> <C>
A . . . . . . . . Employees
B . . . . . . . . Equipment
C . . . . . . . . Escrow Agreement
D . . . . . . . . Contracts
E . . . . . . . . Existing Royalties
F . . . . . . . . Lands
G . . . . . . . . Mineral Rights
H . . . . . . . . Mongolian Joint Venture
Budget
I . . . . . . . . Permits and Licenses
J . . . . . . . . Surety Bonds
K . . . . . . . . Outstanding Operating
Costs
L . . . . . . . . Outstanding Liabilities
and Claims
M . . . . . . . . Insurance Policies
N . . . . . . . . Environmental Matters
O . . . . . . . . Employment Contracts
P . . . . . . . . Swiss Royalty
Q . . . . . . . . Litigation
R . . . . . . . . Material Contracts
</TABLE>
- 25 -
<PAGE> 26
<TABLE>
<S> <C>
S . . . . . . . . Third Party Consents
T . . . . . . . . Opinion of Vendors' Counsel
U . . . . . . . . Opinion of Purchaser's Counsel
V . . . . . . . . Curative Matters
W . . . . . . . . Letter Regarding Bridge Loan
X . . . . . . . . [INTENTIONALLY DELETED]
Y . . . . . . . . Limited Indemnity Agreement
Z . . . . . . . . Existing Defaults not to be Cured Prior
to Closing
</TABLE>
SECTION 2 - PURCHASE AND SALE
2.1 PURCHASED ASSETS. The Vendors hereby agree to sell or cause
to be sold to the Purchaser or to its nominee or nominees, and the Purchaser
hereby agrees to purchase and take title to, the Purchased Assets, free and
clear of any and all Encumbrances, except for the Permitted Encumbrances,
pursuant to a final non-appealable order of the United States Bankruptcy Court,
at the Closing with effect as of the Effective Date, upon and subject to the
terms and conditions herein contained.
2.2 EXCLUDED ASSETS. The parties hereto acknowledge and agree
that:
(a) the sale and purchase provided for in this Agreement is
restricted to the Purchased Assets only; and
(b) for greater certainty, the Purchaser is not acquiring any of
the Excluded Assets.
2.3 EFFECTIVE DATE. The Effective Date of the acquisition of the
Purchased Assets and Business shall be the date on which the Closing occurs.
2.4 RISK OF LOSS AND DAMAGE PRIOR TO CLOSING. Risk of loss of
the Purchased Assets shall pass to the Purchaser at Closing, and the Vendors
shall bear all risk of loss or damage to the Purchased Assets until Closing and
the Purchaser shall bear all risk of loss after Closing.
SECTION 3 - PURCHASE PRICE, ADJUSTMENTS AND PAYMENT
3.1 EARNEST MONEY DEPOSIT. On or before the execution and
delivery of this Agreement, the Purchaser shall obtain an irrevocable letter of
credit in the sum of $1,500,000 for a term of twelve months naming "Energy
Fuels, Ltd., as Debtor-in-Possession" as the beneficiary. This letter of
credit shall be the sole measure of recovery against the Purchaser and shall be
liquidated damages to compensate the Vendors if the Vendors fulfill their
obligations then due under this Agreement prior to Closing and the Purchaser
fails to fulfill its obligations under this Agreement
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<PAGE> 27
prior to Closing. The letter of credit shall be held by an escrow agent
according to the Earnest Money Escrow Agreement.
3.2 PURCHASE PRICE. Subject to adjustment as provided in
paragraph 3.6, the Purchase Price for the Purchased Assets shall be an amount
equal to the aggregate of:
(a) $20,425,000;
(b) the Processing Contract Price Adjustment Amount;
(c) the Mongolian Expenditures budgeted to be paid and actually
paid after September 30, 1996; and
(d) the assumption by the Purchaser or its nominee or nominees of
the Assumed Obligations (a non-cash amount).
3.3 PAYMENT OF PURCHASE PRICE. The Purchaser shall pay the
Purchase Price to the Vendors or to third parties as may be ordered or directed
by the Bankruptcy Court and instructed by the Vendors as follows:
(a) an amount equal to the sum of:
(i) $18,925,000, plus or minus any applicable Interim
Adjustment Amount set out in the Interim Statement
of Adjustments;
(ii) the estimated Processing Contract Price Adjustment
Amount as set out in the Interim Statement of
Adjustments; and
(iii) the Mongolian Expenditures budgeted to be paid and
estimated to have been actually paid after September
30, 1996 as set out in the Interim Statement of
Adjustments;
shall be payable at Closing by the delivery of one or more
certified or official bank checks or drafts payable to or to
the direction or order of the Vendors or third parties;
(b) an amount equal to $1,500,000 shall be deposited with the
Escrow Agent at Closing by the delivery of a certified check
or bank draft payable to the Escrow Agent to be held and
disbursed by the Escrow Agent in accordance with the terms of
the Escrow Agreement; and
(c) the assumption by the Purchaser or its nominee or nominees of
the Assumed Obligations (a non-cash amount).
3.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price for the
Purchased Assets shall be allocated among the Purchased Assets in a manner to
be agreed upon between the Vendors, the Committee and
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<PAGE> 28
the Purchaser prior to Closing, after taking into account Section 1060 of the
Internal Revenue Code, the applicable Treasury Regulations and the respective
fair market values of the Purchased Assets, based on the relative fair market
value of such assets, but in any event shall provide for the allocation of such
portion of the Purchase Price to EFN to reflect the reasonably equivalent
value, if any, of such Purchased Assets owned by EFN. The Vendors and the
Purchaser agree to report the sale and purchase of the Purchased Assets for all
federal, state, provincial and local tax purposes in a manner consistent with
such allocation. If the Vendors, the Committee and the Purchaser are unable to
agree on an allocation of the Purchase Price prior to Closing, the matter shall
be referred to the Bankruptcy Court for resolution. The Vendors shall provide
information that may be reasonably required by the Purchaser for the purpose of
preparing any returns that may be required with respect to the transaction
provided for herein pursuant to Section 1060 of the Internal Revenue Code, any
Treasury Regulations promulgated thereunder, any other similar provision of the
Internal Revenue Code and any other similar, applicable foreign, state or local
tax law or regulation.
3.5 DEDUCTIONS FROM HOLDBACK. If the Purchaser has identified a
Holdback Claim against any of the Vendors for any breach of representation,
warranty, covenant or other obligation under this Agreement, on or before the
first anniversary of the Closing Date, and gives notice in writing to the
Vendors and the Escrow Agent to that effect, specifying in reasonable detail
the nature of the Holdback Claim and specifying the amount that the Purchaser
reasonably considers to be necessary to satisfy the amount of the Holdback
Claim, the Escrow Agent shall retain such amount together with interest
accruing thereon in escrow pursuant to the Escrow Agreement until the validity
and amount of the Holdback Claim is determined by agreement between the parties
or by a court, at which time the amount of the Holdback Claim, to the extent
funds are then held in escrow, shall be provided to the Purchaser to the extent
so agreed or determined by the Court. Upon the first anniversary of the date
hereof, the Escrow Agent shall disburse all amounts then held in escrow to the
Vendors except for those amounts set aside to satisfy unresolved Holdback
Claims, which shall be disbursed upon the agreement of the parties or the
Court's determination of the validity and amount of each such Holdback Claim;
all pursuant to the Escrow Agreement. The amount of any unresolved Holdback
Claim, when so determined, shall be payable to the Purchaser plus accrued
interest thereon and the remainder of the escrow funds, if any, to the Vendors.
If any such Holdback Claims are so determined to be payable to the Purchaser,
the Purchase Price shall be adjusted accordingly. The amount payable to the
Purchaser for all such claims plus all accrued interest thereon shall not
exceed $1,500,000 in aggregate plus all accrued interest thereon (except for
any Claim relating to the Vendors' obligation to pay all remaining Liabilities
of the Subsidiaries not assumed by the Purchaser, which Claims shall not be
limited). No Holdback Claim (other than a Claim relating to the Vendors'
obligation to pay all remaining Liabilities of the Subsidiaries not assumed by
the Purchaser) shall be allowed unless
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<PAGE> 29
it is submitted within 12 months of the Closing Date and the alleged breach of
the representation or warranty or covenant accrued prior to the end of such 12-
month period.
3.6 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
adjusted in the following circumstances:
(a) to reflect any payments to the Purchaser under the Escrow
Agreement; and
(b) by adjusting for any amounts referred to in paragraph 3.7.
3.7 ADJUSTMENTS. The Vendors and the Purchaser will make
Purchase Price adjustments as follows:
(a) The Purchase Price will be reduced by the following amounts:
(i) an amount agreed to between the Vendors and the
Purchaser, or failing such agreement, three times
the amount of the gross proceeds of the sale of any
Equipment, Lands, Supplies, or Mineral Rights that
are sold between July 30, 1996 and the Closing Date,
as liquidated damages, it being agreed that this is
a fair and reasonable estimate of the replacement
cost of such assets;
(ii) 100% of the gross proceeds of the sale of any U308
derived from the Processing Contract, other than any
such U308 used to pay the direct transportation
costs involved in performing the Processing
Contract;
(iii) the gross proceeds of the sale of any other
Purchased Asset between July 30, 1996 and the
Closing Date;
(iv) the net profits realized by the Vendors between any
purchases under the Cameco Agreement and sales under
the Cameco Matching Sales Agreements which occur on
or after January 1, 1997; and
(v) any amounts required to be paid by the Purchaser
after the Closing on account of maintenance of
Purchased Assets, Mineral Rights maintenance fees,
operating costs and expenses, Taxes, permit and
license fees and lease fees payable, rentals and
other permit and license fees received or
receivable, vehicle license fees and insurance
premiums that had accrued prior to Closing but that
had not been paid at or prior to Closing;
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<PAGE> 30
(b) The Purchase Price will be increased by:
(i) any Prepaid Expenses relating to any of the
Purchased Assets;
(ii) any amounts paid by the Vendors or the Subsidiaries
prior to the Closing on account of maintenance of
Purchased Assets, Mineral Rights maintenance fees,
operating costs and expenses, Taxes, permit and
license fees and lease fees payable, rentals and
other permit and license fees, vehicle license fees,
and insurance premiums, that relate to the operation
of the Business and ownership of the Purchased
Assets on and after the Closing Date, that are not
otherwise included as Prepaid Expenses; and
(iii) any net profits realized by the Purchaser between
any purchases under the Cameco Agreement (for any
1996 purchase obligations) and sales under the
Cameco Matching Sales Agreements which occur after
Closing but on or before December 31, 1996;
(c) Except as specifically provided for in this Agreement, no
other adjustments will be made for any other operating costs,
required maintenance expenditures, or Taxes, property
maintenance payments, reclamation payments or insurance
premiums paid by the Vendors or the Subsidiaries prior to
Closing;
(d) At Closing, the Purchaser and the Vendors shall agree upon an
Interim Statement of Adjustments setting out, to the extent
reasonably practicable, the adjustments to the Purchase Price
pursuant to paragraphs (a) and (b) above. The net amount
(the "Interim Adjustment Amount") shall be added to or
deducted from, as appropriate, the amount payable under
paragraph 3.2(a) by the Purchaser to the Vendors on Closing.
The Interim Statement of Adjustment shall also set out the
estimated Processing Contract Price Adjustment Amount and the
estimated Mongolian Expenditures initially paid after
September 30, 1996;
(e) Within the 90 day period following Closing, the Vendors and
the Purchaser shall prepare and agree upon a final statement
of adjustments to be made pursuant to the provisions of this
Section 3.7 and any other provisions of this Agreement. Upon
agreement as to the amounts of such adjustments, the net
amount thereof shall be remitted by the party who is obliged
to make payment to the other party. No adjustments shall be
made pursuant
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<PAGE> 31
to this Agreement after the end of the 90 day period
following Closing except in respect of any matters of which
either party has given written notice to the other within
such period. At any time prior to the end of the 90 day
period, the Purchaser and the Vendors shall each have the
right upon 7 days prior written notice, to examine, copy and
audit the records of the other that are relevant to effecting
the adjustments pursuant to this Agreement. The party
obliged to make the said net payment shall pay interest
thereon from the Closing until payment at the rate of 8% per
year, calculated and compounded monthly. Any payments made
in accordance with this paragraph shall be made independently
of the Holdback.
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE VENDORS
4.1 DISCLAIMER
4.1.1 THERE ARE NO WARRANTIES, REPRESENTATIONS OR COVENANTS
EXPRESSED OR IMPLIED BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT AND THE SCHEDULES ATTACHED HERETO AND THE DOCUMENTS,
CONVEYANCES AND INSTRUMENTS TO BE DELIVERED BY THE PARTIES AT AND AFTER CLOSING.
THE PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR REPRESENTATIONS
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES AND REPRESENTATIONS IMPLIED UNDER
ANY STATUTE OR LAW.
4.1.2 Prior to the execution of this Agreement, the Purchaser has
been afforded the opportunity to inspect the Purchased Assets and to examine
the records of the Vendors at their offices with respect to the Purchased
Assets, and has been afforded access to all Books and Records and Information
Materials in the Vendors' possession with respect to the Purchased Assets. THE
PURCHASER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
THE VENDORS AND THE SUBSIDIARIES, AND THEIR RESPECTIVE PARTNERS, OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES AND AGENTS HAVE, MADE NO, AND VENDORS
HEREBY EXPRESSLY DISCLAIM ANY, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY
OR COMPLETENESS OF SUCH INFORMATION, AS TO VENDORS' TITLE TO THE PURCHASED
ASSETS, OR AS TO ANY OTHER INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR
ORAL), FURNISHED TO THE PURCHASER BY OR ON BEHALF OF THE VENDORS (INCLUDING THE
EXISTENCE OR EXTENT OF MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF
RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCTION
PRICING ASSUMPTIONS, PRESENT OR PAST PRODUCTION RATES, COMPLIANCE WITH LEASE
TERMS, THE CONDITION OF ANY MINE OR MILL, THE ABILITY TO SELL URANIUM OR
VANADIUM PRODUCTION AFTER CLOSING AND THE ENVIRONMENTAL AND RECLAMATION
OBLIGATIONS ASSOCIATED WITH THE PURCHASED ASSETS).
4.1.3 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE VENDORS
EXPRESSLY DISCLAIM ANY WARRANTY OR REPRESENTATION AS TO THE CONDITION OF ANY
BUILDINGS, EQUIPMENT, FIELD OFFICES, INTELLECTUAL PROPERTY, SUPPLIES,
WARRANTIES AND OTHER ASSETS IN THE NATURE OF
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<PAGE> 32
PERSONAL PROPERTY, FIXTURES AND ITEMS OF MOVABLE PROPERTY COMPRISING ANY PART
OF THE PURCHASED ASSETS, INCLUDING (i) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY ON CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF THE PURCHASER UNDER
APPLICABLE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND (v) ANY CLAIM BY
THE PURCHASER FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, IT
BEING EXPRESSLY UNDERSTOOD BY THE PURCHASER THAT, EXCEPT AS EXPRESSLY PROVIDED
IN THIS AGREEMENT, THE BUILDINGS, EQUIPMENT, FIELD OFFICES, INTELLECTUAL
PROPERTY, SUPPLIES, WARRANTIES AND OTHER ASSETS IN THE NATURE OF PERSONAL
PROPERTY, FIXTURES AND ITEMS ARE TO BE ACCEPTED AS IS, WHERE IS, WITH ALL
FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND THAT THE
PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS THE PURCHASER DEEMS
APPROPRIATE.
4.2 REPRESENTATIONS AND WARRANTIES. The Vendors each
individually represent, warrant and covenant to the Purchaser, as to their
respective Purchased Assets and Business and Purchased Assets owned by and
Business carried on by their respective Subsidiaries, as follows and
acknowledge that the Purchaser is relying upon the following representations,
warranties and covenants in connection with its purchase of the Purchased
Assets:
4.2.1 Corporate Status and Authority
(a) STATUS OF EFEX AND EFN: Each of EFEX and EFN is a duly
incorporated and validly existing corporation in good
standing under the laws of the State of Colorado, and has the
corporate power and capacity to own the Purchased Assets
stated herein to be owned by it, to carry on the Business and
to carry out the transactions contemplated by this Agreement.
(b) STATUS OF EFL: EFL is a duly formed and validly existing
limited partnership in good standing under the laws of the
State of Colorado, and has the power and capacity to own the
Purchased Assets stated herein to be owned by it, to carry on
the Business and to carry out the transactions contemplated
by this Agreement.
(c) DUE AUTHORIZATION: The execution and delivery of this
Agreement and the completion of the transactions contemplated
hereby have been duly authorized by all necessary corporate
or partnership action (as the case may be) on the part of
each of the Vendors and appropriate orders of the Bankruptcy
Court, and this Agreement has been duly executed and
delivered by each of the Vendors and constitutes a legal,
valid and binding obligation of each of the Vendors
enforceable in accordance with its terms.
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<PAGE> 33
4.2.2 Purchased Assets
(a) OWNERSHIP: The Vendors or the Subsidiaries have good and
marketable title to all of the Lands and patented mining
claims set forth on Schedule "F" and "G", free and clear of
all Encumbrances except Permitted Encumbrances, and the
Vendors own all other Purchased Assets free and clear of all
Encumbrances other than Permitted Encumbrances. Without
limiting the generality of the foregoing, the Vendors or the
Subsidiaries own, subject, in the case of unpatented mining
claims, to the paramount title of the United States, and are
in exclusive possession of the Mineral Rights described in
Schedule "Q"; and the Vendors or the Subsidiaries have the
ability to convey to the Purchaser or its nominee or nominees
all of their right, title and interest in and to the Mineral
Rights and all of the other Purchased Assets.
(b) ZONING: To the best of the knowledge of the Vendors, all
Lands are zoned to permit the particular activity carried out
on such Lands by the Vendors or the Subsidiaries or any
person to whom the Vendors or the Subsidiaries have given
occupancy rights in respect of such Lands.
(c) TAXES: There are no liens for Taxes upon any of the
Purchased Assets, except liens for Taxes not yet due except
for certain property taxes coming due in December, 1996 which
will be paid by the Vendors prior to or at Closing.
(c) ROYALTY PAYMENTS: Except as set forth in Schedule "V", all
holders of landowners' royalties, overriding royalties, net
profits interests, working interests and similar interests in
any of the Purchased Assets or Business have been timely and
properly paid. There are no accrued and unpaid amounts in
respect of landowner's royalties, overriding royalties, net
profits interests or similar interests.
(d) OPERATING COSTS: Except as set out in Schedule "K", all
operating costs and expenses chargeable to any joint venture
interest included in the Purchased Assets, under applicable
operating agreements, as of the date hereof have been paid in
full.
(e) CONFLICTING RIGHT OR INTEREST. To the best of the knowledge
of the Vendors there is no right or interest in any of the
Lands or Mineral Rights asserted by others because of
overlapping or conflicting mining claims, mill sites, tunnel
sites, or government leases other than as set forth on
Schedules "F" or "G".
(f) PROPER PERFORMANCE. With respect to the Mineral Rights
comprising the Purchased Assets, subject, in the case of
unpatented mining claims, only to the paramount title of
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<PAGE> 34
the United States: (i) in the case only of Mineral Rights
located by the Vendors or the Subsidiaries, the Mineral
Rights were properly laid out and monumented; (ii) in the
case only of Mineral Rights located by the Vendors or the
Subsidiaries, all required location and validation work was
properly performed; (iii) in the case only of Mineral Rights
located by the Vendors or the Subsidiaries, location notices
and certificates were properly recorded and filed with
appropriate governmental agencies; (iv) all assessment work
or payment in lieu thereof required to hold the Mineral
Rights has been performed through the most recent assessment
year and up to the date hereof; (v) all assessment work
required to hold the mining claims through the most recent
assessment year and up to the date hereof has been or will be
timely performed by the Vendors or the Subsidiaries prior to
Closing; and (vi) all affidavits of assessment work and other
filings required to maintain the Mineral Rights in good
standing have been properly and timely recorded and filed
with appropriate governmental agencies except for certain
assessment work notices filed with the State of Utah in 1995
and associated with the Bradford Litigation. Provided,
however, that the Vendors shall not be in breach of this
representation and warranty as to unpatented mining claims on
account of any determination of any court or governmental
agency that the work performed as assessment work did not
constitute the required annual assessment work or occupancy
for the purposes of preserving or maintaining ownership of
the unpatented mining claims, provided that the work done was
of the kind generally accepted in the mining industry as
assessment work under existing law.
(g) NO DEFECTS, LIENS OR ENCUMBRANCES. There are no defects,
liens or Encumbrances (other than Permitted Encumbrances)
that will have a material adverse effect on the Mineral
Rights, that will not be otherwise discharged or released
prior to or at Closing, provided however, nothing contained
herein shall be deemed to be a representation or warranty
that any of the unpatented mining claims has a discovery of
mineral resources within its respective boundaries.
(h) LANDS: To the best of the knowledge of the Vendors, the list
of Lands set out in Schedule "F" accurately reflects all fee
simple interests of the Vendors and the Subsidiaries in real
property (other than patented mining claims) used in the
conduct of the Business.
(i) EQUIPMENT: To the best of the knowledge of the Vendors, the
list of Equipment set out in Schedule "B" accurately
describes the Equipment and other personal property owned by
the Vendors or the
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<PAGE> 35
Subsidiaries having a Equipment Cost in excess of $1,000 per
item. The Vendors or the Subsidiaries own the Equipment set
forth on Schedule B free of all Encumbrances except for
Permitted Encumbrances.
(j) ENCROACHMENTS: To the best of the knowledge of the Vendors,
all Lands and Buildings owned by the Vendors or Subsidiaries
are located wholly within the boundaries of the Lands and do
not infringe upon or contravene the provisions of any
easement, right of way or encumbrance registered against or
otherwise affecting the Lands, and there are no buildings,
fixtures, improvements or facilities on any adjoining lands,
whether public or private, that encroach on the Lands.
4.2.3 Business Operations
(a) OPERATING AUTHORITIES: The Vendors and Subsidiaries have
acquired, and currently hold the Licenses and Permits set
forth in Schedule "I" except for those certain Permits and
Licenses held by Umetco and shown on Schedule "I". To the
best of the knowledge of the Vendors, no other licenses,
consents, authorizations, approvals, privileges, waivers,
exemptions, orders, certificates, rulings, agreements and
other concessions granted by or entered into with any
governmental or regulatory authority are required in
connection with, or applicable to, the Purchased Assets or
the Business, that are material to the Purchased Assets or
the Business. The Licenses and Permits set forth in Schedule
I are in good standing and are being complied with in all
material respects. The Purchaser acknowledges that Reno
Creek has not yet been permitted by the State of Wyoming or
the Nuclear Regulatory Commission and that the Purchaser will
have to comply with any additional laws or regulations
applicable to any Permit or License that have been
promulgated by governmental agencies after the issuance of
such Permit or License, and with any laws or regulations
applicable to the transfer of the Permits and Licenses, prior
to the operation of the U.S. Mining and Exploration
Properties.
(b) COMPLIANCE WITH LAWS: Except as otherwise expressly
represented in this Agreement, the Vendors and the
Subsidiaries are operating and using the Purchased Assets,
and are conducting the Business, in compliance with all
applicable laws and regulations of each jurisdiction in which
the Purchased Assets are located or in which they conduct the
Business. Except as set out in Section 4.2.6, the Vendors
make no representations regarding compliance with
Environmental Laws.
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<PAGE> 36
4.2.4 Financial
(a) LIABILITIES: To the best of the knowledge of the Vendors,
neither the Vendors nor the Subsidiaries have any debts or
Liabilities (whether accrued, contingent, absolute or
otherwise and whether or not determined or determinable)
including Liabilities relating to Taxes, except:
(i) Liabilities listed in Schedules and Statements of
Financial Affairs filed in the Jointly Administered
Bankruptcy Cases as of August 1, 1996;
(ii) Liabilities set forth in Proofs of Claim filed in
the Bankruptcy Case as of August 1, 1996;
(iii) Liabilities in the amounts and to the persons
described in Schedule "L" hereto; or
(iv) Liabilities disclosed in this Agreement, including
but not limited to Liabilities under or in
connection with the Swiss Royalty, the KKL Option,
the Term Loan and the Dissolution Agreement
The inclusion of an obligation or purported obligation on any
schedule attached hereto does not constitute an admission by
any of the Vendors that such obligation or purported
obligation is in fact valid or that any of the Vendors are
liable on such obligation.
(b) NO BROKERS: Neither the Vendors nor the Subsidiaries have
incurred any Liability and will incur no Liability,
contingent or otherwise, for broker's or finder's fees in
connection with this transaction for which the Purchaser
shall have any responsibility whatsoever.
(c) LIABILITIES OF THE SUBSIDIARIES: As of the Closing Date, all
Liabilities (except for Assumed Obligations) of the
Subsidiaries shall have been paid in full or reserved for as
set forth herein. The Vendors shall place in trust from the
proceeds of sale of the Purchased Assets an amount sufficient
to satisfy all such Liabilities which may exist after the
Closing Date. The amount the Vendors place in trust shall be
no less than the sum of:
(i) all known and asserted, but disputed or otherwise
unpaid, Liabilities of the Subsidiaries; and
(ii) such other sums as the Vendors using reasonable
business judgment determine is necessary to satisfy
any other unpaid Liabilities (which
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<PAGE> 37
are not assumed by Purchaser) or other amounts owing
or reasonably expected to be owing by the
Subsidiaries, including, without limitation,
unliquidated or contingent Liabilities.
These sums shall remain in trust to satisfy the Claims of all
holders of a Liability or such other amounts against the
Subsidiaries until all such Liabilities are satisfied in full
or the Bankruptcy Court enters an order authorizing the
disbursal or reduction of such trust funds. The Swiss
Utilities, but no other parties, shall be considered as third
party benificiaries of this section 4.2.4(c).
4.2.5 Insurance
(a) LIST OF POLICIES: Schedule "M" contains a complete and
accurate listing of all insurance policies of the Vendors and
the Subsidiaries relating to the Purchased Assets or the
Business including, but not limited to, all property damage,
general liability, motor vehicle, director and officer
liability and life policies.
(b) GOOD STANDING: Each of the insurance policies listed in
Schedule "M" is in good standing, all premiums required to be
paid by the Vendors or the Subsidiaries have been properly
paid, there have been no misrepresentations or failures to
disclose material facts in connection with such policies, and
the Vendors have no knowledge of any facts which might render
any of the policies invalid or unenforceable.
(c) OUTSTANDING CLAIMS: Except as discussed in Schedule "M", no
threatened or actual pending Claims against any of the
policies described in Schedule "M" have been made in the
preceding 5 years. The Vendors or the Subsidiaries have
given timely notice of or have otherwise presented in a
timely fashion every claim under each such insurance policy.
4.2.6 Environmental
Except as set forth in Schedule "N" hereto, to the best of
the knowledge of the Vendors:
(a) HAZARDOUS MATERIAL: No Hazardous Materials used in or
generated by any of the Purchased Assets or Business have
been or are currently placed, used, stored, treated,
manufactured, disposed of, released, discharged, spilled or
emitted in a manner which has been asserted to be a violation
of any Environmental Laws or the Permits and Licenses by any
governmental or regulatory agency other
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than notices of a violation of an administrative or reporting
requirement.
(b) WASTE DISPOSAL: All of the Purchased Assets and Business
that were or are used for the generation, handling,
treatment, storage or disposal of Hazardous Materials used in
or generated by the Purchased Assets or Business on the Lands
or on any of the Mineral Rights have been and are or were
properly permitted and operated in compliance with all
Environmental Laws at the time such activities were
undertaken by the Vendors.
(c) ENVIRONMENTAL CONTAMINATION: There has been no Environmental
Contamination on any of the Purchased Assets or Business
which has been asserted to be a violation of any
Environmental Laws or the Permits and Licenses by any
governmental or regulatory agency other than notices of a
violation of an administrative or reporting requirement.
(d) ENVIRONMENTAL ORDERS AND AGREEMENTS: There are no orders,
agreements or consent orders to which the Vendors or any
Subsidiary is a party relating to compliance of any of the
Purchased Assets or the Business with Environmental Laws.
(e) ENVIRONMENTAL CLAIMS: There have been no orders issued or
administrative or judicial proceedings, threatened or
pending, and no investigations, removal, remedial or response
actions ordered, conducted, commenced, taken or threatened,
under or pursuant to any Environmental Laws with respect to
the Purchased Assets or the Business or any other businesses
conducted on or from the Lands or any Mineral Rights other
than routine inspections. No Claims, actions or other
proceedings are pending or threatened with respect to
Environmental Contamination, the violation of any
Environmental Laws or Permits and Licenses.
(f) PERMITS: All permits, licenses, approvals, authorizations,
consents, registrations or other actions required under
Environmental Laws to own and operate the Purchased Assets
and the Business have been obtained and all terms and
conditions attached thereto have been duly complied with and
all such licenses, approvals, authorizations, consents and
registrations are in full force and effect and in good
standing. The Purchaser acknowledges that Reno Creek has not
yet been permitted by the State of Wyoming or the Nuclear
Regulatory Commission and that the Purchaser will have to
comply with any additional laws or regulations applicable to
any Permit or License that have been promulgated by
governmental agencies after the issuance of such Permit or
License, and with any laws or regulations applicable
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<PAGE> 39
to the transfer of the Permits and Licenses, prior to the
operation of the U.S. Mining and Exploration Properties.
(g) NUISANCE: No Claims of nuisance have been made or
threatened related to the use of, and operations relating to,
the Purchased Assets and the Business or any other business
conducted on or from the Lands or any Mineral Rights.
(h) RESOLUTION OF ASSERTED VIOLATIONS: All actions required of
the Vendors by the agency asserting each violation of
Environmental Laws or Permits and Licenses set out in
Schedule "N" hereto have been performed by the Vendors and
there are no further actions required of the Vendors with
regard to such asserted violations.
4.2.7 Tax Matters
(a) VENDORS RESPONSIBLE FOR TAX LIABILITIES. The Vendors shall
be responsible for all taxes incurred or accrued or resulting
from any Business or use of the Purchased Assets prior to the
Effective Time, and the Purchaser shall assume no obligation
or Liabilities with respect to any such Taxes.
(b) OUTSTANDING CLAIMS: Subject to Section 4.2.4(a), Schedule
"L" hereto describes all federal, state, municipal and other
taxation authorities that have asserted Claims for taxes
relating to any of the Vendors, the Subsidiaries, the
Purchased Assets or Business, and the nature and amount of
the Claims. There are no other taxation authorities that may
validly assert any such Claims except as described in
Schedule "L" hereto.
(c) EMPLOYEE WITHOLDING\SOCIAL SECURITY TAXES: The Vendors have
timely and properly withheld from Employee wages and paid
over to the proper governmental authorities all amounts
required to be so withheld and paid over under all local,
county, state and federal tax and witholding tax requirements
related to the wages, salaries, commissions, bonuses and
other remuneration payable to Employees, and the Vendors
shall have executed and filed all reports, returns and
declarations related thereto.
4.2.8 Employee Matters
(a) LIST OF EMPLOYEES: The list of employees set out in Schedule
"A" is a complete list of the employees of each of the
Vendors and the Subsidiaries as of December 1, 1996.
(b) EMPLOYMENT CONTRACTS: Other than as set out in Schedule "O",
none of the Vendors or Subsidiaries is party to any oral or
written consulting contract,
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management contract, labor services contract or similar
agreement for the services of a particular individual to the
Vendors or Subsidiaries, and none of the employees of any of
the Vendors or Subsidiaries is employed on other than an
indefinite hiring basis by the Vendors or Subsidiaries
terminable at will on reasonable notice according to law
without further liability to any of the Vendors or
Subsidiaries.
(c) UNION CONTRACTS: There are no collective bargaining
agreements with any trade union or employee association
currently in force with any of the Vendors or the
Subsidiaries, and there are no pending applications for
certification or decertification of any collective bargaining
unit notice of which has been served upon any of the Vendors
or the Subsidiaries or of which any of the Vendors or the
Subsidiaries is aware, and there are no oral understandings
with union negotiators which extend beyond current collective
bargaining agreements.
(c) BENEFIT PLANS/LABOR: The Vendors shall be responsible for
all benefit, bonus, profit-sharing, retirement income,
termination, severance, dental, medical disability, health,
pension or other plans, programs, policies or other
arrangements in place for the benefit or advantage of the
employees of any of the Vendors or Subsidiaries as at the
date hereof, and there are no pending or threatened work
stoppages or labor disputes, charges of unfair labor practice
or charges of violation of individual rights by any present
or former employee of any of the Vendors or Subsidiaries
accrued or resulting from the Business prior to the Effective
Time.
(d) EMPLOYER ASSOCIATIONS: None of the Vendors or Subsidiaries
is a member of any employer, management, industry or other
trade, or business association under which any of the Vendors
or Subsidiaries is obligated to contribute to any employee or
contractor employee benefit fund, including any pension
plans, health benefit plans or other similar employee
entitlements.
(e) WORKERS COMPENSATION ASSESSMENT: No events have occurred with
respect to any of the Vendors or Subsidiaries which, to the
best of the knowledge of the Vendors, is likely to result in
any claim or action against any of the Vendors or
Subsidiaries or any significant increase in any workers
compensation board assessment or any similar assessment
payable by the Vendors or Subsidiaries.
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<PAGE> 41
4.2.9 Litigation and Claims
(a) ADVERSE PROCEEDINGS: The list and description of outstanding
Claims contained in Schedule "Q" is a complete and accurate
listing of all outstanding actions, Claims, demands,
lawsuits, prosecutions, arbitrations or other alternative
dispute resolution proceedings or governmental or regulatory
actions, claims or proceedings by or against any of the
Vendors or any of the Subsidiaries relating to any of the
Purchased Assets or the Business, and there is no other
adverse proceeding pending or, to best of the knowledge of
the Vendors, threatened by or against, or relating to, any of
the Vendors or any of the Subsidiaries, any of the Purchased
Assets or the Business. To the best of the knowledge of the
Vendors, they are not aware of any basis for any other
action, claim, demand, lawsuit, prosecution, arbitration or
other alternative dispute resolution proceeding or other
adverse proceeding which, if pursued, would have a material
adverse effect on any of the Vendors or Subsidiaries or any
of the Purchased Assets or the Business. Except as set out
in Schedule "Q", there are no actions, claims, demands,
lawsuits, prosecutions, arbitrations or other alternative
dispute resolution proceedings or other adverse proceedings
in respect of which there is any possibility of any material
liability on the part of any of the Vendors or the
Subsidiaries,relating to the Purchased Assets or the
Business.
(b) COMPLIANCE DIRECTIVES: Except as disclosed in Schedule "Q",
there are no outstanding compliance orders, notices of
violations, enforcement proceedings, claims, actions or other
proceedings of which the Management Group is aware relating to
the Purchased Assets, or the Business, from any police, fire
department, sanitation or health authorities, or
environmental agencies, or from any other federal, state or
local authority, department or agency, nor do any of the
Vendors or the Subsidiaries have notice that there are any
matters under or subject to consideration by any such
authorities relating to any of the Vendors or Subsidiaries.
(c) NOTICE OF DEFAULT/CLAIMS: Except as expressly disclosed in
this Agreement, none of the Vendors or Subsidiaries has
received any notice of any default, violation or termination
of any Material Contract, law or Permits or Licenses and, to
the best of knowledge of the Vendors, no fact or circumstance
exists which will, or is likely to, result in such a default,
violation or termination.
(d) NO SEIZURE: There is no eminent domain, appropriation,
expropriation or seizure proceeding in respect of any of the
Purchased Assets that is pending or has been
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<PAGE> 42
threatened against any of the Vendors or Subsidiaries, the
Purchased Assets or the Business.
(e) TRADEMARK AND PATENT INFRINGEMENT: The conduct of the
Business by the Vendors and the Subsidiaries does not
infringe upon any patent, trademark or other proprietary
right, domestic or foreign, of any person which could, if
prosecuted, have a material adverse effect on any of the
Purchased Assets or the Business.
4.2.10 Material Contracts
(a) MATERIAL CONTRACTS: Schedule "R" contains a complete and
accurate listing and description of all Material Contracts to
which any of the Vendors or Subsidiaries is a party, by which
any of the Vendors or Subsidiaries is bound or under which
any of the Vendors or Subsidiaries is entitled to any
benefits.
(b) GOOD STANDING: Except as disclosed in Schedule "R" hereto,
none of the Vendors or Subsidiaries is in breach or default
of any of the terms of the Contracts that are Material
Contracts, and none of the Vendors is aware of or should
reasonably be expected to be aware of any breach or default
of any terms of such Material Contracts by any other party
thereto, and each such contract is in good standing and in
full force and effect without amendment thereto. No state of
facts exists which, after notice or lapse of time or both,
would constitute such a default or breach where there is any
significant likelihood that such breach or default referred
to in this clause (b) would have a material adverse effect on
any of the Purchased Assets or the Business.
4.2.11 Effect of this Transaction
(a) NO ADVERSE IMPLICATIONS: Neither the execution and delivery
of this Agreement nor the completion and performance of the
transactions contemplated hereby will:
(i) give any person the right to terminate or cancel any
contractual or other rights with any of the Vendors
or Subsidiaries where such termination or
cancellation would have a material adverse effect on
any of the Vendors or Subsidiaries;
(ii) result in the creation of any Encumbrances, other
than the Swiss Royalty, on any of the Purchased
Assets or in the default under any agreement giving
a third party security against any of the Purchased
Assets or in the attachment of any floating security
interest or general security interest in a security
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<PAGE> 43
agreement granted, issued or assumed by any of the
Vendors or Subsidiaries where any of such events
could have a material adverse effect on any of the
Vendors or Subsidiaries;
(iii) violate any provision of any indenture, mortgage,
lien, lease, agreement, instrument, order, statute,
ordinance, rule, regulation, permit, arbitration
award, judgment or decree to which any of the
Vendors or Subsidiaries is a party or by which any
of the Vendors or Subsidiaries or the Purchased
Assets are bound, the violation of which could have
a material adverse effect on any of the Vendors or
Subsidiaries or impair the legality or
enforceability of this Agreement or the transactions
contemplated hereby; nor
(iv) be contrary to the provisions of the Charter
Documents of any of the Vendors or Subsidiaries;
(b) THIRD PARTY APPROVALS: Except as disclosed on Schedule "S"
hereto and other than the software licenses, fax and copier
rental agreements, which are not material to the Business, or
as obviated by a valid, enforceable Bankruptcy Court order,
there are no approvals, consents, orders, legislation,
regulations or any other action of any governmental or
regulatory body or other third parties that may be required
by any of the Vendors or the Subsidiaries in connection with
the execution, delivery or performance by any of the Vendors
or the Subsidiaries of this Agreement or the transactions
contemplated in this Agreement.
4.2.12 Accuracy of Schedules. To the best of the knowledge of the
Vendors, all of the Schedules to this Agreement are complete and accurate, and
without limiting the generality of the foregoing:
(a) Schedule "J" hereto contains a complete list and description
of all of the collateral for the Surety Bonds;
(b) Schedule "J" hereto is a complete list and description of all
of the surety bonds to secure the estimated environmental and
reclamation costs of the Mill and the other Purchased Assets;
(c) Schedule "I" hereto is a complete list of all Permits and
Licenses; and
(d) Schedule "G" hereto is a complete list of all Mineral Rights.
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SECTION 5 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents, warrants and covenants to the Vendors as follows and
acknowledges that the Vendors are relying upon the following representations,
warranties and covenants in connection with the sale of the Purchased Assets
and Business:
(a) STATUS OF PURCHASER: The Purchaser is a duly incorporated
and validly existing corporation in good standing under the
laws of the State of Delaware and has the corporate power and
capacity to carry out the transactions contemplated by this
Agreement.
(b) DUE AUTHORIZATION: The execution and delivery of this
Agreement and the completion of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of the Purchaser, and this Agreement has
been duly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the
Purchaser enforceable in accordance with its terms.
(c) NON-CONTRAVENTION: Neither the execution, delivery and
performance of this Agreement nor the completion of the
transactions contemplated hereby will conflict with or result
in a breach of or default under any agreement or other
instrument or obligation to which the Purchaser is a party or
by which the Purchaser is bound.
(d) LITIGATION: There are no actions, suits, judgments,
litigations, investigations, proceedings, consent decrees or
settlement agreements outstanding, pending or threatened
against or affecting the Purchaser which would prevent the
Purchaser from entering into this Agreement and completing
the transactions contemplated hereby.
(e) FINANCIAL CAPABILITY: The Purchaser has or has access to
sufficient funds in order to close the transaction
contemplated by this Agreement and provide adequate assurance
of future performance for all Assumed Obligations. The
Purchaser will, on the Closing Date, have at least:
(i) $30,000,000 in working capital (which working
capital may consist of subordinated debt); and
(ii) a Book Value of $30,000,000;
for the purpose of paying the Purchase Price and operating
the Business; provided, however, if at Closing or subsequent
thereto, the Purchaser transfers or assigns the Mongolian
Joint Venture Interests (or grants or conveys the right to be
transferred the Mongolian Joint
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Venture Interest) to a nominee which is not a wholly owned
subsidiary of the Purchaser, then the Purchaser will either:
(x) increase the minimum amount of such working capital and
Book Value on the Closing Date to $35,000,000 or, if the
transfer occurs after the Closing Date, increase the working
capital on the date of such transfer, by $5,000,000; or (y)
arrange for the nominee (or the nominee's parent company)
which obtains the Mongolian Joint Venture Interest to
guarantee payment and performance of the Purchaser's
obligations hereunder. For greater certainty, subject to
paragraph 6.5(c) below, the Purchaser shall not be required
to maintain any level of working capital or Book Value
subsequent to the Closing, or if $5,000,000 is added to the
working capital pursuant to clause (x) of paragraph
5.1(e)(ii), subsequent to the date such working capital is
added.
(f) NO BROKERS: The Purchaser has incurred no Liability and will
incur no Liability, contingent or otherwise, for broker's or
finder's fees in connection with this transaction for which
the Vendors shall have any responsibility whatsoever.
(g) INVESTMENT EXPERIENCE OF PURCHASER: The Purchaser's
principals and their advisors have experience in these types
of transactions and as a result the Purchaser is fully
capable of evaluating the transactions contemplated by this
Agreement.
SECTION 6 - COVENANTS
6.1 OPERATIONS UNTIL CLOSING. Except as otherwise provided in
this Agreement or as otherwise agreed in writing by the Purchaser, the Vendors
and the Subsidiaries will, from the date of this Agreement to Closing:
(a) CONDUCT OF BUSINESS: carry on and conduct the Business in
the ordinary course, consistent with past practice and, in
particular:
(i) will use all reasonable efforts to maintain the
Purchased Assets in accordance with standard
industry practice;
(ii) except with respect to Permitted Encumbrances, will
not mortgage, pledge, subject to lien or otherwise
encumber the Purchased Assets in whole or in part or
sell, transfer or dispose of, or agree to dispose
of, any of the Purchased Assets;
(iii) use all reasonable efforts to keep available the
services of the present employees of the
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<PAGE> 46
Vendors and the Subsidiaries and to maintain the
relations and goodwill with suppliers, customers and
others having relations with the Vendors or the
Subsidiaries;
(iv) the Vendors will not sell any U308 derived from the
performance of the Processing Contract at any time
prior to December 23, 1996, except for U3O8 used to
pay the transportation costs directly associated
with the Processing Contract;
(v) if the Bridge Loan is not funded by December 23,
1996, the Vendors shall have the right to sell U308
derived from the Processing Contract provided that
the Vendors grant the Purchaser with a right of
first refusal to purchase such U3O8, except for U3O8
used to pay the transportation costs directly
associated with the Processing Contract. Prior to
selling any such U3O8, the Vendors shall furnish to
the Purchaser, in writing, the proposed terms and
conditions of such sale of U3O8. Within five
business days after receipt of the terms and
conditions of the proposed sale, the Purchaser shall
notify the Vendors, in writing, if it wishes to
exercise its right of first refusal and thereby
purchase the U3O8. If the Purchaser fails to
exercise its right of first refusal within five
business days after its receipt of the terms and
conditions of a proposed sale of the U3O8, the
Purchaser shall be deemed to have rejected its right
of first refusal with respect to the proposed sale;
(vi) will not negotiate or enter into or terminate, prior
to its expiration, any Material Contract;
(vii) will not pay any dividends or make any other
distributions in respect of capital stock or repay
any debts to affiliated entities;
(viii) will not fail to make any property or joint venture
payment that is due and payable prior to the
Effective Date except for those expressly disclosed
in this Agreement;
(ix) will not close the transaction set out in the URI
Agreement; and
(x) if Closing occurs before January 31, 1997, will not
enter into any sales agreements with purchasers of
U308 from time to time which
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<PAGE> 47
match EFEX's purchase obligations under the Cameco
Agreement after January 1, 1997
unless otherwise agreed to in writing by the Purchaser.
Notwithstanding that Section 3.7 of this Agreement provides
an adjustment mechanism for certain sales of Purchased
Assets, any activities that violate this paragraph (a) shall
be considered a breach of this Agreement. However, if the
Purchaser agrees in writing to an activity in violation of
this paragraph (a), then the adjustment mechanism set out in
Section 3.7 of this Agreement shall apply. However,
Purchaser will not unreasonably withhold consent with respect
to any matters above except those matters set forth in
subsections iv,v and ix, provided that the value of the
Purchased Assets is not materially affected.
(b) NEW CAPITAL PROJECTS: not, without the Purchaser's prior
written consent or unless required by law or required to
repair or replace any loss or damage to the Purchased Assets
arising subsequent to the execution of this Agreement,
commence or commit to any new capital projects or make any
capital or exploration expenditures except Permitted Capital
Expenditures;
(c) AGREEMENTS: not, without the prior written consent of the
Purchaser, amend or vary any of the Material Contracts, the
Permits and Licenses or the Mineral Rights or enter into any
agreement or lease or obtain any additional permit, right of
way, license or other similar right in connection with the
Business or Purchased Assets except:
(i) renewals or replacements of any of the Permits and
Licenses or Surety Bonds on substantially the same
terms and conditions; and
(ii) any additional permits, leases, rights-of-way,
licenses or similar rights obtained or entered into
in the ordinary course of the Business, consistent
with past practice, or as required by law;
(d) INSURANCE: maintain and cause the Subsidiaries to maintain
in full force and effect the insurance coverage described in
Schedule "M", and the Vendors or the Subsidiaries shall pay
all premiums in connection with such insurance coverage and
shall not act or fail to act so as to invalidate such
insurance coverage; the proceeds of any such insurance which
shall become payable as a result of any physical loss or
damage to the Purchased Assets or any part of the Purchased
Assets after the date of this Agreement until the Closing
Date, to the extent not applied to the repair or replacement
of such
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<PAGE> 48
Purchased Assets prior to the Closing Date, shall be deemed
to be included as part of the Purchased Assets, and the
parties to this Agreement agree that any such insurance
proceeds and all rights in respect of such insurance proceeds
shall from the date of execution of this Agreement be held in
trust for the Purchaser by the Vendors and the Subsidiaries
and shall be assigned by the Vendors to the Purchaser in
respect of and in replacement for any of the Purchased Assets
or any part of the Purchased Assets lost, destroyed or
damaged by any of the causes in respect of which the policies
of insurance are maintained; the Vendors shall take all
necessary steps to the satisfaction of the Purchaser, acting
reasonably, to ensure that any assignments of the benefits of
insurance in respect of the Purchased Assets in favor of any
party other than the Purchaser or its nominee or nominees by
either of them are subject to and subordinate to the interest
and entitlement of the Purchaser or its nominee or nominees
to proceeds of such insurance as provided in this Agreement;
(e) ACCESS: subject to the provisions of the confidentiality
agreement that has been executed by the Purchaser relating to
the Business and the Purchased Assets, provide to the
Purchaser, its employees, representatives and agents access
during normal business hours to the facilities, properties
and all books, accounts, data and records relating to the
Business or the Purchased Assets, including electronically
stored data and records, and to the Vendors' and
Subsidiaries' personnel including, without limitation, all
financial and operating data relating to the Business or the
Purchased Assets and all, or true copies of all, title
documents, contracts, agreements, mortgages, instruments,
leases and other documents relating to the Purchased Assets
or the Business as the Purchaser from time to time reasonably
requests.
(f) COOPERATION/PRE-CLOSING ACTIVITIES: to facilitate Closing on
or before December 31, 1996 or as soon as possible, the
Vendors shall have commenced pre-closing activities
immediately upon the execution of this Agreement, which pre-
closing activities include, without limitation: (i) making
all reasonable efforts to seek and obtain all consents and
approvals necessary for the assignment of the Vendors'
interests in contracts, licenses, and joint venture interests
(including consents and approvals, if any needed for the
Nuclear Regulatory Commission, the parties to the Mongolian
Joint Venture, Umetco Mineral Corporation, Cameco
Corporation, Techsnabexport, Chubu Electric Power Company,
Kyushu Electric Power Company and Sumitomo Corporation); (ii)
providing Hart- Scott-Rodino notices or other required
notices, and (iii) providing Purchaser with access to the
Vendors facilities and personnel, as reasonably requested
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by Purchaser to aid it in connection with the pre-closing
activities.
6.2 REBUILDING FACILITIES. In the event of any loss or
destruction of the Purchased Assets in whole or in part after the date of this
Agreement and up to the Closing, the Vendors and the Purchaser shall negotiate
in good faith to agree upon the application of any proceeds of insurance to
rebuilding, repairing or replacement of the lost or destroyed Purchased Assets
in the best interests of the maintenance and continuation of the Business, and
in accordance with the plans of the Purchaser for the Purchased Assets and
Business. If the Purchaser and the Vendors are unable to agree upon the
application of such proceeds, the proceeds shall be held by the Vendors and
conveyed to the Purchaser at Closing.
6.3 REQUESTS FOR CONSENTS. The Vendors and the Purchaser will
use all reasonable efforts to obtain, prior to Closing:
(a) all consents and approvals necessary for the assignment of
the Vendor's interest in the Contracts, the Permits and
Licenses and the Surety Bonds to the Purchaser; or
(b) if applicable, the re-issuance of any one or more of the
Contracts, Permits and Licenses and Surety Bonds in the name
of the Purchaser or its nominee or nominees,
and the Vendors will not, except as presently contemplated by the terms thereof
or with the prior written consent of the Purchaser, agree to any amendment or
variation to the terms of such Contracts, Permits and Licenses or Surety Bonds
in connection with, or as a condition of, such assignment or re-issuance.
6.4 AGREEMENTS REQUIRING CONSENT. Where a consent of a third
party is required to permit the transfer or assignment to the Purchaser of any
of the Vendors' interest in any of the Contracts, Permits and Licenses or
Surety Bonds, the assignment of those agreements and rights in respect of which
the required consent has not been received on or before the Closing Date will
not be effective in each case until the applicable consent has been received or
the Bankruptcy Court enters an order authorizing the Vendors to assume such
agreement and assign it to the Purchaser and, in the absence of such consent or
Bankruptcy Court Order, such agreement or right will be held by the Vendors
following the Closing in trust for the benefit and exclusive use of the
Purchaser. The Vendors shall continue to use all reasonable efforts to obtain
the required consents. The Vendors shall only make use of such agreements and
rights in accordance with the directions of the Purchaser that do not conflict
with the terms of such Contracts, Permits and Licenses or Surety Bonds provided
that the Purchaser shall reimburse the Vendors for all reasonable costs and
expenses incurred as a result of the direction of the Purchaser.
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6.5 PURCHASER'S COVENANTS.
(a) GENERAL: The Purchaser will, prior to and on the Closing
Date, use all reasonable efforts to obtain all consents in
form and substance reasonably satisfactory to the Purchaser.
(b) CAPITAL STRUCTURE: The Purchaser will, on the Closing Date,
have at least:
(i) $30,000,000 in working capital (which working
capital may consist of subordinated debt); and
(ii) a Book Value of $30,000,000
for the purpose of paying the Purchase Price and operating
the Business; provided, however, if at Closing or subsequent
thereto, Purchaser transfers or assigns the Mongolian Joint
Venture Interests (or grants or conveys the right to be
transferred the Mongolian Joint Venture Interest) to a
nominee which is not a wholly owned subsidiary of Purchaser,
then Purchaser will either: (x) increase the minimum amount
of such working capital and Book Value on the Closing Date to
$35,000,000 or, if the transfer occurs after the Closing
Date, increase the working capital on the date of such
transfer, by $5,000,000; or (y) arrange for the nominee (or
the nominee's parent company) which obtains the Mongolian
Joint Venture Interest to guarantee payment and performance
of Purchaser's obligations hereunder. For greater certainty,
subject to paragraph 6.5(c) below, Purchaser shall not be
required to maintain any level of working capital or Book
Value subsequent to the Closing, or if $5,000,000 is added to
the working capital pursuant to clause (x) of paragraph
6.5(b)(ii), subsequent to the date such working capital is
added.
(c) TRANSFER RESTRICTIONS: At any time during the one-year
period after the Closing, without the consent of the Vendors,
acting reasonably, the Purchaser will not:
(i) on account of any debt to any parent company or
other affiliated entities, repay any principal sums
due thereunder; or
(ii) in the case of equity, make any capital
distributions,
other than from net income or profits, unless at the time of
and after giving effect to such repayment or distribution,
the Purchaser has a Book Value in excess of $30,000,000.
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<PAGE> 51
(d) NOMINEE ENTITIES: The Purchaser shall be responsible for
all the Assumed Obligations and shall continue to be liable
for and hereby guarantees payment and performance of any
Assumed Obligation which may be assigned to a nominee at
Closing.
6.6 BANKRUPTCY COURT APPROVAL. The Vendors will have obtained on
or before December 16, 1996 an order from Bankruptcy Court which implements the
sale of the Purchased Assets to the Purchaser in accordance with the terms and
conditions set forth herein. Such order shall be in a form reasonably approved
by the Purchaser and its bankruptcy counsel. The order and the bankruptcy
approval process shall include:
(a) the Court's approval of the sale of the Purchased Assets to
the Purchaser upon the terms and conditions set forth herein;
(b) the entry of an appropriate and final Order which, inter
alia, finds and concludes that:
(i) EFL and EFEX are authorized to proceed with the sale
of the Purchased Assets upon the terms and
conditions set forth herein pursuant to '363(b) and
(f) of the Bankruptcy Code;
(ii) any objections timely filed with respect to the sale
of the Purchased Assets shall be overruled or the
interest of such objectors have been satisfied or
adequately provided for by the Court or EFL and
EFEX;
(iii) the estates of EFL and EFEX are authorized to
proceed with the sale of the Purchased Assets upon
the terms and conditions set forth herein pursuant
to '363(b) and (f) of the Bankruptcy Code;
(iv) no competitive bid for the Purchased Assets has been
received which complies with the bidding
requirements approved by the Bankruptcy Court;
(v) the Purchase Price as set forth herein represents a
fair value of the Purchased Assets;
(vi) the sale of the Purchased Assets on the terms
contemplated herein is in the best interest of the
estates of EFL and EFEX;
(vii) EFL, EFEX, the Committee and the Purchaser have
acted and negotiated this transaction in good faith
as set forth in ' 363(m) of the Bankruptcy Code;
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<PAGE> 52
(viii) the Court shall retain jurisdiction for the purposes
of enforcing the provisions of the Order;
(ix) the sale to the Purchaser of the Purchased Assets by
the estates of EFL or EFEX shall be made, pursuant
to ' 363(f), free and clear of any and all liens,
security interests, charges, and other encumbrances
and claims of any kind, except for the Permitted
Encumbrances and Assumed Obligations;
(x) any fees or commissions due to any brokers involved
in the consummation of this transaction as a result
of the acts of the Committee, the Vendors or the
Subsidiaries shall be paid from the proceeds of the
Purchase Price and shall not be the obligations of
the Purchaser, provided, however, that the
Purchaser shall be responsible for its own broker's
fees or commission, if any;
(xi) upon completion of the winding up of the
Subsidiaries, the Liquidation is final, effective
and complete, and the Vendors are authorized to sell
all of the Purchased Assets of the Subsidiaries
(except the Swiss Royalty) of every kind and nature,
including, without limitation, all lands, licenses,
permits, mineral rights, reserves, ore stockpiles,
equipment, infrastructure, contracts, inventory,
intellectual property, general intangibles, notes,
receivables, machinery, vehicles, equipment,
furniture and fixtures, such assets are property of
the estate of EFL and all remaining liabilities (not
assumed by the Purchaser), if any, of the
Subsidiaries will be paid in full by the liquidating
agent. Under no circumstances shall any such
unpaid liabilities be the obligation of the
Purchaser or its nominees except as expressly set
forth herein;
(xii) the estates of EFL and EFEX are authorized to assume
and assign to the Purchaser or its nominees, the
following executory contracts:
A. the Processing Contract;
B. the Gobi Region Mineral Agreement;
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<PAGE> 53
C. the Founding Agreement;
D. the Argunexco Joint Venture;
E. the Cameco Agreement;
F. the Japanese Contracts; and
G. any other Contracts necessary for
the reasonable operation of the
Business and any of the Purchased
Assets;
(xiii) the Purchased Assets shall be sold free and clear of
all liens, security interests, charges, encumbrances
and claims of any kind (except for Permitted
Encumbrances and Assumed Obligations), including
without limitation those liens, security interests,
charges, encumbrances and claims relating to the
Term Loan, which shall be released at Closing and
the outstanding balance of which shall be paid at
Closing to the Swiss Utilities from the proceeds of
the Purchase Price; and
(xiv) such other findings of fact and conclusions of law
reasonably requested by the Purchaser and agreed to
by the Vendors acting reasonably;
(c) provisions to the effect that other persons shall have the
right to submit a competing bid in accordance with the Motion
For Approval of (1) Overbid Procedures For Sale Of Assets,
(2) Minimum Overbids, (3) Breakup Fee and (4) Cost
Reimbursement filed in the Bankruptcy Case as amended by the
Stipulation Resolving Official Joint Creditors' Committee's
Application To Expand The Scope Of The Blackstone Group L.P.
As Financial Advisor, Motion For Approval of (1) Overbid
Procedures For Sale of Assets, (2) Minimum Overbids, (3)
Breakup Fee and (4) Cost Reimbursement, And Objections
Thereto and in accordance therewith and as modified hereby:
(i) if the Vendors are unable to consummate the sale of
the Purchased Assets to the Purchaser in accordance
with the terms and conditions set forth herein or
if the Purchaser terminates the Purchase Agreement
as set forth herein, but after February 14, 1997,
then the Purchaser shall be granted an
administrative expense claim under '503(b)(1), for
all its reasonable out-of-pocket fees, costs and
expenses (up to a maximum of $500,000) (the "Cost
Reimbursement") it incurred in connection with its
attempt to acquire the
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<PAGE> 54
Purchased Assets, including, without limitation,
those fees (including without limitation attorneys'
and consultants' fees), costs and expenses incurred
in conducting due diligence efforts, negotiating the
terms and conditions of the proposed sale and
drafting the letter of intent dated July 30, 1996,
this Agreement and other documents to effectuate the
proposed sale. The Cost Reimbursement shall be
payable in accordance with subsequent orders of the
Bankruptcy Court, taking into account the Vendors'
operations and the existence of other administrative
claims. If the Cost Reimbursement is not paid
within sixty days of the allowance of the
administrative expense claim, the Purchaser shall be
entitled to interest on the Cost Reimbursement at
the London Interbank Offered Rate;
(ii) if the Sale is not approved by December 19, 1996,
the Purchaser shall have the right to terminate this
Agreement, which termination shall be effective upon
written notice to the Committee; and
(iii) if the Purchaser terminates its obligations under
this Agreement after December 11, 1996 but before
February 14, 1997, then the Cost Reimbursement shall
not become due and payable to the Purchaser.
However, if the Purchaser terminates its obligations
under this Agreement on or after February 14, 1997,
then the Cost Reimbursement shall become due and
payable to the Purchaser.
6.7 HART-SCOTT-RODINO APPROVAL. As soon as reasonably
practicable after the entry of the Order, the Vendors and the Purchaser shall
file an application under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended ("Hart-Scott-Rodino") as "acquired parties" in connection with
the transactions contemplated hereby and shall request expedited treatment
thereof and shall file an application for an Exon-Florio waiver. To the extent
reasonably practicable, the Vendors and the Purchaser will cooperate in the
preparation of their respective applications prior to the entry of the Order.
The Vendors and the Purchaser shall use their reasonable best efforts to ensure
that all required Hart-Scott-Rodino approvals in connection with the
transactions contemplated hereby are obtained prior to the Closing Date or all
required waiting periods under Hart-Scott-Rodino have expired. The filing fee
for such Hart-Scott-Rodino applications shall be shared equally by the
Purchaser on the one hand and the Vendors on the other hand.
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<PAGE> 55
6.8 LIABILITIES OF SUBSIDIARIES. The Vendors shall pay or cause
to be paid in full or reserve, prior to the Closing Date, all Liabilities
(except for Assumed Obligations) of the Subsidiaries. The Vendors shall place
in trust from the proceeds of sale of the Purchased Assets an amount sufficient
to satisfy all such Liabilities which may exist after the Closing Date. The
amount the Vendors place in trust shall be no less than the sum of:
(a) all known and asserted, but disputed or otherwise unpaid
Liabilities of the Subsidiaries; and
(b) such other sums as the Vendors using reasonable business
judgment determine are necessary to satisfy any other unpaid
Liabilities (which are not assumed by Purchaser) or other
amounts owing or reasonably expected to be owing by the
Subsidiaries, including, without limitation, unliquidated or
contingent Liabilities.
These sums shall remain in trust to satisfy the Claims of all holders of a
Liability against the Subsidiaries until all such Liabilities or amounts are
satisfied in full or the Bankruptcy Court enters an order authorizing the
disbursement or reduction of such trust funds. The Swiss Utilities, but no
other parties, shall be considered as third party benificiaries of this section
6.8.
SECTION 7 - CONDITIONS OF CLOSING
7.1 CONDITIONS OF THE PURCHASER: The obligation of the Purchaser
to complete the purchase of the Business and the Purchased Assets contemplated
by this Agreement is subject to the fulfilment of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES: The representations and
warranties of the Vendors contained in this Agreement shall,
except as contemplated in this Agreement, be true and correct
on and as of the Closing in all material respects with the
same effect as though such representations and warranties had
been made as of the Closing;
(b) COVENANTS: All of the covenants and agreements of the
Vendors to be performed on or before the Closing pursuant to
this Agreement shall have been duly performed in all material
respects;
(c) COMPLETION OF LIQUIDATION: At least five business days prior
to Closing, the Liquidation shall have been completed to the
reasonable satisfaction of the Purchaser such that at least
five business days prior to Closing:
(i) all of the assets and liabilities of H-B, CRP, ASP,
AZ1 or KNP, except the Swiss Royalty, will be assets
and liabilities of EFL; and
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<PAGE> 56
(ii) the only interest that KKL, KKG, NOK and P-H will
have in any of H-B, CRP, ASP, AZ1 or KNP or any of
their respective assets or in EFL or any of its
assets will be the Swiss Royalty, the KKL Option and
the Term Loan;
provided however, that nothing herein shall be considered a
waiver by KKL, KKG or NOK of any rights and remedies against
the Vendors, their Affiliates, the Subsidiaries or Oren
Benton under or in connection with the Dissolution Agreement.
In addition and without limiting the foregoing, the
Liquidation shall have been completed as set forth in
paragraph 6.6(b)(x) and the Subsidiaries shall have executed
and delivered the Swiss Royalty;
(d) RECEIPT OF COURT ORDER REGARDING LIQUIDATION: The entry of a
non-appealable bankruptcy court order confirming that all of
the assets and liabilities of each of H-B, CRP, ASP, AZ1 and
KNP were acquired and assumed by EFL upon the Liquidation;
(e) ACCESS TO BOOKS AND RECORDS: The Purchaser shall have
received unrestricted access to the books and records and
personnel of each of the Vendors and the Subsidiaries, having
received all requested information relating to the Purchased
Assets and Business and having received all requested
cooperation from each of such parties, commencing on the date
hereof;
(f) BUSINESS IN ORDINARY COURSE: The Business of each of the
Vendors and Subsidiaries being carried on in the ordinary
course until Closing and there being no material adverse
change in the Business of any of the Vendors or the
Subsidiaries or in the Purchased Assets prior to Closing
(with the exception of changes arising as a result of the
transactions contemplated by this Agreement);
(g) MAINTENANCE OF PROPERTIES: Except as disclosed herein, the
Vendors and Subsidiaries making all payments and expenditures
and taking all steps necessary to keep each of the Purchased
Assets in good standing until Closing including, without
limitation, making the following payments:
(i) all payments required to be paid to employees for
wages, salaries and benefits and all state, federal
and local taxes and other required payments;
(ii) all payments required to keep all existing
properties and joint venture interests in good
standing;
(iii) all office and mill holding costs; and
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<PAGE> 57
(iv) all real property and personal property taxes and
assessments;
(h) TRANSFER OF MONGOLIAN JOINT VENTURE INTEREST: Suitable
arrangements having been made with the other parties to the
Mongolian Joint Venture to enable the Mongolian Joint Venture
Interest to be transferred to the Purchaser or its nominee in
its present form (free of any new or additional liens,
charges, royalty interests, encumbrances and security
interests on any of the underlying assets of the Mongolian
Joint Venture);
(i) TRANSFER OF TITLE: Subject to paragraph 7.4 hereof, title to
the Purchased Assets having been transferred to the Purchaser
or its nominee or nominees as contemplated herein;
(j) URI AGREEMENT NOT CLOSED: The transactions set out in the
URI Agreement shall not have been completed, nor shall any
steps have been taken towards such completion;
(k) CANCELLATION OF OPTION AGREEMENT: The Option Agreement is
surrendered and cancelled by KKL to the reasonable
satisfaction of the Purchaser at Closing;
(l) TREATMENT OF LIENS: Any and all agreements between the
Vendors or the Subsidiaries and any other parties providing
for the creation or attachment of a lien, security interest,
royalty interest, option or other encumbrance (other than the
Permitted Encumbrances) upon any of the Purchased Assets
shall either, by agreement in writing satisfactory to the
Purchaser, be borne by EFL or EFEX or attach to the proceeds
of sale of the Purchased Assets;
(m) TREATMENT OF BENCO FAMILY PARTNERSHIP: Oren Benton and the
Benco Family Partnership shall surrender and cancel in
writing or other satisfactory evidence to the Purchaser
acting reasonably any and all agency agreements and other
agreements relating to or affecting the Mongolian Joint
Venture Interest or its underlying assets or any other
Purchased Assets;
(n) LIABILITIES OF SUBSIDIARIES: As of the Closing Date, the
Term Loan shall have been paid and, subject to clause (k)
above, all other Liabilities (except for Assumed Obligations)
of the Subsidiaries shall have been paid in full or the
Vendors shall have reserved from the proceeds of sale of the
Purchased Assets an amount sufficient to satisfy all such
Liabilities in a manner as set forth in paragraph 6.8 above;
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<PAGE> 58
(o) UMETCO MATTERS: On or before Closing:
(i) the Purchaser shall have received written consents
executed by authorized officers of Umetco and Union
Carbide Corporation consenting to the payment-in-
full of the Umetco Note at Closing upon the
replacement of the Mill Bond in a form reasonably
satisfactory to the Purchaser. Such payment shall
consist of: (x) the lesser of the face amount of the
replacement Mill Bond or the principal and interest
due on the Umetco Note (excluding any offsets or
defenses) as of the date of the transfer of the Mill
Bond; and (y) a promissory note in the amount equal
to the residual amount owing under the Umetco Note,
if any, after payment of the amount set forth in
subsection (x) above, which note shall bear interest
at the rate set forth in the Umetco Note. Such note
shall be a negotiable instrument, free of any
claims, defenses and offsets as purchaser may
reasonably approve.
(ii) At the Closing, the payment referred to in clause
(i)(x) of this paragraph and the issuance of the
note referred to in clause (i)(y) of this paragraph
shall have occured;
(p) TRANSFER OF PERMITS AND LICENSES: Subject to paragraph 7.4
hereof, the Vendors shall have obtained receipt of any
necessary and material United States governmental state and
other regulatory approvals that are required in order to
complete the transfer of the Permits and Licenses so
contemplated hereunder including, without limitation,
issuances or transfer of all Nuclear Regulatory Commission
licenses relating to the Mill and other assets to the
Purchaser or its nominees.
(q) UMETCO PERMIT TRANSFERS. All Permits and Licenses relating
to any of the Purchased Assets held by Umetco, or any of
Umetco's Affiliates or other third parties shall have been
transferred to the Purchaser or its nominees or the Vendors
shall have posted an amount in escrow equal to two (2) times
the amount of the reclamation bond or surety obligation
associated with any delayed mine permit transfer.
(r) REQUIRED BANKRUPTCY NOTICE PROCEDURES. The Vendors shall
have advertised and provided notice of the Motion, the
Liquidation and the proposed sale to all parties in interest
and all entities holding a Liability against the Subsidiaries
or Vendors or their Affiliates in the jointly administered
bankruptcy proceedings. Such
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<PAGE> 59
advertisement and notice shall have included, without
limitation, the following:
(i) the notice shall have been mailed, no less than
thirty days prior to a Bankruptcy Court hearing to
approve the sale or otherwise implement this
Agreement, to all known creditors and other entities
holding a Liability against the Subsidiaries or
Vendors or their Affiliates in the jointly
administered bankruptcy proceedings;
(ii) the notice shall have described, in reasonable
detail, the Liquidation and the proposed sale of the
Purchased Assets to the Purchaser;
(iii) the notice shall also have been served upon all
local, state and federal taxing and environmental
authorities as reasonably designated by Purchaser,
including those local, state and federal taxing and
environmental authorities in Colorado, Wyoming,
Utah, Arizona and Washington D.C.;
(iv) the Liquidation and sale of the Purchased Assets to
Purchaser shall have been advertised to provide
reasonable notice to all known or unknown creditors
of the Vendors and Subsidiaries of the transactions
contemplated herein and shall have included, without
limitation, advertisements or announcements (in a
form reasonably acceptable to the Purchaser) in the
following periodicals, newspapers or journals:
A. the Denver Post;
B. Nuclear Fuel;
C. South Utah News;
D. The Blue Mountain Panorama;
E. The Daily Sentinel;
F. The Casper Star-Tribune; and
G. Salt Lake Tribune.
(s) HECLA ACKNOWLEDGEMENT. The Purchaser shall have received an
acknowledgement and consent from Hecla consenting to the transfer by the
Vendors of their rights and interest in the Hecla Joint Venture and the
underlying property and acknowledging that the Purchaser or its nominee has the
rights and obligations of
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<PAGE> 60
Union Carbide and Umetco under the joint venture documents and that such rights
and obligations are in good standing.
The foregoing conditions set forth in this Section 7.1 are inserted for the
exclusive benefit of the Purchaser and may be waived in whole or in part by the
Purchaser at any time.
7.2 CONDITIONS OF THE VENDORS. The obligation of the Vendors to
complete the sale of the Business and the Purchased Assets contemplated by this
Agreement is subject to the fulfilment of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES: The representations and
warranties of the Purchaser contained in this Agreement
shall, except as contemplated herein, be true on and as of
Closing in all material respects with the same effect as
though such representations and warranties had been made as
of Closing; and
(b) COVENANTS: All of the covenants and agreements of the
Purchaser to be performed on or before Closing pursuant to
this Agreement shall have been duly performed in all material
respects.
The foregoing conditions set forth in this Section 7.2 are inserted for the
exclusive benefit of the Vendors and may be waived in whole or in part by the
Vendors at any time.
7.3 MUTUAL CONDITIONS. The obligation of the Vendors to complete
the sale of the Business and Purchased Assets as contemplated by this Agreement
and of the Purchaser to complete the purchase of the Business and Purchased
Assets as contemplated by this Agreement is subject to fulfilment of the
following conditions:
(a) NO ORDERS OR PROCEEDINGS: No injunction or restraining order
of a court or administrative tribunal of competent
jurisdiction shall be in effect which prohibits the
transactions contemplated by this Agreement, and no action or
proceeding shall have been instituted or remain pending
before any such court or administrative tribunal to restrain
or prohibit the transactions contemplated by this Agreement;
(b) RECEIPT OF BANKRUPTCY COURT ORDERS: The Vendors shall have
complied with the procedures and obtained the court orders
referred to in paragraph 6.6;
(c) RECEIPT OF HART-SCOTT-RODINO APPROVAL: Receipt by the
Vendors and the Purchaser of Hart-Scott-Rodino approval of
the transactions contemplated hereby or the expiration of all
Hart-Scott-Rodino waiting periods;
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<PAGE> 61
(d) TRANSFER OF SURETY BONDS: Appropriate arrangements having
been made to validly transfer all of the Surety Bonds and the
Bonding Security to the Purchaser or its nominees or, in the
event any such Surety Bonds are not transferred to the
Purchaser, the Purchaser shall have made reasonable efforts
to replace such Surety Bonds on terms acceptable to the
Purchaser in its reasonable discretion;
(e) THIRD PARTY CONSENTS: Receipt of all third-party consents
other than the software licenses, fax and copier rental
agreements, which are not material to the Business, or an
enforceable final and nonappealable Bankruptcy Court order
obviating the need for any such consents listed in Schedule
"S" hereto;
(f) JAPANESE CONSENTS: Receipt of all consents required for the
valid and enforceable assignment of the Japanese Contracts to
the Purchaser, which consents shall be in a form reasonably
acceptable to the Purchaser;
(g) ARGUNEXCO CONSENTS: Receipt of all consents required for the
valid and enforceable assignment of the Argunexco Joint
Venture to the Purchaser, which consents shall be in a form
reasonably acceptable to the Purchaser , provided that for
all such consents to be deemed to have been obtained, EFN
shall have been released from its guaranty of the agreement
dated _______ with respect to the supply of uranium to Duke
Power, or the Purchaser shall have agreed to provide such
guaranty to Duke Power;
(h) MILL BOND TRANSFER: Subject to the payment-in-full of the
Umetco Note, the Purchaser shall have replaced the Mill Bond
and thereby shall have released Umetco and Union Carbide from
the Mill Bond.
The foregoing conditions are inserted for the mutual benefit of the Vendors and
the Purchaser and may be waived in whole or in part only if jointly waived by
the Vendors and the Purchaser. If any of the foregoing conditions have not
been fulfilled by the Closing or shall, prior to the Closing, have become
incapable of fulfilment, either the Vendors or the Purchaser may terminate this
Agreement by notice to the other to that effect, without prejudice however to
any right or remedy of the Vendors or the Purchaser with respect to a breach of
any covenant in this Article or a failure to close the transaction contemplated
hereby within the time frames set out herein.
7.4 AGREEMENT TO WAIVE CONDITIONS: The Purchaser hereby
agrees to waive the condition set out in paragraphs 7.1(i) and (p) above with
respect to the transfer of any Permits and Licenses at or before Closing if the
Purchaser is satisfied, acting reasonably, that any such Permits or Licenses
not so transferred at or before Closing are:
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(a) not material to the Purchased Assets or Business; or
(b) if material, the Purchaser is satisfied that either
(i) the approval of the transfer of the Permit or
License is routine and will be granted within ninety
(90) days after the Closing; or
(ii) an adequate amount of the Purchase Price is held
back at Closing, over and above the Holdback amount
referred to in paragraph 3.3(b), to protect the
Purchaser if the Permit or License is not
transferred within a reasonable amount of time after
Closing.
For greater certainty, and without limitation, any Permits or
Licenses required to allow the Purchaser to fully operate the
Mill and operate and mine the Arizona 1 Mine, Canyon Mine,
Sunday Mine Complex and West Sunday Mine Complex and the Reno
Creek property are considered to be material to the Purchased
Assets and Business.
7.5 FURTHER ADJUSTMENTS. If one or more of the conditions referred to in
sections 7.1, 7.2 or 7.3 are not satisfied at or prior to Closing and the
Purchaser and Vendors mutually agree, the Purchaser and Vendors may negotiate a
change to the Purchase Price and/or an additional holdback (over and above the
holdback referred to in paragraph 3.3(b) to compensate for the failure of such
condition or conditions being satisfied.
SECTION 8 - CLOSING TRANSACTIONS
8.1 CLOSING DATE. Closing shall occur as soon as reasonably
practicable after the entry of the final Order of the Bankruptcy Court
approving the Purchase Agreement or the sale of the Purchased Assets in
accordance with '363(b) and (f), and in any event no later than February 14,
1997. If Closing does not occur by February 14, 1997, the Purchaser shall have
the right upon five days written notice to the Vendors and Committee following
February 14, 1997 to extend Closing for a thirty day period (the "First
Extension Period"). If the Purchaser does not elect to extend Closing, then
the Purchaser and the Vendors and Committee shall at such time and at all times
thereafter until Closing has occurred each have the right to terminate this
Agreement upon written notice to the other party without further obligation
except as provided herein. If the Purchaser elects to so extend Closing and
Closing does not occur before the end of the First Extension Period then the
Purchaser shall have the right upon five (5) days' written notice to the
Vendors and Committee following the expiration of the First Extension Period,
to extend Closing for a further thirty day period (the "Second Extension
Period"). If the Purchaser does not so elect to further extend Closing or
Closing does not occur within the Second Extension Period, then the Purchaser
and the Vendors and
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Committee shall at such time and at all times thereafter until Closing has
occurred each have the right to terminate this Agreement upon written notice to
the other party without further obligation except as provided herein. The
provisions of this paragraph 8.1 are subject to modification on the terms and
conditions set out in paragraph 8.9. The Vendors and the Purchaser shall be
obligated to close during any Extension Period upon the satisfaction or waiver
of the Closing Conditions set forth in Section 7.
8.2 TIME AND PLACE OF CLOSING. Closing shall be 10:00 a.m.
(M.S.T.) on the Closing Date, or such other time as the Vendors and the
Purchaser may agree upon in writing. The place for Closing shall be at the
offices of Dorsey & Whitney LLP, Denver, Colorado, or at such other place as
the Vendors and the Purchaser may agree upon in writing.
8.3 POSSESSION. Subject to Closing occurring, the Purchaser
shall be entitled to have possession of the Purchased Assets and Business as of
and from Closing, and the Vendors will, on Closing, forthwith deliver to the
Purchaser all keys in the possession of the Vendors relative to the Purchased
Assets. The parties agree to cooperate to achieve a swift but orderly transfer
of control of the Purchased Assets after Closing.
8.4 VENDOR'S CLOSING DOCUMENTS. At Closing, the Vendors will
deliver the following to the Purchaser:
(a) all deeds, bills of sale, transfers and assignments which are
necessary to assign or transfer the Purchased Assets or the
Vendors' interest in the Purchased Assets to the Purchaser as
contemplated by this Agreement in such form as the parties
may agree, acting reasonably;
(b) certified copies of resolutions of the directors and a
special resolution of the shareholders, partners, or
liquidating agent as the case may be, of each of the Vendors
approving the sale of the Business and Purchased Assets as
contemplated by this Agreement and the execution and delivery
of this Agreement and all documents required to be executed
by the Vendors pursuant to this Agreement;
(c) documents executed by the Swiss Utilities acknowledging their
consent to, and authorization of the Liquidating Agent (as
defined in the Dissolution Agreement) of the Subsidiaries to
implement the completion of the Liquidation, unless this
requirement is waived by the Purchaser;
(d) a certificate dated the Closing Date of an authorized officer
of each of the Vendors certifying that, to the best of the
officer's knowledge, the representations and warranties made
by the Vendors in this Agreement are true
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and correct in all material respects as at Closing and that
all covenants and agreements to be observed or performed by
the Vendors on or before Closing pursuant to the terms of
this Agreement have been duly observed and performed in all
material respects, with particulars of any applicable
exceptions;
(e) [This paragraph intentionally omitted]
(f) an opinion of the Vendors' counsel substantially in the form
of Schedule "T";
(g) evidence of the satisfaction or waiver of all conditions set
out in Section 7;
(h) good standing certificates and other customary closing
documents required by the Purchaser or its counsel, acting
reasonably;
(h) valid and binding releases, in a form reasonably acceptable
to the Purchaser, whereby Vendors and their successors and
assigns release the Purchaser from all claims arising under
''544-549 of the Bankruptcy Code;
(i) a statement from Vendors to the Purchaser regarding the
employees listed on Schedule "A", setting forth an accurate
description of the compensation, benefits, whether or not
unionized, position, job, classification, date of hire, age
and working location of each such employee and representing
and warranting to Purchaser the accuracy and validity of such
information; and
(j) a certificate from the Vendors stating that the Liquidation
has been completed as contemplated by this Agreement.
8.5 PURCHASER'S CLOSING DOCUMENTS. At the Closing the Purchaser
will deliver to the Escrow Agent a certified or an official bank check or draft
payable to the Escrow Agent in the amount of $1,500,000, pursuant to paragraph
3.3(b), and will deliver the following to the Vendors:
(a) a certified or official bank check or draft payable to the
Vendors, or as the Vendors or the Bankruptcy Court may order
or direct, in the amount specified in paragraph 3.3(a);
(b) documents with respect to the assumption by the Purchaser
from and after the Closing of the Assumed Obligations, in
such form as the parties may agree, acting reasonably;
(c) a certified copy of resolutions of the directors of the
Purchaser approving the purchase of the Business and the
Purchased Assets as contemplated by this Agreement and the
execution and delivery of this Agreement and all
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<PAGE> 65
documents required to be executed by the Purchaser pursuant
to this Agreement;
(d) a certificate dated the Closing Date of an authorized officer
of the Purchaser certifying that, to the best of the
officer's knowledge, the representations and warranties made
by the Purchaser in this Agreement are true and correct in
all material respects as at the Closing and that the
covenants and agreements to be observed or performed by the
Purchaser on or before the Closing pursuant to the terms of
this Agreement have been duly observed and performed in all
material respects, with particulars of any applicable
exceptions;
(e) an opinion of the Purchaser's counsel substantially in the
form of Schedule "U";
(f) good standing certificates and other customary closing
documents required by the Vendors or its counsel, acting
reasonably;
(g) an assumption and assignment agreement relating to
Purchaser's assumption of that portion of Assumed Obligations
comprised of all Environmental and Reclamation Obligations in
a form as the parties may agree, acting reasonably; and
(h) an indemnification agreement, in a form set forth in Schedule
"Y".
8.6 CONCURRENT DELIVERY. It shall be a condition of the Closing
that all matters of payment and the execution and delivery of documents by each
party to the other all pursuant to the terms of this Agreement shall be
concurrent requirements and that nothing shall be complete at the Closing until
everything required as a condition precedent to the Closing has been paid,
executed and delivered.
8.7 DELIVERY OF BOOKS AND RECORDS. Immediately following the
Closing, the Vendors shall deliver or make available to the Purchaser in the
respective places where such documents are now located, the Books and Records,
together with the original Contracts, Permits and Licenses and Surety Bonds
which relate thereto to the extent in the possession of the Vendors.
8.8 TRANSFER. Subject to compliance with the terms and
conditions of this Agreement, the transfer of possession of the Purchased
Assets shall be deemed to take effect as at Closing.
SECTION 9 - ASSUMPTION OF OBLIGATIONS AND LIABILITIES
9.1 ASSUMPTION OF OBLIGATIONS AND LIABILITIES. Effective on the
Closing, the Purchaser or its nominee or nominees shall assume
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<PAGE> 66
and be responsible for the performance of all obligations which are to be
observed or performed from and after the Closing Date under the Assumed
Obligations.
9.2 VENDOR'S OBLIGATIONS AND LIABILITIES. The Vendors shall be
responsible for the performance of all obligations and satisfaction of all
Liabilities pertaining to the Business and the Purchased Assets other than
those to be observed and performed by the Purchaser. The Vendors shall be
responsible for curing any defaults or arrearages relating to all Contracts and
other Purchased Assets which are to be assumed and assigned to Purchaser
including, without.limitation those defaults or arrearages set out in Schedule
"V" but excluding the defaults set forth in Schedule "Z".
9.3 COST AND TAX ALLOCATIONS. The Vendors shall pay any and all
federal or foreign taxes associated with or resulting from the transactions
contemplated hereby. Any state sales or use taxes shall be borne by the
Purchaser. Any state or local transfer taxes associated with or resulting from
the transactions contemplated hereby shall be borne equally by the Purchaser
and the Vendors with the Purchaser paying one-half of such tax obligations and
the remaining half paid by the Vendors. The Purchaser shall bear all
administrative costs and related filing fees imposed by governmental agencies
associated with the transfer of Permits and Licenses.
SECTION 10 - POST-CLOSING EVENTS
10.1 TRANSFERS OF EMPLOYMENT. The Vendors and the Purchaser shall
cooperate to effect an orderly transfer of employment of the Employees of the
Vendors and in that regard the Vendors shall give or cause to be given notice
of termination of employment effective the Closing Date to all Employees of the
Vendors and simultaneously therewith the Purchaser shall give offers of
employment (such employment to commence on the Closing Date) to each of such
Employees of the Vendors terminated by the Vendors.
10.2 CERTAIN OBLIGATIONS RESPECTING EMPLOYEES. The Vendors and
the Purchaser agree that the Vendors will be responsible for and will pay to
those Employees all obligations and Liabilities of the Vendors and the
Subsidiaries owing on account of any of the Employees in respect of any period
prior to the Effective Time, including, without limitation, all salaries,
wages, vacation pay, bonuses, commissions, incentive payments, severance and
retention payments, if any, and other like payments to which those Employees
may be entitled, whether or not accrued, as being payable in respect of any
period prior to the Effective Time.
10.3 CHANGE AND USE OF NAME. The Vendors agree that as soon as
possible after the Closing Date the Vendors shall change their names and the
names of any of their Affiliates that include the words "Energy Fuels" to a
name that does not include the words
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<PAGE> 67
"Energy Fuels" or any part thereof or any similar words. The Vendors agree
that from and after the Closing Date neither the Vendors nor any of their
Affiliates will use as a business name or name of an entity the words "Energy
Fuels" or any part thereof or any similar words. The Vendors will deliver to
the Purchaser at the Closing all documentation required to effect such name
changes.
The Vendors shall, prior to the Closing, pass all necessary
resolutions to change their names to names which do not include the words
"Energy Fuels" and shall take all steps reasonably required in order to permit
the Purchaser and its nominees to use that name. Purchaser acknowledges that
John Adams may have the non-exclusive right to use the "Energy Fuels" name.
10.4 EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Within sixty days
after the Closing Date, the Purchaser shall notify the Vendors of any executory
contracts or unexpired leases which Purchaser seeks to assume but which are not
listed on Schedule "D" which executory contracts or unexpired leases relate to
the Business and are not subject to a previous court order under '365 of the
Bankruptcy Code authorizing the assumption and assignment of such executory
contracts or unexpired lease to the Purchaser. The Vendors shall thereafter
use their best efforts to assume and assign to the Purchaser such executory
contracts and unexpired leases.
SECTION 11 - SURVIVAL OF REPRESENTATIONS AND RECOURSE
11.1 SURVIVAL. The representations and warranties of the
Purchaser contained in paragraph 5.1 of this Agreement shall survive the
completion of the transactions contemplated hereby and shall continue in full
force and effect thereafter for a period of 12 months after the Closing Date,
after which they shall expire; provided however, that if the Vendors assert a
claim based upon the representations and warranties of the Purchaser contained
in this Agreement within 12 months after the Closing Date, then such claim
shall continue until resolved or otherwise adjudicated. The Purchaser's
covenants and agreements set out in paragraphs 5.1(e), 5.1(f), 6.5, 9.1, 9.3,
10 and 11 and all other covenants and agreements of the Purchaser set out in
this Agreement including, but not limited to, assumption of the Assumed
Obligations that do not relate to obligations to be performed at or before
Closing, shall survive indefinitely or for such shorter time period as
expressly set out therein. The representations, warranties, and agreements of
the Vendors contained in this Agreement shall survive the completion of the
transactions contemplated hereby and shall continue in full force and effect
thereafter for a period of 12 months after the Closing Date with the exception
of the representations and warranties set out in paragraph 4.2.4(d), which
shall survive indefinitely; provided however, that if the Purchaser asserts a
claim based upon the representations, warranties, and agreements of the Vendors
contained in this Agreement within 12
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<PAGE> 68
months after the Closing Date, then such claim shall continue until resolved or
otherwise adjudicated. The Vendors covenants set out in paragraphs 4.2.4(c),
4.2.7(a), 4.2.7(c), 4.2.8(d), 6.4, 6.8 and 9.3 and Sections 10 and 11 and all
other covenants and agreements of the Vendors set out of this Agreement that
do not relate to obligations to be performed at or before Closing shall survive
indefinitely or for such shorter time period as expressly set out therein.
11.2 INDEMNITY BY THE VENDORS. Subject to the limitations set
forth in paragraphs 11.1 and 11.5, in addition to any rights the Purchaser has
under this Agreement with respect to any claims, the Vendors will indemnify and
save the Purchaser harmless from and against all losses, costs, damages,
expenses, penalties and Liabilities suffered or incurred by the Purchaser or
its nominee or nominees:
(a) by reason of a breach of any representation, warranty,
covenant or agreement of the Vendors set forth in this
Agreement;
(b) arising out of or in connection with any Liabilities or
obligations of the Vendors that are not Assumed Obligations
by the Purchaser pursuant to this Agreement relating to the
Business or any of the Purchased Assets; and
(c) arising out of or in connection with any Liabilities of the
Subsidiaries which are not Assumed Obligations.
For greater certainty, the indemnity obligations of the Vendors to the
Purchaser shall be limited to the Holdback Amount except for claims arising
under paragraph 11.2(c) which shall be unlimited.
11.3 INDEMNITY BY THE PURCHASER: Subject to the limitations set
forth in paragraphs 11.1 and 11.5, in addition to any rights the Vendors have
under this Agreement with respect to any claims, the Purchaser will indemnify
and save the Vendors harmless from and against all losses, costs, damages,
expenses, penalties and Liabilities suffered or incurred by the Vendors:
(a) by reason of a breach of any representation, warranty,
covenant or agreement of the Purchaser set forth in this
Agreement; and
(b) arising out of or in connection with any obligations
comprising the Assumed Obligations.
11.4 DEFENSE OF INDEMNITY CLAIMS. In the event of a claim (an
"Indemnity Claim") being made by a third party against a party hereto (the
"Indemnified Party") in respect of which another party (the "Indemnifier") has
covenanted to indemnify the Indemnified Party, the following provisions shall
apply.
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<PAGE> 69
The Indemnified Party shall promptly give notice to the
Indemnifier of any Indemnity Claim in respect of which the Indemnified Party
intends to claim for indemnification against the Indemnifier under this
Agreement. Such notice shall specify with reasonable particularity (to the
extent that the information is available) the nature of the Indemnity Claim.
The Indemnifier shall, at its own expense, assume control of the negotiation,
settlement and defense of such Indemnity Claim. The Indemnified Party shall
cooperate with the Indemnifier in respect of such Indemnity Claim, and the
Indemnifier shall reimburse the Indemnified Party for all the Indemnified
Party's reasonable expenses as a result of the Indemnifier's assumption of such
Indemnity Claim and arising from the Indemnified Party's cooperation. The
Indemnified Party shall have the right to participate in the negotiation,
settlement and defense of such Indemnity Claim at its own expense and shall
have the right to disagree on reasonable grounds with the selection and
retention of counsel, in which case counsel satisfactory to the Indemnifier and
the Indemnified Party shall be retained by the Indemnifier. If the Indemnifier
fails to defend any Indemnity Claim within a reasonable time, the Indemnified
Party shall be entitled to assume control of the Indemnity Claim at the expense
of the Indemnifier, and the Indemnifier shall be bound by the results obtained
by the Indemnified Party with respect to such Indemnity Claim.
11.5 EXTENT OF HOLDBACK CLAIMS. Any Holdback Claims made by the
Purchaser for any breaches of representation, warranty, covenant or agreement
of the Vendors contained herein or for indemnification shall be limited in
aggregate to the $1,500,000 deposited with the Escrow Agent under the Escrow
Agreement plus accrued interest except for any Holdback Claims in connection
with any Liabilities of the Subsidiaries which are not Assumed Obligations,
which such claims shall be unlimited. However, the parties agree that the
party substantially prevailing in any disputed Holdback Claim shall be entitled
to reimbursement for reasonable attorney's and other professional's actual fees
and disbursements incurred in prosecuting or defending any disputed Holdback
Claim. If the Claim is determined, as to liability, partially, but not
substantially in favor of the Purchaser and partially, but not substantially in
favor of the Vendors, or the amount of the Holdback Claim is decided somewhere
between the amount claimed by the Purchaser and Vendors but not substantially
in favor of either the Purchaser or the Vendors, then the court or other
appropriate authorities that made the determination shall apportion such fees
and expenses fairly between the parties.
11.6 ADDITIONAL RULES AND PROCEDURES. The following provisions
shall also apply with respect to Indemnity Claims:
(a) In the event that any Indemnity Claim is of a nature such
that the Indemnified Party is legally bound or required by
applicable law to make a payment to any person (a "Third
Party") with respect to such Indemnity Claim before the
completion of settlement negotiations or related legal
proceedings, including without limitation,
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the posting of any security to stay any process of execution
or judgment, the Indemnifier shall, subject to the
limitations set forth in paragraph 11.5 be obligated to make
such payment or post security therefor, on behalf of the
Indemnified Party. If the Indemnifier fails to do so, the
Indemnified Party may make such payment or post security
therefor and the Indemnifier shall, forthwith after demand by
the Indemnified Party, reimburse the Indemnified Party for
any such payment or cause the security to be replaced and
released. If the amount of any liability of the Indemnified
Party under the Indemnity Claim in respect of which such a
payment was made, as finally determined, is less than the
amount which was paid by the Indemnifier to the Indemnified
Party, the Indemnified Party shall, forthwith after receipt
of the difference from the third party, pay the amount of
such difference to the Indemnifier.
(b) Except in the circumstance contemplated by paragraph 11.6(a),
or unless the Indemnifier fails to assume control of the
negotiation, settlement and defense of any Indemnity Claim,
the Indemnified Party shall not negotiate, settle, compromise
or pay any Indemnity Claim except with the prior written
consent of the Indemnifier (which consent shall not be
unreasonably withheld).
(c) The Indemnified Party shall not permit any right of appeal in
respect of any Indemnity Claim to terminate without giving
the Indemnifier notice thereof and an opportunity to contest
such Indemnity Claim.
(d) The Indemnified Party and the Indemnifier shall cooperate
fully with each other with respect to Indemnity Claims, shall
keep each other fully advised with respect thereto (including
supplying copies of all relevant documentation promptly as it
becomes available) and shall each designate a senior officer
who will keep himself informed about and be prepared to
discuss the Indemnity Claim with his counterpart and with
counsel at all reasonable times.
(e) Notwithstanding anything else in this paragraph 11.6, the
Indemnifier shall not settle any Indemnity Claim or conduct
any related legal or administrative proceeding in a manner
which would, in the opinion of the Indemnified Party, acting
reasonably, have a material adverse impact on the Indemnified
Party.
(f) The provisions of paragraph 11.4 and this paragraph 11.6 are
intended to set out the procedures to be followed with
respect to an Indemnity Claim and, provided the Indemnified
Party follows such procedures in all material respects,
nothing contained in paragraph 11.4 and this paragraph 11.6
shall derogate from the Indemnifier's obligations to
indemnify the Indemnified Party as otherwise provided in this
Agreement.
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<PAGE> 71
11.7 COOPERATION AND EXCHANGE OF INFORMATION. The Vendors, the
Subsidiaries and the Purchaser shall provide each other with such cooperation
and information as any of them reasonably may request of the others in
connection with their respective business operations including, without
limitation, litigation matters, accounting matters, filing any Tax Return,
determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or proceeding in respect of Taxes. Such cooperation and
information shall include, without limitation, providing copies of relevant Tax
Returns or portions thereof, together with accompanying schedules and related
work papers and documents relating to rulings or other determinations by Taxing
authorities. Each party shall make its employees available on a mutually
convenient basis to provide explanation of any documents or information
provided hereunder. Each party shall, upon written request from the other
party, provide such factual information reasonably necessary for litigation
matters, accounting matters, filing Tax Returns, Tax planning, contesting any
Tax audit or for such other reasonable purposes. In addition, if the Purchaser
intends to offer employment to a former employee of the Vendors, the Vendors
shall, at the request of the Purchaser, provide the Purchaser with any records
or files relative to any such former employee. Vendors shall maintain and
safeguard all information relating to accounting matters, Tax returns, Tax
planning, contesting Tax amounts or litigation and all files relating to former
employees and shall not destroy it without at least 30 days prior written
notice to Purchaser.
Any information or copies thereof retained or acquired by the Vendors
that relates to any of the Purchased Assets or Business shall be maintained as
confidential by the Vendors and shall not be used by the Vendors for any
purpose that would be contrary to the interests of or competitive with the
Purchaser or that would impair the value to the Purchaser of any of the
Purchased Assets or the Business. Any such information shall cease to be
confidential if such information has been publicly disseminated other than as a
result of disclosure by any of the Vendors or by their directors, officers,
shareholders, owners, agents or representatives.
11.8 DISPUTE RESOLUTION. Unless otherwise specifically set forth
herein, for any dispute concerning the terms of this Agreement or either
party's performance hereunder which the parties have failed to resolve by good
faith negotiation, the following procedure shall apply:
(a) the dispute shall be submitted to the jurisdiction of the
Bankruptcy Court for resolution; and
(b) if the Bankruptcy Court declines jurisdiction, then the
dispute shall be resolved by the following arbitration
procedures:
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<PAGE> 72
(i) Either party may serve a demand for arbitration upon
the other party, naming an arbitrator, via certified
mail. The party upon which the demand is served
shall serve a response upon the party serving the
demand naming a second arbitrator, within 30 days
after receipt of said demand. The two arbitrators
shall name a third arbitrator and, upon their
failure to do so within 15 days after the naming of
the second arbitrator, the third arbitrator shall be
named by the American Arbitration Association
("AAA"), Denver, Colorado.
(ii) The parties shall submit an agreed-upon statement of
issues to the arbitrators within 30 days after the
third arbitrator is selected, or, if they cannot
agree upon the issues, each party shall submit its
proposed statement of issues. Within 30 days after
the statement(s) of issues is filed, each party
shall submit a list of witnesses whom it intends to
call at the hearing, including a summary of
testimony which each witness will give at the
hearing. The parties may amend said list at any
time prior to 30 days before trial. In no event
shall either party be allowed to call a witness who
is not included in that party's witness list.
(iii) Before the hearing, the parties shall have the
opportunity to conduct reasonable discovery, which
shall include written interrogatories and requests
for admissions, document exchanges and limited
depositions; provided, however, that each party
shall only be allowed four depositions, 25
interrogatories (including all discrete subparts) 25
requests for production of documents and ten
requests for admissions or such other discovery
reasonably approved by the arbitrator.
(iv) The arbitration shall be conducted pursuant to the
Commercial Arbitration Rules of the AAA. The
arbitrators shall render a decision in writing based
upon the statement(s) of issues submitted by the
parties, the evidence presented at the hearing, the
Agreement, and the laws of the State of Colorado.
(v) Pending a decision by the arbitrators, the Agreement
shall remain in full force and effect and each party
shall fully perform its obligations under the
Agreement without prejudice to the dispute which is
being
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arbitrated, to the extent such performance is
practicable.
SECTION 12 - MISCELLANEOUS
12.1 NOTICES. Any notice, request, demand or communication
required or permitted to be given under this Agreement shall be in writing and
delivered by hand or facsimile transmission to the party to which it is to be
given as follows:
To the Vendors:
Holden & Jessop, P.C.
303 E. 17th Avenue, Suite 930
Denver, CO 80203-1264
Attention James Holden
Facsimile No.: (303) 860-7233
To the Purchaser:
International Uranium Holdings Corporation
1320 - 885 West Georgia Street
Vancouver, British Columbia, Canada, V6C 3E8
Attention: Lukas Lundin
Facsimile No.: (604) 689-4250
or to such other address as a party may specify by notice given in accordance
with this Section. Any such notice, request, demand or communication given
shall be deemed to have been given, in the case of delivery by hand, when
delivered, and in the case of delivery by facsimile transmission, when a
legible facsimile is received by the recipient if received before 5:00 p.m. on
a Business Day or on the next Business Day if such facsimile is received on a
day which is not a Business Day or after 5:00 p.m. on a Business Day.
12.2 FURTHER ASSURANCES. Each of the parties shall execute and
deliver all such further documents and do such further acts and things as may
be reasonably required from time to time to convey title to the Purchased
Assets to the Purchaser or to otherwise give effect to this Agreement.
12.3 TIME IS OF THE ESSENCE. Time shall be of the essence of this
Agreement.
12.4 DISCLOSURE OF INFORMATION. The Vendors confirm their
understanding and agreement with the Purchaser that, upon execution and
delivery of this Agreement and the entry of the Bankruptcy Court Order
approving the transactions contemplated herein, the Purchaser shall be
permitted to disclose confidential information that it and its agents have
received from the Vendors to the public
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by way of offering memorandum, proxy statement or similar disclosure document
for the purposes of a public financing of the Purchaser, the proceeds of which
will be used in connection with the Purchased Assets. Provided, however, the
Purchaser shall obtain express consent from Chubu Electric Power Company,
Kyushu Electric Power Company and Sumitomo Corporation before disclosing any
confidential information relating to the Japanese Contracts.
12.5 ASSIGNMENT. Except with the written consent of the other
party, neither the Vendors nor the Purchaser may assign any of their respective
benefits, obligations or liabilities under or in respect of this Agreement,
provided that, at any time prior to the Closing, the Purchaser may, without any
such consent, assign all of its rights and benefits under this Agreement to one
or more nominees of the Purchaser which deliver to the Vendors an instrument in
writing executed under seal by such nominee or nominees confirming that they
are bound by and shall perform all of the obligations of the Purchaser under
the agreement as if they were an original signatory thereto, jointly and
severally bound thereby with the Purchaser, and such instrument in writing
shall contain an acknowledgement under seal of the Purchaser that it continues
to be bound by the Agreement. In the event of an assignment contemplated
above, any reference in this Agreement to the "Purchaser" shall be deemed to
include the assignee.
12.6 NO RIGHTS OF THIRD PARTIES. Other than the rights of parties
under the assumption and assignment agreements to be executed by the Purchaser
and except as otherwise provided in sections 4.2.4(c) and 6.8, nothing in this
Agreement is intended or shall be construed to confer upon or give any person
or entity any rights or remedies under or by reason of this Agreement or any
transaction that this Agreement contemplates.
12.7 INUREMENT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
any nominees of the Purchaser which is an assignee of the Purchaser as
contemplated in paragraph 12.4.
12.8 FAILURE TO ACT IN GOOD FAITH. Notwithstanding any other
provision in this Agreement, the Purchaser and the Vendors shall act in good
faith and shall use good faith efforts to consummate the transactions
contemplated hereby. Notwithstanding any other provision in this Agreement, if
the Vendors do not act in good faith or do not use good faith efforts to
consummate the transactions contemplated hereby, whether because of changes in
the price of uranium or vanadium or the identification of other parties
interested in acquiring all or a portion of the Purchased Assets or Business or
otherwise, and the transactions contemplated hereby are not completed in
accordance with the terms hereof, the Purchaser shall be entitled to full
damages at law and in equity without any limitation or agreement to liquidated
damages or limitation as to cost reimbursement.
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IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
C/S ENERGY FUELS EXPLORATION CO.,
Debtor-in-Possession
By:
----------------------------------
Oren L. Benton, Chairman
C/S ENERGY FUELS LTD., Debtor-in-
Possession
By Energy Fuels Mining Joint Venture,
Debtor-in-Possession
Its General Partner
By First Concord Mining Company
Its General Partner
By:
----------------------------------
Oren L. Benton, Chairman
C/S ENERGY FUELS NUCLEAR INC.
By:
----------------------------------
Oren L. Benton, Chairman
C/S INTERNATIONAL URANIUM HOLDINGS
CORPORATION
By:
----------------------------------
Earl E. Hoellen, President
<PAGE> 1
ATTACHMENT - ITEM 19(b)3(i) - 1998 EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
INTERNATIONAL URANIUM CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The purposes of the International Uranium Corporation 1998 Employee
Stock Purchase Plan (the "Plan") are to (a) assist employees of International
Uranium Corporation, an Ontario corporation (the "Company"), and of its
subsidiary corporations in acquiring a stock ownership interest in the Company
pursuant to a plan that is intended to qualify as an "employee stock purchase
plan" under Section 423 of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), and (b) help employees provide for their future security and
encourage them to remain in the employ of the Company and its subsidiary
corporations.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below.
"BOARD" means the Board of Directors of the Company.
"CHANGE NOTICE DATE" has the meaning set forth in Section 9.2.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the Company's Compensation Committee or another
committee appointed by the Board and given authority by the Board to administer
the Plan.
"COMPANY" means International Uranium Corporation, an Ontario
corporation, and includes any successor corporation thereto.
"DESIGNATED SUBSIDIARY" has the meaning set forth under the definition
of "Eligible Employee" in this Section 2.
"ELIGIBLE COMPENSATION" means all regular cash compensation, including
overtime, cash bonuses and commissions. Regular cash compensation does not
include severance pay, hiring and relocation bonuses, pay in lieu of vacation or
sick leave, or any other special payments, or any gain from stock option
exercises.
"ELIGIBLE EMPLOYEE" means any employee of the Company or any Subsidiary
Corporation designated by the Board or the Committee (a "Designated
Subsidiary"), who is in the employ of the Company (or any Designated Subsidiary)
on one or more Offering Dates and who meets the following criteria:
(a) the employee does not, immediately after the Purchase Right is
granted, own stock (as defined by the Code) possessing 5% or
more of the total combined voting power or value of all classes
of stock of the Company or of a Parent Corporation or a
Subsidiary Corporation;
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(b) the employee's customary employment is for more than 20 hours
per week;
(c) the employee's customary employment is for more than five months
in any calendar year; and
(d) the employee:
(i) has been employed for at least 1 year; or
(ii) was an employee on March 23, 1998.
If the Company permits any employee of a Designated Subsidiary to
participate in the Plan, then all employees of that Designated Subsidiary who
meet the requirements of this paragraph shall also be considered Eligible
Employees.
"EMPLOYER" means the corporation which employs the particular
Participant, and which is the Company or a Designated Subsidiary.
"ENROLLMENT PERIOD" has the meaning set forth in Section 6.1.
"ESPP BROKER" has the meaning set forth in Section 10.1.
"INSIDER" means:
(a) an insider as defined under Section 1(1) of the Securities Act
(Ontario), other than a person who falls within that definition
solely by virtue of being a director or senior officer of any
corporation which is a subsidiary (as such term is defined in
subsection 1(2) of the Business Corporations Act (Ontario), as
such provision is from time to time amended, varied or
re-enacted) of the Company; and
(b) an associate as defined under Section 1(1) of the Securities Act
(Ontario) of any person who is an insider by virtue of item (a)
above.
"NONPARTICIPATION NOTICE" has the meaning set forth in Section 6.3.
"OFFERING" has the meaning set forth in Section 5.1.
"OFFERING DATE" means the first day of an Offering.
"OFFERING PERIOD" has the meaning set forth in Section 5.1.
"PARENT CORPORATION" means any corporation, other than the Company, in
an unbroken chain of corporations ending with the Company if, at the time of the
granting of the Purchase Right, each of the corporations, other than the
Company, owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means any Eligible Employee who has elected to
participate in an Offering in accordance with the procedures set forth in
Section 6.1 and who has not withdrawn from the Offering or whose participation
in the Offering has not terminated.
"PERCENTAGE NOTICE" has the meaning set forth in Section 6.3.
"PLAN" means the International Uranium Corporation 1998 Employee Stock
Purchase Plan.
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"PLAN ADMINISTRATOR" has the meaning set forth in Section 3.1.
"PURCHASE DATE" means the last day of each Purchase Period.
"PURCHASE PERIOD" has the meaning set forth in Section 5.2.
"PURCHASE PRICE" has the meaning set forth in Section 8.
"PURCHASE RIGHT" means an option granted under the Plan pursuant to
Section 423 of the Code that allows an Eligible Employee to purchase Stock under
the Plan.
"SHARE COMPENSATION ARRANGEMENT" means any stock option, stock option
plan, employee stock purchase plan or any other compensation or incentive
mechanism involving the issuance or potential issuance of the Stock, including a
share purchase from treasury which is financially assisted by the Company by way
of a loan, guarantee or otherwise.
"STOCK" means the common shares, without par value, of the Company.
"SUBSCRIPTION" has the meaning set forth in Section 6.1.
"SUBSCRIPTION DATE" has the meaning set forth in Section 6.1.
"SUBSIDIARY CORPORATION" means any corporation, other than the Company,
in an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Purchase Right, each of the corporations, other than the
last corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
SECTION 3. ADMINISTRATION
3.1 PLAN ADMINISTRATOR
The Plan shall be administered by the President of the Company (the
"Plan Administrator"), except for those items expressly reserved to the Board or
the Committee under the Plan (which items may be delegated by the Board or the
Committee to the Plan Administrator). To the extent that Eligible Employees are
employees of a Designated Subsidiary, the Plan Administrator (or, if applicable,
the Board or Committee) shall administer the Plan on behalf of such Designated
Subsidiary. Any decisions made by the Board, the Committee or the Plan
Administrator shall be applicable equally to all Eligible Employees.
3.2 ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Subject to the provisions of the Plan, the Plan Administrator shall
have exclusive authority, in the Plan Administrator's discretion, to determine
all matters relating to Purchase Rights granted under the Plan, including all
terms, conditions, restrictions and limitations of Purchase Rights; provided,
however, that all Participants granted Purchase Rights pursuant to the Plan
shall have the same rights and privileges within the meaning of the Code. The
Plan Administrator shall also have exclusive authority to interpret the Plan and
may, consistent with the requirements of Code Section 423, from time to time,
adopt and change rules and regulations of general application for the Plan's
administration. The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, unless revised by the Board or the
Committee, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's other officers or employees as the Plan Administrator so determines.
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SECTION 4. STOCK SUBJECT TO PLAN
Stock acquired by Participants under the Plan shall be drawn from
authorized and unissued Stock or shall be Stock acquired or caused to be
acquired by the Employer or the Company on behalf of the Participants, or a
combination of any of the foregoing, as determined from time to time at the sole
discretion of the Board. Subject to adjustment from time to time as provided in
Section 19, a maximum of 6,700,000 shares of Stock may be acquired under the
Plan; of such 6,700,000 shares of Stock, the maximum number of authorized but
unissued shares of Stock which shall be made available for sale under the Plan
shall be 3,350,000 shares of Stock. Any shares of Stock that have been made
subject to a Purchase Right that cease to be subject to the Purchase Right
(other than by reason of exercise of the Purchase Right), including, without
limitation, in connection with the cancellation or termination of the Purchase
Right, shall again be available for acquisition in connection with future grants
of Purchase Rights under the Plan.
SECTION 5. OFFERING DATES
5.1 OFFERING PERIODS
The Plan shall be implemented by one or more or a series of offerings
(each, an "Offering"), which need not be consecutive or at regular intervals.
Except as otherwise set forth herein, Offerings shall commence on July 1 and
January 1 of each year and end on the next December 31 and June 30,
respectively, occurring thereafter. Notwithstanding the foregoing, whether or
not Offerings are made, the date of commencement of the first Offering, the term
and frequency of Offerings and any time or interval between Offerings shall be
determined by the Board or the Committee. Without limiting the generality of the
foregoing, the Board or the Committee may establish (a) a different term for one
or more Offerings and (b) different commencing and ending dates for such
Offerings; provided, however, that an Offering Period (the "Offering Period")
may not exceed one year. Unless the Plan Administrator in the Plan
Administrator's sole discretion determines otherwise for future Offerings, an
employee who becomes eligible to participate in the Plan after an Offering
Period has commenced shall not be eligible to participate in such Offering but
may participate in any subsequent Offering, provided that such employee is still
an Eligible Employee as of the commencement of any such subsequent Offering.
Unless the Plan Administrator in the Plan Administrator's sole discretion
determines otherwise for future Offerings, Eligible Employees may not
participate in more than one Offering at a time. In the event the first or the
last day of an Offering Period is not a regular business day, then the first day
of the Offering Period shall be deemed to be the next regular business day and
the last day of the Offering Period shall be deemed to be the last preceding
regular business day.
5.2 PURCHASE PERIODS
Each Offering Period shall consist of one or more consecutive purchase
periods (each, a "Purchase Period"). Except as otherwise set forth below,
Purchase Periods shall commence on the first day of each month within the
Offering Period and end on the last day of each such month. Notwithstanding the
foregoing, the Board or the Committee may establish (a) different terms for one
or more Purchase Periods within an Offering Period and (b) different commencing
dates and Purchase Dates for any such Purchase Period. The last day of each
Purchase Period shall be the Purchase Date for such Purchase Period. In the
event the first or last day of a Purchase Period is not a regular business day,
then the first day of the Purchase Period shall be deemed to be the next regular
business day and the last day of the Purchase Period shall be deemed to be the
last preceding regular business day.
SECTION 6. PARTICIPATION IN THE PLAN
6.1 INITIAL PARTICIPATION
Subject to delivery of the Percentage Notice to the Eligible Employees
pursuant to Section 6.3, an Eligible Employee shall become a Participant on the
first Offering Date after satisfying the eligibility requirements and delivering
to the designated department or office of the Employer (the "Designated
Department") during the enrollment period established by the Plan Administrator
(the
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<PAGE> 5
"Enrollment Period") a subscription (the "Subscription") in the form and
manner prescribed by the Plan Administrator and by the date established by the
Plan Administrator (the "Subscription Date"):
(a) indicating the Eligible Employee's election to participate in
the Plan;
(b) authorizing payroll deductions and stating the amount to be
deducted regularly from the Participant's pay; and
(c) authorizing the purchase of Stock for the Participant in each
Purchase Period.
An Eligible Employee who does not deliver a Subscription to the
Designated Department during the Enrollment Period and on or before the
Subscription Date shall not participate in the Plan for that Offering Period or
for any subsequent Offering Period, unless such Eligible Employee subsequently
enrolls in the Plan by delivering a Subscription to the Designated Department
during the Enrollment Period and on or before the Subscription Date for such
subsequent Offering Period. The Plan Administrator may, from time to time,
change the Subscription Date as deemed advisable by the Plan Administrator in
its sole discretion for the proper administration of the Plan.
6.2 CONTINUED PARTICIPATION
A Participant shall automatically participate in the next Offering
Period unless the Participant:
(a) delivers a Nonparticipation Notice to the Company pursuant to
Section 6.3;
(b) stops payroll deductions pursuant to Section 9.2;
(c) withdraws from the Plan pursuant to Section 11.1; or
(d) terminates employment as provided in Section 12.
6.3 PERCENTAGE DETERMINATIONS
At least 10 business days prior to the commencement of each Offering
Period, the Company shall provide each Eligible Employee with written notice as
to the percentages determined by the Board (as contemplated by Section 8 and
Section 9.3) that are applicable to the next Offering Period (the "Percentage
Notice"). Each Participant is entitled to advise the Company in writing, within
the 10 business day period commencing on the date of the Percentage Notice, of
the Participant's decision to opt out of the Plan for such Offering Period by
delivering to the Company written notice indicating the Participant's decision
to opt out of the Plan for such Offering Period (the "Nonparticipation Notice").
Subject to Section 6.2, the Participant shall automatically participate in each
subsequent Offering Period unless the Participant so delivers the
Nonparticipation Notice with respect to the Percentage Notice applicable to any
such subsequent Offering Period.
SECTION 7. LIMITATIONS ON RIGHT TO PURCHASE STOCK
7.1 $25,000 LIMITATION
No Participant shall be entitled to purchase Stock under the Plan (or
any other employee stock purchase plan that is intended to meet the requirements
of Code Section 423 sponsored by the Company, a Parent Corporation or a
Subsidiary Corporation) at a rate that exceeds U.S. $25,000 in fair market
value, determined as of the Offering Date for each Offering Period (or such
other limit as may be imposed by the Code), for each calendar year in which a
Participant participates in the Plan (or any other employee stock purchase plan
described in this Section 7.1).
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7.2 PRO RATA ALLOCATION
In the event the number of shares of Stock that might be purchased by
all Participants in the Plan exceeds the number of shares of Stock available in
the Plan, the Plan Administrator shall make a pro rata allocation of the
remaining shares of Stock in as uniform a manner as shall be practicable and as
the Plan Administrator shall determine to be equitable. Fractional shares may be
issued under the Plan only to the extent permitted by the Board or the
Committee.
SECTION 8. PURCHASE PRICE
The purchase price (the "Purchase Price") at which Stock may be
acquired by Participants in an Offering pursuant to the exercise of all or any
portion of a Purchase Right granted under the Plan shall be a percentage
determined by the Board for the applicable Offering Period, such percentage to
be not less than 85% and not more than 100%, of the fair market value of the
Stock on the Purchase Date. The fair market value of the Stock on the Purchase
Date shall be (a) in the case of authorized but unissued shares of Stock, the
weighted average trading price for the Stock on The Toronto Stock Exchange for
the five trading days completed immediately prior to the Purchase Date, and (b)
in the case of shares of Stock purchased on the open market, the purchase price
of such Stock on The Toronto Stock Exchange on the Purchase Date. In the event
that such Stock is not listed and posted for trading on The Toronto Stock
Exchange on the date in question, then the fair market value shall be determined
based on the price(s) of the Stock on such stock exchange in Canada on which the
Stock is listed and posted for trading as may be selected for such purpose by
the Board. In the event that such Stock is not listed and posted for trading on
any stock exchange the fair market value shall be the fair market value of such
Stock as determined by the Board in good faith. For clarification, in the event
that Stock is acquired by Participants in any given Purchase Period from a
combination of both authorized but unissued Stock and Stock purchased on the
open market, then the "effective" Purchase Price shall be equal to the dollar
amount obtained by dividing (A) the sum obtained by adding (i) the product of
the number of shares of Stock issued from treasury and the applicable Purchase
Price and (ii) the product of the number of shares of Stock purchased on the
open market and the applicable Purchase Price, by (B) the total number of shares
of Stock acquired on the Purchase Date.
SECTION 9. PAYMENT OF PURCHASE PRICE
9.1 GENERAL RULES
Stock that is acquired pursuant to the exercise of all or any portion
of a Purchase Right may be paid for only by means of payroll deductions from the
Participant's Eligible Compensation unless the Plan Administrator in the Plan
Administrator's sole discretion establishes other methods for payment of the
Purchase Price. Except as set forth in Section 6.3 or this Section 9, the amount
of compensation to be withheld from a Participant's Eligible Compensation during
each pay period shall be determined by the Participant's Subscription.
9.2 CHANGE NOTICES
During an Offering Period, a Participant may elect to stop, but not
otherwise decrease or increase, withholding from the Participant's compensation
by providing an amended Subscription to the Designated Department by a date at
least ten days prior to the end of the pay period for which such election is to
be effective (the "Change Notice Date"); provided, however, that the Plan
Administrator may change the Change Notice Date from time to time. In the event
a Participant elects to stop withholding during any Offering Period, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
delivering a Subscription to the Designated Department in accordance with
Section 6.1.
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9.3 PERCENT WITHHELD
The amount of payroll withholding with respect to the Plan for any
Participant during any pay period shall be at least 1% of the Participant's
Eligible Compensation for such pay period, but shall not exceed 10%, or such
lesser percentage as may be determined by the Board for the applicable Offering
Period, of the Participant's Eligible Compensation for such pay period. Amounts
shall be withheld only in whole percentages.
9.4 PAYROLL DEDUCTIONS
Payroll deductions shall commence on the first payday following the
Offering Date and shall continue through the last payday of the Offering Period
unless sooner altered or terminated as provided in the Plan.
9.5 MEMORANDUM ACCOUNTS
Individual accounts shall be maintained for each Participant for
memorandum purposes only. All payroll deductions from a Participant's
compensation shall be credited to such account, but shall be deposited with the
general funds of the Employer. All payroll deductions received or held by the
Employer may be used by the Employer for any corporate purpose.
9.6 NO INTEREST
No interest shall be paid on cash payments or payroll deductions
received or held by the Employer.
9.7 ACQUISITION OF STOCK
On each Purchase Date of an Offering Period, each Participant shall
automatically acquire, pursuant to the exercise of the Participant's Purchase
Right, the number of shares of Stock arrived at by dividing the total amount of
the Participant's accumulated payroll deductions for the Purchase Period by the
Purchase Price; provided, however, that in no event shall the number of shares
of Stock purchased by the Participant exceed the number of whole shares of Stock
so determined, except to the extent that the Board or the Committee has
determined that fractional shares may be issued under the Plan.
9.8 REFUND OF EXCESS AMOUNTS
Any cash balance remaining in the Participant's account after a
purchase of Stock at the end of a Purchase Period shall be refunded to the
Participant as soon as practical after the Purchase Date. In the event the cash
to be returned to a Participant pursuant to the preceding sentence is in an
amount less than the amount necessary to purchase a whole share of Stock, and
the Board or Committee has not determined that fractional shares may be issued,
the Plan Administrator may establish procedures whereby such cash is maintained
in the Participant's account and applied to the purchase of Stock in the
subsequent Purchase Period or Offering Period.
9.9 WITHHOLDING OBLIGATIONS
At the time the Purchase Right is exercised, in whole or in part, or at
the time some or all of the Stock is disposed of, the Participant shall make
adequate provision for federal, provincial and state withholding obligations of
the Employer, if any, that arise upon exercise of the Purchase Right or upon
disposition of the Stock. The Employer may, but shall not be obligated to,
withhold from the Participant's compensation the amount necessary to meet such
withholding obligations.
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9.10 TERMINATION OF PARTICIPATION
No Stock shall be purchased on behalf of a Participant on a Purchase
Date if the Participant's participation in the Offering or the Plan has
terminated prior to such Purchase Date.
9.11 PROCEDURAL MATTERS
The Plan Administrator may, from time to time, establish (a)
limitations on the frequency and/or number of changes in the amount withheld
during the Offering, (b) an exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, (c) payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes in
the Employer's processing of properly completed withholding elections, and (d)
such other limitations or procedures as deemed advisable by the Plan
Administrator in the Plan Administrator's sole discretion that are consistent
with the Plan and in accordance with the requirements of Code Section 423.
9.12 LEAVES OF ABSENCE
During leaves of absence approved by the Employer and meeting the
requirements of the applicable Treasury Regulations promulgated under the Code,
a Participant may continue participation in the Plan by delivering cash payments
to the Plan Administrator or such individual designated by the Plan
Administrator on the Participant's normal paydays equal to the amount of the
Participant's payroll deduction under the Plan had the Participant not taken a
leave of absence.
SECTION 10. STOCK PURCHASED UNDER THE PLAN
10.1 ESPP BROKER
If the Plan Administrator designates or approves a stock brokerage or
other financial services firm to hold shares purchased under the Plan for the
accounts of Participants (the "ESPP Broker"), the following procedures shall
apply. Promptly following each Purchase Date, the number of shares of Stock
purchased by each Participant shall be deposited into an account established in
the Participant's name with the ESPP Broker. A Participant shall be free to
undertake a disposition of the shares of Stock in the Participant's account at
any time, but, in the absence of such a disposition, the shares of Stock must
remain in the Participant's account at the ESPP Broker until the holding period
set forth in Code Section 423(a) has been satisfied. With respect to shares of
Stock for which the Code Section 423(a) holding periods have been satisfied, the
Participant may move those shares of Stock to another brokerage account of the
Participant's choosing or request that a stock certificate be issued and
delivered to the Participant. A Participant who is not subject to payment of
U.S. income taxes may move the Participant's shares of Stock to another
brokerage account of the Participant's choosing or request that a stock
certificate be delivered to the Participant at any time, without regard to the
Code Section 423(a) holding period.
10.2 NOTICE OF DISPOSITION
By entering the Plan, each Participant agrees to give the Employer
prompt notice of any Stock acquired in an Offering that is disposed of within
the later of (a) two years after the Offering Date for such Offering and (b) one
year after the Purchase Date for such Stock, showing the number of such shares
disposed of and the Purchase Date for such Stock. This notice shall be required
from the Participant regardless of whether or not the Participant is then
employed by the Employer. This notice shall not be required if and so long as
the Company or Employer has a designated ESPP Broker.
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SECTION 11. VOLUNTARY WITHDRAWAL
11.1 WITHDRAWAL FROM THE PLAN
A Participant may withdraw from the Plan by providing to the Designated
Department a notice of withdrawal in the form and manner required by the Plan
Administrator for such purpose. Any withdrawal from an Offering shall constitute
a withdrawal from the Plan unless the Board or the Committee determines for any
future Offerings that withdrawal from an Offering shall not result in a
withdrawal from the Plan and any succeeding Offering. Such notice of withdrawal
must be provided to the Designated Department at least ten days prior to the end
of the Purchase Period for which such withdrawal is to be effective or by any
other date specified by the Plan Administrator for any future Offering. If a
Participant withdraws after the Purchase Date for a Purchase Period of an
Offering, the withdrawal shall not affect Stock acquired by the Participant in
that Purchase Period and any earlier Purchase Periods. In the event a
Participant voluntarily elects to withdraw from the Plan, the withdrawing
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
delivering a Subscription to the Designated Department in accordance with
Section 6.1.
11.2 RETURN OF PAYROLL DEDUCTIONS
Upon withdrawal from the Plan pursuant to Section 11.1, the withdrawing
Participant's accumulated payroll deductions that have not been applied to the
purchase of Stock shall be returned as soon as practical after the withdrawal,
without the payment of any interest, to the Participant, and the Participant's
interest in the Offering shall terminate. Such accumulated payroll deductions
may not be applied to any other Offering under the Plan.
SECTION 12. TERMINATION OF EMPLOYMENT
Termination of a Participant's employment with the Employer for any
reason, including retirement, disability or death, or the failure of a
Participant to remain an Eligible Employee, shall immediately terminate the
Participant's participation in the Plan. The payroll deductions credited to the
Participant's account since the last Purchase Date shall, as soon as practical,
be returned to the Participant or, in the case of a Participant's death, to the
Participant's legal representative, and all the Participant's rights under the
Plan shall terminate. Interest shall not be paid on sums returned to a
Participant pursuant to this Section 12. A transfer of employment or services
between or among the Company and a Designated Subsidiary shall not be considered
a termination of employment or services.
SECTION 13. RESTRICTIONS UPON ASSIGNMENT
A Purchase Right granted under the Plan shall not be transferable and
shall be exercisable during the Participant's lifetime only by the Participant.
The Plan Administrator will not recognize, and shall be under no duty to
recognize, any assignment or purported assignment by a Participant of the
Participant's interest in the Plan, of the Participant's Purchase Right or of
any rights under the Participant's Purchase Right.
SECTION 14. NO RIGHTS OF SHAREHOLDER UNTIL SHARES ISSUED
With respect to shares of Stock subject to a Purchase Right, a Participant shall
not be deemed to be a shareholder of the Company, and the Participant shall not
have any of the rights or privileges of a shareholder. A Participant shall have
the rights and privileges of a shareholder of the Company when, but not until,
the shares have been issued following exercise of the Participant's Purchase
Right.
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SECTION 15. AMENDMENT OF THE PLAN
The Board or the Committee may amend the Plan in such respects as it
shall deem advisable; provided, however, that to the extent required for
compliance with Code Section 423 or any applicable law or regulation,
shareholder approval will be required for any amendment that will (a) increase
the total number of shares as to which Purchase Rights may be granted under the
Plan, (b) modify the class of employees eligible to receive Purchase Rights, or
(c) otherwise require shareholder approval under any applicable law or
regulation.
SECTION 16. TERMINATION OF THE PLAN
The Board may suspend or terminate the Plan at any time. Unless the
Plan shall theretofore have been terminated by the Board, the Plan shall
terminate on, and no Purchase Rights shall be granted after June 30, 2008,
except that such termination shall have no effect on Purchase Rights granted
prior thereto. No Purchase Rights shall be granted during any period of
suspension of the Plan.
SECTION 17. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including
any Eligible Employee or Participant) the right to remain in the employ of the
Company or a Parent Corporation or Subsidiary Corporation, or to affect the
right of the Company or a Parent Corporation or Subsidiary Corporation to
terminate the employment of any person (including any Eligible Employee or
Participant) at any time with or without cause.
SECTION 18. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Parent Corporation or
Subsidiary Corporation. Nothing in the Plan shall be construed to limit the
right of the Company, any Parent Corporation or any Subsidiary Corporation to
(a) establish any other forms of incentives or compensation for employees of the
Company, any Parent Corporation or any Subsidiary Corporation or (b) grant or
assume options otherwise than under the Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition, by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
SECTION 19. ADJUSTMENTS
19.1 ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Stock, then (subject to any required action by the
Company's shareholders) the Board or the Committee, in its sole discretion,
shall make such equitable adjustments as it shall deem appropriate in the
circumstances (i) in the maximum number and kind of securities subject to the
Plan as set forth in Section 4 and (ii) the number and kind of securities
subject to any outstanding Purchase Right and the per share price of such
securities. The determination by the Board or the Committee as to the terms of
any of the foregoing adjustments shall be conclusive and binding.
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19.2 MERGER, ACQUISITION OR LIQUIDATION OF THE COMPANY
In the event of the merger or consolidation of the Company into another
corporation, the acquisition by another corporation of all or substantially all
of the Company's assets, or the liquidation or dissolution of the Company, the
Purchase Date with respect to outstanding Purchase Rights shall be the business
day immediately preceding the effective date of such merger, consolidation,
liquidation or dissolution unless the Board or the Committee shall, in its sole
discretion, provide for the assumption or substitution of such Purchase Rights
in a manner complying with Code Section 424(a).
19.3 LIMITATIONS
The grant of Purchase Rights will in no way affect the Company's right
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
SECTION 20. SHARE COMPENSATION ARRANGEMENTS
For so long as the Stock of the Company is listed on The Toronto Stock
Exchange, the following provisions shall apply:
(a) the maximum number of shares of Stock which may be
purchased through open market purchases (i) in any 30 day period shall not
exceed 2% of the shares of Stock outstanding at the date of the purchase, and
(ii) in any 12 month period shall not exceed the greater of 10% of the Company's
public float (as defined in Part XXIII of the General By-law of The Toronto
Stock Exchange) of the Stock or 5% of the shares of Stock outstanding at the
date of the purchase (excluding any Stock held by or on behalf of the Company);
(b) the maximum number of shares of Stock, which may be issued
to any one Insider and such Insider's associates under the Plan and any other
Share Compensation Arrangement in any 12 month period shall be 5% of the shares
of Stock outstanding at the date of the issuance (on a non-diluted basis);
(c) the maximum number of shares of Stock which may be issued
to all Insiders under the Plan and any other Share Compensation Arrangement in
any 12 month period shall be 10% of the shares of Stock outstanding at the date
of the issuance (on a non-diluted basis);
(d) any entitlement to acquire shares of Stock granted
pursuant to the Plan or any other Share Compensation Arrangement prior to the
Eligible Employee becoming an Insider shall be excluded for the purposes of the
limits set out in items (b) and (c) above;
(e) all references in this Section 20 to "the shares of Stock
outstanding at the date of the issuance" shall mean that number of shares of
Stock determined on the basis of the number of shares of Stock that are
outstanding immediately prior to the share issuance in question, excluding
shares of Stock issued pursuant to any Share Compensation Arrangement over the
preceding one year period.
SECTION 21. REGISTRATION
The Company shall be under no obligation to any Participant to register
for offering or resale under the Securities Act of 1933, as amended, or register
or qualify under state or provincial securities laws, any shares of Stock. The
Company may issue or cause to be issued certificates for shares with such
legends and subject to such restrictions on transfer and stop-transfer
instructions as counsel for the Company deems necessary or desirable for
compliance by the Company with federal, provincial and state securities laws.
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SECTION 22. EFFECTIVE DATE
The Plan's effective date is the later of the date it is approved by
the Company's shareholders or made effective by the Board.
FEBRUARY 4, 1998
Approved by the Corporation's Board of Directors on February 4, 1998 and by the
Corporation's shareholders on [MARCH 23], 1998.
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ATTACHMENT - ITEM 23-2 CONSENT OF EXPERT SASKATOON MINING
- --------------------------------------------------------------------------------
CONSENT OF EXPERT
SASKATOON MINING & MINERAL SERVICE, LTD.
Saskatoon Mining & Mineral Service, Ltd. ("S2MS") hereby consents to
the references and disclosures in the Form 20-F Registration Statement of
International Uranium Corporation to S2MS, our report entitled "Acquisition
Study of Energy Fuels Nuclear, Inc." dated November 1996 (the "Report"), and all
data from the Report.
Saskatoon Mining & Mineral Service, Ltd.
