SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of
1934
Filed by the registrant X
Filed by a Party other than the registrant
Check the appropriate box:
X Preliminary Proxy Statement
SCHEDULE 14A (RULE 14A-
101)
Commission Only (as
Permitted by Rule
14a-6(e)(2)
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-
11(o) or Rule 14a-12
CHIEF CONSOLIDATED MINING COMPANY (FILE # 1-1761)
(Name of registrant as Specified in its Charter)
Confidential, For Use of the
(name of Person(s) Filing Proxy Statement, if Other
than the
registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required (Vote on Directors and
Accountants Only)
Fee computed on table below per Exchange Act
Rules 14-a6(I)(1) and 0-11
(1) Title of each class of securities to which
transactions applies:
COMMON STOCK: PREFERRED STOCK
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the
filing fee is calculated and state how it was
determined):
N\A
(4) Proposed maximum aggregate value of transaction:
N\A
(5) Total fee paid
N\A
Preliminary
Copy
CHIEF CONSOLIDATED MINING COMPANY
500 Fifth Avenue
New York, New York 10110
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS IN LIEU OF ANNUAL
MEETING TO BE HELD DECEMBER 29, 1999
To the Shareholders of Chief Consolidated Mining Company:
Notice is hereby given that a Special Meeting of
Shareholders in Lieu of Annual Meeting of Chief Consolidated
Mining Company will be held at the Doral Hotel, 70 Park
Avenue at 38th Street (Park Avenue Suite) New York City, New
York 10016 on Wednesday, December 29, 1999 at 11:00 A.M.
New York City time for the following purposes:
(1) To elect seven (7) directors to serve during the
ensuing year.
(2) To consider and act upon a proposal to amend and
restate the Articles of Incorporation of the Company,
if the shareholders approve at the meeting the proposal
to sell shares of a new class of convertible common
stock as set forth at Proposal (3), below.
(3) To consider and act upon a proposal that would
approve the sale by the Company to a private investor
of 3,500,000 shares of a new class of voting
convertible common stock, together with the right to
purchase an additional 5,000,000 shares, if the
shareholders approve at the meeting the proposal to
amend and restate the Articles of Incorporation of the
Company as set forth at Proposal (2), above.
(4) To approve the selection of the firm of Arthur
Andersen LLP as independent public accountants for the
Company for the current fiscal year.
(5) To transact such other business as may properly
come before the meeting and any adjournments thereof.
The holder of common and preferred stock of the Company
of record at the close of business on November 29, 1999
will be entitled to notice of and to vote at this
meeting and any adjournments thereof.
By Order of the Board of Directors
Edward R. Schwartz
Secretary
November 30, 1999
WE URGE ALL SHAREHOLDERS TO ATTEND THE MEETING IN
PERSON, IF POSSIBLE, IF NOT, THEY ARE URGED TO DATE, SIGN
AND RETURN THE PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. The Proxy may be revoked at any time before it is
voted, and shareholders executing proxies may attend the
meeting and vote there in person should they so desire.
Management of the Company desires all shareholders to
take an interest in the affairs of the Company and your
interest can best be evidenced by attendance at the
forthcoming meeting. Without a quorum in attendance the
above matters to be taken up cannot be acted upon. Expense
of obtaining a quorum for the meeting can be kept at a
minimum if you attend the meeting either in person or by
proxy.
Preliminary Copy
PROXY STATEMENT
This Proxy Statement is furnished in connection with
the solicitation by the management of Chief Consolidated
Mining Company ("the Company") of proxies to be used at the
Special Meeting of Shareholders in Lieu of Annual Meeting of
the Company, to be held at the Doral Hotel, 70 Park Avenue
at 38th Street (Park Avenue Suite) New York City, New York
10016 on Wednesday, December 29, 1999 at11:00 A.M. New York
City time and any adjournment or adjournments thereof.
Proxy material will first be mailed about December 3, 1999.
The accompanying form of Proxy is solicited on behalf of
management of the Company. Shareholders will vote upon: (1)
the election of seven (7) directors to the Board of
Directors of the Company; (2) a proposal to amend and
restate the Articles of Incorporation of the Company: (3) a
proposal to approve the sale by the Company to a private
investor of 3,500,000 shares of a new class of voting
convertible common stock, together with the right to
purchase an additional 5,000,000 shares; (4) the approval of
the selection of auditors of the Company; and (5) such other
business as may properly come before the meeting or any
adjournments thereof. The approval of both Proposals (2)
and (3) will be required in order for either of them to
become effective.
The enclosed Proxy may be revoked at any time before it
is exercised by written notice to the Company bearing a
later date than the Proxy, and any shareholder attending the
meeting may vote in person whether or not the shareholder
has previously submitted a Proxy. Each proposal is
identified in the Proxy and the accompanying Notice of
Special Meeting of Shareholders in Lieu of Annual Meeting
and is set forth and more fully described and commented upon
under the applicable headings for each proposal in this
Proxy Statement. The election of directors is designated
Proposal 1; the proposal to amend and restate the Articles
of Incorporation of the Company is designated Proposal 2;
the Proposal to approve the sale by the Company to a private
investor of 3,500,000 shares of a new class of voting
convertible common stock, together with the right to
purchase an additional 5,000,000 shares is designated
Proposal 3; and the approval of the selection of independent
public accountants of the Company is designated as Proposal
4. Where instructions are indicated, the proxies will be
voted in accordance therewith. Where no instructions are
indicated, the proxies will be voted FOR the nominees for
directors, FOR the proposal to amend and restate the
Articles of Incorporation, FOR the proposal to approve the
sale of a new class of voting convertible common stock to an
investor, and FOR the selection of auditors, all as
described below, and in their discretion with respect to any
other business as may properly come before the meeting and
any adjournment or adjournments thereof.
The By-laws of the Company provide that the Annual
Meeting of the Shareholders be held on the third Tuesday in
May of each year. Since the forthcoming Shareholders'
Meeting is being held on December 29, 1999 in lieu of May 18
, 1999 ( the third Tuesday in May, 1999) the December 29,
1999 meeting is deemed to be a Special Meeting of
Shareholders.
The record date set by the Board of Directors for the
determination of stockholders entitled to vote is November
29, 1999. On that date there were 11,168 shares of
preferred stock and 7,954,601 shares of common stock
outstanding and entitled to vote. Holders of each class are
entitled to one vote per share without distinction as to
class. Upon the election of directors, shareholders have
cumulative voting rights. Under cumulative voting,
shareholders may multiply the number of shares of stock held
by them by the number of positions to be filled and
distribute the resulting numbers of votes among any or all
nominees in any manner they see fit. The seven nominees
receiving the greatest number of votes will be elected as
directors. The cumulative vote represented by management
proxies will be distributed among management's seven
nominees in management's discretion so as to elect as many
management nominees as possible. Shareholders representing
a majority of the outstanding shares entitled to vote at the
meeting must be present or represented by proxy to
constitute a quorum. The shares represented by a proxy
submitted by a shareholder will be counted for the purpose
of determining whether a quorum is present; however, if the
shareholder abstains from voting on a particular proposal,
the proxies will not vote those shares on the proposal.
VOTING SECURITIES AND
VOTING SECURITIES ANDVOTING SECURITIES ANDVOTING SECURITIES
AND
PRINCIPAL STOCKHOLDERS
(a) The following table shows as of November 22, 1999
stock ownership of all persons known to management to be
beneficial owners of more than 5% of the common stock of the
Company:
Name and Address of Amount and Nature ofPercentage
Beneficial Owners Beneficial Ownership of Class
William E. Simon 564,600 shares (1) 7.1%
310 South Street
Morristown, NJ 07962
Robert R. Hermann 484,000 shares 6.06%
7701 Forsyth St.
Clayton, MO 63105
(1) 314,600 shares owned directly by William E. Simon;
250,000 shares owned by a corporation in which Mr. Simon has
shared power to direct the vote and disposition of the
Company's shares held by the corporation by virtue of his
ownership of voting stock in said corporation.
(b) The equity securities of the Company beneficially
owned by all directors, director nominees and officers, and
by directors, director nominees and officers of the Company
as a group, as of November 22, 1999, are:
Title
Of Name and Address Amount and Nature ofPercentage
Class of Beneficial Owner of Beneficial
Ownership* of Class
Common Stock
$0.05 par value:
Christopher A. Arnold (1) 200 0%
1629 Locust Street
Philadelphia, PA 19103
Thomas Bruderman (1)(2) 46,100 0.6%
1573 Bronson Road
Fairfield, CT 06430
William R. Dimeling (1) 200 0%
1629 Locust Street
Philadelphia, PA 19103
Paul Hines (3) 130,000(4) 1.6%
12 Flying Cloud Road
Stamford, CT 06902
Robert E. Poll (1) 150,000 1.9%
225 West 86th Street
New York, NY 10024
Edward R. Schwartz (5) 165,100(6)2.04%
500 Fifth Avenue
New York, NY 10110
Richard R. Schreiber (1)200 0%
1629 Locust St
Philadelphia, PA 19103
Leonard Weitz (3) 189,010(7)(8) 2.33%
500 Fifth Avenue
New York, NY 10110
Owned by all directors 680,810(9) 8.16%
director nominees and officers as a group
Preferred
Stock, $0.50
Par value: None
* Each director, director nominee and officer has sole
voting and investment power with respect to shares owned.
(1) Director nominee.
(2) Does not include 8,000 shares owned by Mr. Bruderman's
wife, in which shares Mr. Bruderman disclaims any beneficial
interest.
(3) Director and director nominee.
(4) Includes nonqualified stock options previously approved
by the shareholders to purchase 120,000 shares held
by Paul Hines. Also includes 5,000 shares held in IRA
account.
(5) Director.
(6) Includes nonqualified stock options previously approved
by the shareholders to purchase 120,000 shares held
by Edward R. Schwartz. Does not include 200 shares
owned by Mr. Schwartz's wife, in which shares Mr. Schwartz
disclaims any beneficial interest.
(7) Includes nonqualified stock options previously approved
by the shareholders to purchase 120,000 shares held
by Leonard Weitz. Also includes 8,000 shares held in
IRA account and 40,000 shares owned jointly with Leonard
Weitz's wife.
(8) Does not include 20,000 shares owned by Leonard Weitz's
wife, in which shares Mr. Weitz disclaims any beneficial
interest.
(9) Includes options to purchase an aggregate of 360,000
shares as referred to at
Notes (4), (6) and (7), above. All options may be exercised
by the directors or officers holding same within 60
days.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following information for each of the Company's
last three completed fiscal years is presented concerning
the compensation of Leonard Weitz as Chairman, President
and Chief Executive Officer of the Company:
SUMMARY COMPENSATION TABLE
Name and Annual Long-Term
Principal Compensation Compensation All Other
Position Year Salary Awards-Options
Compensation
Leonard Weitz 1998 $175,000(1) - -
(Chairman 1997 $175,000(1) - -
& Chief 1996 $141,667(1)
(2) -
Executive
Officer)
(1) During the year 1996, Leonard Weitz received annual
base salary under the terms of an employment agreement dated
January 4, 1988, which agreement was to expire September 30,
1996. A new employment agreement was entered into between
the Company and Leonard Weitz, effective as of September 1,
1996. Under the terms of that employment agreement, Mr.
Weitz will be employed as Chairman, President and Chief
Executive Officer of the Company for a five year period
ending August 31, 2001. Under the employment agreement,
Leonard Weitz will receive an annual base salary of $175,000
and such bonuses as the Board of Directors of the Company
may determine.
(2) On December 10, 1996, shareholders of the Company
approved a nonqualified stock option granted to Leonard
Weitz by the Company's Board of Directors on August 8, 1996
to purchase 60,000 shares of the Company's common stock at
an option price of $7 per share. The closing price of the
Company's common stock on The NASDAQ Stock Market on
November 12, 1999 was $2.94 per share. The exercise price
of the option was the market price of the common stock on
the date of grant. Leonard Weitz may exercise all or a part
of the option so long as he continuously remains a director
or officer, but in no event later than the expiration date
of option, except his personal representatives may exercise
within twelve months from date of death.
OPTION GRANTS DURING FISCAL YEAR ENDED DECEMBER 31, 1998
No stock options were granted by the Company to Leonard
Weitz during the fiscal year ended December 31, 1998.
OPTION EXERCISES DURING FISCAL YEAR
ENDED DECEMBER 31, 1998 AND OPTION VALUES
ON DECEMBER 31, 1998
The following table contains, with respect to stock
options held by Leonard Weitz, information as to options
exercised during the year 1998, the aggregate dollar value
realized upon exercise, the total number of unexercised
options held on December 31, 1998 and the aggregate dollar
value of the in-the-money, unexercised options held on
December 31, 1998.
Shares
Value of Unexercised
Acquired or Value Number of
Unexercised in-the-money options Name ExercisedRealized Options at
12/31/98 at 12/31/98 (3)
Nonqualified:
Leonard Weitz None None 120,000 (1)(2) None
(1) All options held are fully exercisable.
(2) Nonqualified stock options approved by shareholders.
(3) Values are calculated by subtracting the exercise price
from the closing price of the Company's common stock on The
Nasdaq Stock Market on December 31, 1998.
Compensation of Directors
Leonard Weitz, Chairman of the Board and Chief
Executive Officer of the Company, is employed through August
31, 2001 under an employment agreement dated September 1,
1996. See "Compensation of Directors and Executive Officers
- - Summary Compensation Table", above, for further details
concerning Mr. Weitz's employment agreement.
During 1998, each director who was not an officer of
the Company received an annual fee of $5,000; no attendance
fees were paid. Edward R. Schwartz, the Secretary-Treasurer
of the Company, who is a director, did not receive a salary
in 1998; he received a $10,000 annual fee in lieu of salary.
The Board of Directors set a rate of $750 per day for
services performed by each outside director of the Company
that are in addition to services regularly performed by him
as a director.
No stock options were granted by the Company to any
directors during the fiscal year ended December 31, 1998 and
no director exercised in 1998 any stock options held by him.
See "Voting Securities and Principal Stockholders," above,
for information as to stock options held by directors.
PROPOSAL 1: ELECTION OF DIRECTORS.
Seven directors are proposed to be elected at the
meeting to serve until the meeting of shareholders to be
held in the year 2000 and until their successors shall be
elected and qualify. The persons named in the enclosed form
of proxy intend to vote such proxy for the election of the
seven nominees named below as directors of the Company. If
any nominee shall become unavailable for election, the
proxies will be voted for the election of such persons, if
any, as shall be designated by the Board of Directors. It
is not anticipated that any nominee will be unavailable for
election.
The seven nominees for directors consist of two current
directors, Paul Hines and Leonard Weitz, and five persons
who have not previously served as directors. The past five
years business experience of each of the nominees is set
forth below. Messrs. Hines and Weitz were each elected to
the Board of Directors at the meeting of shareholders held
on December 15, 1998. Edward R. Schwartz, a current
director, is not a nominee for director, but will continue
as Secretary and Treasurer of the Company. Two former
directors of the Company, James Callery and Victor V.
Tchelistcheff, who were elected at the December 15, 1998
meeting of shareholders resigned as directors during the
year 1999.
In electing directors, holders of common stock have
cumulative voting rights, that is, each holder of record of
common stock shall be entitled to as many votes as shall
equal the number of shares owned of record multiplied by the
number of directors to be elected, and may cast all of such
votes for a single director or may distribute them among all
or some of the directors to be voted for, as such holder
sees fit. Unless contrary instructions are given, the
persons named on the proxy will have discretionary authority
to accumulate votes in the same manner. Certain information
for each nominee for director is set forth below:
Director
Name Age Since Business
Experience During Past Five Years
Christopher A. Arnold 29 - A principal of
Dimeling, Schreiber & Park, a private
investment partnership that makes private equity
investments in a broad range of middle market
companies, from September 1999 to present.
Various positions with General Electric Capital
Corporation, a diversified financial services company
from prior to 1995 to September 1999.
Thomas Bruderman 57 - Corporate
communications consulting, investment
banking transactions and investment management
conducted through Canterbury Companies Inc., as
President, since prior to 1995. Corporate
communications consultant for the Company from
1996 to November, 1999.
William R. Dimeling 58 - A principal of
Dimeling, Schreiber & Park, a private
investment partnership that makes private equity
investments in a broad range of middle market
companies, since prior to 1995.
Paul Hines 62 1994 Financial and
management consultant, since prior to 1995.
Robert E. Poll 51 - Financial and
management consulting through
Poll Financial, LLC, as President, since January
1998; Managing Director of Lazard Freres & Co.
from July 1995 to December 1997 and General
Partner of Lazard Freres & Co. from prior to
January 1995 to June 1995- Manager of Public
Finance and Municipal Bond Departments and
other investment banking activities.
Richard R. Schreiber 44 - A principal of
Dimeling, Schreiber & Park, a private
investment partnership that makes private equity
investments in a broad range of middle market
companies, since prior to 1995.
Leonard Weitz 70 1967 Chairman and
Chief Executive Officer of the
Company since 1971; President from 1971 to
December 1993 and August 1996 to present.
PROPOSAL 2: AMEND AND RESTATE ARTICLES OF INCORPORATION.
The Company was incorporated on January 27, 1909 under
the laws of the Territory of Arizona. Since its
incorporation, there have been several amendments to the
Articles of Incorporation that were previously approved by
the shareholders. On November 19, 1999, the Board of
Directors of the Company approved and recommended for
submission to shareholders for their approval several
amendments to the Articles of Incorporation, which proposed
amendments are described below. The Board of Directors also
approved and recommended for submission to shareholders for
their approval a Restated Articles of Incorporation of the
Company that reflects both the existing Articles of
Incorporation, as previously amended, and the proposed
amendments to be voted upon at this meeting. A copy of the
Restated Articles of Incorporation is annexed hereto as
Exhibit A. The principal purpose of the amendments to the
Articles of Incorporation in this Proposal 2 is to authorize
the creation of a new class of convertible common stock,
shares of which would be sold to a private investor under
the terms of a transaction for which approval of the
shareholders is sought under Proposal 3. Unless the
shareholders approve both Proposal 2 (amending and restating
the Articles of Incorporation) and Proposal 3 (approving the
stock sale transaction) at the meeting, neither the
amendments to the Articles of Incorporation, nor the stock
sale transaction will become effective.
Current Authorized and Outstanding Capital Stock of the
Company: The authorized capital stock of the Company is
presently comprised of 20,000,000 shares of $.50 par value
common stock and 1,500,000 shares of $.50 par value
preferred stock. The preferred stock is identical in all
respects to the existing common stock, except that in the
event of distributions to shareholders in liquidation of the
Company, the preferred shareholders are to receive $.50 per
share before any other distributions are made to the
shareholders. As of November 29,1999, there were 7,954,601
shares of common stock issued and outstanding and 11,168
shares of preferred stock issued and outstanding.
As described in Proposal 3, below, if the shareholders
approve the sale of shares of a new class of convertible
common stock to an investor, the sale transaction, in order
to be consummated, will require an amendment to the Articles
of Incorporation that authorizes the issuance of the new
class of convertible common stock. The Board of Directors
of the Company has therefore proposed that Article IV of the
Articles of Incorporation be amended so as to provide that
the amount of capital stock of the Company be increased from
its present $10,750,000 to $25,750,000, with the capital
stock to be divided into three classes: 1,500,000 shares of
$.50 par value preferred stock (as currently constituted);
20,000,000 shares of $.50 par value common stock (as
currently constituted); and 30,000,000 shares of a new $.50
par value convertible common stock.
If Proposals 2 and 3 are approved by the shareholders at
this meeting and the amendments to the Articles of
Incorporation become effective, the holders of each of the
three above described classes of capital stock will have
equal voting rights, that is, one vote for each share of
stock held.
A summary of each the proposed amendments to the Articles of
Incorporation, including the amendment to Article IV of the
Articles of Incorporation that creates the terms and
preferences of the new $.50 par value convertible common
stock issue ("convertible common stock"), is set forth
below. See the Restated Articles of Incorporation annexed
hereto as Exhibit A, for the exact terms of the amendments.
Description Of Proposed Amendments To Articles Of
Incorporation.
Authorized Capital of the Company. Article IV of the
Articles of Incorporation provides for two current classes
of capital stock, a class of $.50 par value preferred stock
comprised of 1,500,000 authorized shares and a class of
$.50 par value common stock comprised of 20,000,000
authorized shares. The amendment will create a new class of
capital stock, comprised of a class of 30,000,000 shares of
$.50 par value convertible common stock. The following a
summary of the terms and preference of the convertible
common stock issue, as set forth in Article IV of the
Restated Articles of Incorporation annexed hereto as Exhibit
A:
Voting rights. Convertible common stock to have voting
rights equal to common stock and preferred stock, each share
entitling the holder to one vote at all meetings of the
stockholders on all matters upon which stockholders are
entitled to vote under Arizona law.
Dividend rights. The holders of the convertible common
stock shall be entitled to receive when, as, and if declared
by the Board of Directors out of funds legally available for
the purpose, dividends at an annual rate of 8% , payable
annually solely in additional shares of convertible common
stock. Such a dividend shall be payable as a simple
dividend for the fiscal years ending December 31, 2000,
2001, and 2002. Thereafter, dividends paid on the
convertible common stock shall be cumulative, and rights
shall accrue to the holders of the convertible common stock
in the event that the Company shall fail to declare or pay
dividends on the convertible common stock for any fiscal
year, whether or not earnings of the Company for such year
were sufficient to pay such dividends in whole or in part.
Conversion rights. Each share of convertible common
stock shall be convertible at any time at the option of the
holder thereof, into one fully paid and non-assessable share
of common stock of the Company, subject to adjustment in the
rate of conversion. The rate of conversion may change in
the event of stock dividends, stock splits, reverse splits,
reclassification of shares, stock rights or warrants issued
to the other classes of the Company's capital stock,
consolidations or mergers, and alike. The Company shall at
all times reserve and keep available out of its authorized
but unissued shares of common stock, solely for the purpose
of effecting the conversion of the shares of the convertible
common stock, such number of shares of common stock as shall
from time to time be sufficient to effect the conversion of
all outstanding shares of the convertible common stock, and
if at any time the number of authorized but unissued shares
of common stock shall not be sufficient to effect the
conversion, the Company will take such corporate action as
may be necessary to increase its authorized but unissued
shares of common stock.
Redemption rights. See "PROPOSAL 3 - Description Of
Stock Purchase Agreement.-
Redemption of 3,500,000 shares if additional 5,000,000
shares not purchased.", below, for description of
circumstances under which the holder of 3,500,000 shares of
convertible common stock to be purchased from the Company
upon the approval of Proposals 2 and 3 at the meeting, shall
have the right to redeem said shares with the Company and
the terms of payment by the Company to the holder.
Rights upon liquidation, dissolution or winding up.
Upon any liquidation, dissolution or winding up of the
Company, no distribution shall be made to the holders of the
convertible common stock of the Company unless the holders
of the preferred stock shall first have received $.50 per
share for each share of preferred stock then held. After
the said payment to the preferred shareholders and before
any further payments are made to the holders of preferred
stock and common stock, the holders of the convertible
common stock shall be entitled to receive $2 per share for
each share of convertible common stock then held, plus an
amount equal to $2 on any declared but unpaid dividend on
the convertible common stock. In the event that assets of
the Company remain after distributions to holders of
preferred stock and the holders of the convertible common
stock to the extent of their respective preferences, the
holders of preferred stock, convertible common stock and
common stock shall be entitled to distribution of such
assets on a pro rata basis in accordance with their
holdings.
Future amendments of Articles of Incorporation. So
long as any convertible common stock remains issued and
outstanding, the Company shall not amend its Articles of
Incorporation without the affirmative vote of the holders of
the convertible common stock, voting as a class.
Maximum Indebtedness. Article VIII of the Articles of
Incorporation currently provides that the highest amount of
indebtedness and liability to which the Company may at any
one time subject itself to $1 million. The Revised Arizona
Statutes do not require that the corporate charter include a
provision creating the maximum amount a corporate debt and
liability. The Board of Directors has proposed an amendment
to the Articles of Incorporation that would eliminate the
portion of Article VIII that creates a maximum amount of
indebtedness and to revise the remaining language of Article
VIII by eliminating reference to any such limitation. See
Article VIII of the Restated Articles of Incorporation
annexed hereto as Exhibit A for the language of said Article
VIII that will be in effect if the amendments become
effective. The purpose of this amendment is to avoid
putting an arbitrary dollar limitation upon the Board of
Directors that could impinge upon the ability of the Board
to conduct future corporate business. Management has no
current plan that would result in a significant increase in
corporate debt.
Principal Place of Business. A proposed amendment to
Article II of the Articles of Incorporation updates the
address of the Company's principal place of business outside
the State of Arizona and names the Company's statutory agent
in Arizona. See Article II of the Restated Articles of
Incorporation in Exhibit A annexed hereto.
Date of Annual Meeting. In order to conform the date upon
which the annual meeting of shareholders is to be held under
both the Articles of Incorporation and the Company's By-
laws, a proposed amendment to Article VI of the Articles of
Incorporation provides that the annual meeting date for the
election of directors shall be the third Tuesday of May.
See Article VI of the Restated Articles of Incorporation in
Exhibit A annexed hereto.
The purpose of the Restated Articles of Incorporation
appearing herein as Exhibit A is to streamline and simplify
the Company's Articles of Incorporation into a single
document, and to include therein the amendment set forth in
this Proposal 2 relating to the authorization of a new class
of convertible common stock that will be required to effect
the sale of stock transaction under Proposal 3, if the
latter proposal is also approved by the shareholders at the
meeting. If Proposals 2 and 3 are approved by the
shareholders at the meeting, the Restated Articles of
Incorporation will supercede the original Articles and all
amendments thereto made prior to the date of this meeting.
Accordingly, your Board of Directors recommends a vote FOR
the following resolution:
RESOLVED: that the Company's Articles of Incorporation be
amended and restated as set forth in Exhibit A to the
Company's Proxy Statement dated November 30, 1999, and that
the officers of the Company be and they hereby are
authorized to execute and file a Restated Articles of
Incorporation of the Company pursuant to Chapter 10 of the
Revised Arizona Statutes and to do all acts and things
necessary in connection therewith; provided, however, that
the shareholders of the Company also approve at the meeting
of shareholders of the Company held December 29, 1999 or any
adjournments thereof, Proposal 3 as set forth in the said
Proxy Statement.
Approval of Proposal 2 requires that a quorum of the
preferred shareholders and a quorum of the common
stockholders each be present at the meeting and that the
preferred shareholders and the common shareholders vote as
separate classes, with the votes cast in favor of Proposal 2
in each class exceeding the votes cast against Proposal 2 in
each class. MANAGEMENT INTENDS TO CAST ITS PROXY VOTES IN
FAVOR OF PROPOSAL 2.
PROPOSAL 3: TO APPROVE THE SALE BY THE COMPANY TO A
PRIVATE INVESTOR OF 3,500,000 SHARES OF A NEW CLASS
OF VOTING COMMON CONVERTIBLE STOCK TOGETHER WITH
THE RIGHT TO PURCHASE AN ADDITIONAL 5,000,000 SHARES.
The Board of Directors of the Company has approved and
recommended for submission to shareholders for their
approval a proposal that the Company sell 3,500,000 shares
of a new class of convertible common stock to the general
partner of a private investment limited partnership and to
grant to the general partner the right to purchase an
additional 5,000,000 shares. Towards that end, the Company
entered into a stock purchase agreement, a stock warrant
agreement and a registration rights agreement with the
general partner. The terms and conditions of the proposed
transaction, including a description of the principal terms
of the stock purchase agreement, the stock warrant agreement
and the registration rights agreement and other aspects of
the proposed transaction are set forth below, including
certain pro-forma financial statements of the Company. The
consummation of the sale of the 3,500,000 shares and, if
elected by the investor the purchase of the additional
5,000,000 shares and the exercise of the warrant, would
result in the need to increase the number of authorized
shares of common stock by a subsequent amendment to the
Articles of Incorporation in order to create a sufficient
reserve to cover the conversion feature of the convertible
common stock. The Company is obligated under the terms of
the stock purchase agreement to take steps necessary to
amend the Articles in that regard. The affirmative vote of
the shareholders will be required and the investor will have
sufficient votes to approve such amendment, if such
amendment is necessary. Also described below are
management's principal reasons for recommending the proposed
stock sale for approval by shareholders and the identity of
and background information regarding the investor. Three
of the nominees for election as directors at this meeting
are principals the general partner. In order for the
transaction under this Proposal 3 to become effective,
Proposal 2, which amends the Articles of Incorporation by
creating the new class of convertible common stock to be
sold to the investor, would also be required to be approved
by the shareholders at this meeting.
Management's Principal Reasons For Recommending Approval.
During recent years, the Company has, from time to time,
sold unregistered shares of its common stock to various
individual investors in transactions exempt from
registration under the Securities Act of 1933. These sales
to individuals primarily ranged in amount from about
$200,000 to $1,000,000. Management directed a substantial
part of the funds so raised towards the development of its
mining properties in Utah, rehabilitating the concentrator
that would be used to process ores from its mines at such
time as production begins, and for other corporate purposes.
Management now proposes to focus its activities on
completing the rehabilitation of the concentrating mill to
process ores, initiating production of gold and silver ores
from the Trixie Mine and developing the potential of the
Homansville area where core samples obtained from prior
surface drilling contained significant gold assays
indicating the possible existence of a gold orebody. In
order to achieve its short term objectives, management
believes that substantial funds will be required and that
the $6,775,000 net cash to be received ($7,000,000 less cash
costs of transaction) if the 3,500,000 share stock sale
becomes effective, will provide that needed funding. In
addition, there is opportunity for the Company to receive
from the investor under the stock purchase agreement, an
additional $10,000,000 from the sale of additional shares if
the investor exercises its right to purchase 5,000,000 more
shares by December 31, 2002. While Management makes no
representations that the $6,775,000 net proceeds from the
initial sale of the 3,500,000 shares of convertible common
stock to the investor will result in a profitable mining
operation for the Company, it is nevertheless necessary for
the Company to acquire funds of that magnitude from some
source in order to actively pursue the development of its
mining properties with the goal of attaining such successful
mining operations. If the shareholders do not approve the
transaction, it will be necessary for the Company to again
seek out individual investors who would purchase
unregistered common stock, and no assurance can be given
that such investors will be found or that, if found, the
amounts received from such stock sales will be sufficient to
satisfy the Company's immediate financial needs.
Management has also considered the possibility of a public
offering, however that alternative is not realistic at this
point in time. Management recognizes that the agreements
with the investor would, if they become effective, result in
significant changes in percentage stock ownership in the
Company. However, if there is factored into the overall
evaluation of the proposed transaction: the immediate
$6,775,000 net cash infusion, the potential of receiving an
additional $10,000,000 from the investor within the next
three years, the ability to immediately proceed with the
Company's planned activities, and the lack of a viable
alternative, management of the Company believes that the
proposed transaction is, on balance, beneficial to the
Company and its shareholders and recommends that the
shareholders approve Proposal 3. As indicated above,
approval of Proposal 2 by the shareholders is also necessary
since the convertible common stock to be sold to the
investor must be authorized under an amendment to the
Company's Articles of Incorporation..
Identity Of Investor. The holder of the convertible common
stock on the stock records of the Company, if the
transaction is approved at this meeting, will be Dimeling
Schreiber & Park, acting in its capacity as general partner
of the Dimeling Schreiber & Park Reorganization Fund II, LP
("Fund II"). Fund II will be the beneficial owner of the
stock. Fund II is a Delaware limited partnership that
terminates December 31, 2007, unless extended by agreement
of the partners. Fund II's purpose is to make private
equity investments and its capital is derived from a group
of limited partner investors and its general partner. (See
"General Partner Of Investor.", below.) Fund II has made
several equity investments since its formation in 1998.
Fund II's investment in the convertible common stock of the
Company would be its first equity investment in a publicly
held corporation. The general partner of Fund II has
advised the Company that Fund II has immediately available
funds sufficient for the general partner to make the
3,500,000 share purchase for $7,000,000 from the Company if
the transaction is approved by the shareholders of the
Company at the meeting, and that the general partner
anticipates that Fund II will have sufficient funds for the
general partner to make the additional 5,000,000 stock
purchase for $10,000,000 as provided in the stock purchase
agreement, if the general partner elects to make such
purchase on behalf of Fund II by December 31, 2002.
Management can give no assurance that the general partner
will exercise its right to make such 5,000,000 share
purchase. See "Description of Stock Purchase Agreement.",
below.
.
General Partner Of Investor. The general partner of Fund
II is Dimeling, Schreiber & Park ("DS&P"), a Pennsylvania
general partnership formed in 1982. As appears in DS&P's
website on The Internet (www.dsppartners.com), DS&P is a
private investment partnership that makes private equity
investments in a broad range of middle market companies;
since 1982, DS&P has completed acquisitions totaling in
excess of $1 billion. As reported by DS&P to the Company,
DS&P's ownership interest in Fund II is 1% as general
partner and 6% as a limited partner. The stock purchase
agreement, stock warrant agreement and stock registration
rights agreement, all dated as of November 18, 1999, are
between the Company and DS&P, with DS&P to hold the
convertible common stock as the general partner of Fund II.
The agreements are subject to the approval of the
shareholders at this meeting. DS&P will have the voting
power on the shares of convertible common stock, since the
shares will be issued in the name of DS&P; as indicated
above, Fund II will be the beneficial owner of the shares.
Based on the total number of shares of existing common stock
and preferred stock issued and outstanding on the November
29, 1999 record date for this meeting, if DS&P, as general
partner of Fund II, purchases the 3,500,000 shares of
convertible common stock from the Company, it would hold of
record 30.4% of the Company's outstanding shares, with all
classes of outstanding shares having equal voting rights.
See "Nominees For Director Who Are Principals Of DS&P.",
below, for names of three nominees for director who are
principals of DS&P.
Nominees For Director Who Are Principals Of DS&P. The
following three persons are included among the seven
nominees for election as directors listed at Proposal 1,
above: William R. Dimeling, a principal of DS&P; Richard R.
Schreiber, a principal of DS&P; and Christopher A. Arnold, a
principal of DS&P. See Proposal 1 for description of five
years business history and other information regarding each
of these director nominees.
Description Of Stock Purchase Agreement.
Sale and purchase of the convertible common stock.
Upon approval of proposals 2 and 3 at this meeting, DS&P, as
general partner of Fund II, will purchase from the Company
3,500,000 shares of the Company's $.50 par value convertible
common stock at $2 per share, for a total purchase price of
$7,000,000. If DS&P, in its sole discretion, determines
that the Homansville area can be a commercially viable
mining project, DS&P, as general partner of Fund II, will
have the right to purchase from the Company an additional
5,000,000 shares of the Company's $.50 par value convertible
common stock at $2 per share, for a total purchase price of
$10,000,000, provided that such purchase is made on or
before December 31, 2002.
Redemption of 3,500,000 shares if additional 5,000,000
shares not purchased. Beginning December 1, 2003, if DS&P
has not previously exercised its right to purchase the
additional 5,000,000 shares by December 31, 2002, DS&P shall
have the right to sell back to the Company all or part of
the 3,500,000 shares of convertible common stock that it had
purchased as a result of shareholder approval of Proposals 2
and 3 at this meeting. The purchase price for those shares
to be paid by the Company shall be $2 per share, said
purchase price to be paid annually by the Company to DS&P in
an amount not to exceed (except at the option of the
Company) the lesser of 50% of Excess Cash Flow or 20% of
DS&P's original cost for the shares, $2. The Agreement
defines the term Excess Cash Flow as earnings before
interest and taxes less capital expenditures and principal
payments on indebtedness. Annual payments will be made
based upon the foregoing formula until the entire purchase
price has been paid to DS&P. DS&P will not be entitled to
redeem any stock received as dividends on the 3,500,000
shares.
Use of proceeds. The Agreement states that the net
proceeds received by the Company from the sale of the
3,500,000 shares shall be used to fund the operations of the
Trixie Mine, including the rehabilitation of the
concentrating mill, and to fund the initial development of
the Homansville area, with the Company to retain a portion
of the proceeds as working capital. See "Net Proceeds To The
Company From The Sale Of Stock", below.
Limitation on DS&P's stockholdings. The maximum
percentage of outstanding shares of the Company's common
stock that may be owned by DS&P shall be 68%.
Dividends on DS&P's stockholdings. So long as
convertible common stock is outstanding, an 8% dividend is
able in shares of convertible common stock, unless DS&P's
holdings of shares of the Company's stock reaches 68%. No
dividends are to be paid on stock received as dividends
during the years 2000 to 2002. Thereafter, the 8% dividend
is paid as a cumulative dividend.
Restriction on payment of dividends on common stock and
preferred stock. Until such time as DS&P purchases the
5,000,000 shares or its right to make such purchase expires,
the Company will not declare any dividends other than the 8%
dividend payable on the convertible common stock.
Directors. The Company's Board of Directors shall
consist of seven persons, with DS&P to have the right to
designate four of the directors upon its purchase of the
3,500,000. If DS&P does not purchase the 5,000,000 shares
and elects to redeem all or part of the 3,500,000 shares, it
loses its right to designate directors. DS&P has elected to
designate three director nominees out of the seven director
nominees at this meeting.
Various other provisions. Included in the Agreement
are provisions covering: DS&P's registration rights (see
"Registration Rights Agreement", below); warrants to
purchase additional shares of convertible common stock (see
"Stock Warrant Agreement", below); assignment of right to
purchase shares; preemptive rights for DS&P to retain its
percentage interest of stock ownership in the Company;
limited mutual rights of indemnification arising from
certain breaches of the agreement; and sundry other matters.
Description Of Stock Warrants Agreement.
Number of shares subject to warrant. The Company has
issued to DS&P a warrant to purchase convertible common
stock pursuant to the terms of the Stock Purchase Agreement.
The warrant gives DS&P the right to purchase that number of
shares of convertible common stock which, at the time of
exercise will represent, when added to the shares of
convertible common stock purchased pursuant to the Stock
Purchase Agreement and any dividends thereon, 68% of the
outstanding common stock of the Company (assuming conversion
of all convertible common stock).
Circumstances under which warrant may be exercised.
The warrant becomes exercisable in the event of a merger
involving a non-affiliate, a sale or disposition of
substantially all the assets of the Company to a non-
affiliate, a public offering of the Company's shares or the
sale of more than 50% of the outstanding convertible common
stock by the holders thereof to a non-affiliate.
Exercise period of warrant. The warrant may be
exercised one time, and the exercise period will depend upon
whether DS&P purchases the additional 5,000,000 shares of
convertible common stock or when an event that creates the
right to exercise occurs; however, the warrant also provides
for an outside date of exercise of December 31, 2004.
Exercise price. The exercise price of the warrant is
$2.25 per share, payable at the time of exercise.
Antidilution provisions. The exercise price of the
warrant shall be subject to adjustment if certain events
occur such as stock dividends, stock splits, combination of
outstanding shares, the issuance of shares of common stock,
the sale of substantially all the assets of the Company,
merger and other similar transactions that affect the number
of outstanding shares of the Company or the continuity of
the Company. The warrant contains provisions for the
computation of any such adjustments.
Various other provisions. Included in the warrant are
provisions covering replacement, transfers, assignments,
delivery of shares upon exercise, and sundry other matters.
Description Of Registration Rights Agreement.
Demand registration requests. In connection with the
purchase of shares of convertible common stock, the Company
grants certain rights to DS&P under the Registration Rights
Agreement to request that the Company file a registration
statement under the Securities Act of 1933 with respect to a
public offering of common stock owned by DS&P (including
underlying shares of common stock to be owned through
conversion of convertible common stock and exercise of
warrants). There are two types of registration requests
that DS&P can make under the Agreement. The first is a
demand registration request wherein DS&P would notify the
Company as to the number of shares of common stock it wishes
to include in the registration statement to be filed with
the Securities and Exchange Commission by the Company for
the purpose of a public offering of those shares; DS&P can
make up to three demand registration requests while it is a
holder of the common stock. acquired through the Stock
Purchase Agreement. The second type of registration request
is a piggy back registration request, where DS&P would
notify the Company as to the number of shares of common
stock it wishes to include in a registration statement that
is planned to be filed by the Company for the purpose of a
public offering of the Company's shares.
The Company's obligations. Upon receipt of a demand
registration request from DS&P, the Company shall use its
best efforts to cause a registration statement to be become
effective under the Securities Act of 1933. Upon receipt of
a piggy back registration request, the Company shall include
the shares specified in the request in its registration
statement, provided, however, that the managing underwriter
of the proposed distribution shall have the right to reduce
the number of shares so requested by DS&P to the extent that
their inclusion would materially adversely affect such
distribution.
Underwriters and expenses of registration. In the case
of a demand registration request, DS&P shall have the right
to select the underwriter. In the case of a piggy back
request, the underwriter is selected by the Company. The
expenses of the registration are to be paid by the Company.
Various other provisions. Included in the Agreement
are provisions covering: DS&P's obligation to enter into an
agreement with the managing underwriter with respect to the
shares it wishes to sell; circumstances where the request
for registration may be delayed, such as the existence of
material inside information as to which the Company believes
it has a valid business purpose in refraining from
disclosing publicly for a period of time; mutual
indemnification provisions relating to untrue or misleading
statements made or omissions relating to the registration
procedure; and sundry other matters.
Finders Fee. If the sale of 3,500,000 shares of convertible
common stock for $7,000,000 is consummated, the Company will
pay a finders fee to the person (the "finder") who
introduced DS&P to the Company. The finders fee will be
comprised of $150,000 in cash and 70,000 unregistered
shares of the Company's existing common stock The finder is
not associated with the Company and the Company has been
advised by DS&P that the finder has no equity or other
monetary interest in DS&P or Fund II. If DS&P exercises it
right as general partner of Fund II to purchase the
additional 5,000,000 shares for $10,000,000 by December 31,
2002, the Company will not pay any finders fee on that
5,000,000 share purchase. The total value of the cash and
stock to be received by the finder upon a sale of the
3,500,000 shares, based on the November 12, 1999 closing
price of the Company's common stock, would be $355,625.
Net Proceeds To The Company From The Sale Of Stock. In
addition to the cash payment of $150,000 to be paid to the
finder, the Company will incur direct costs associated with
the sale of the convertible common stock. These costs
include primarily legal and accounting fees, printing and
mailing costs, and solicitation costs. It is estimated by
the Company that such costs will be approximately $75,000.
Based upon such estimate and the cash portion of the
finders fee, the net proceeds to be received by the Company
from the sale of 3,500,000 shares of convertible common
stock to DS&G will be $6,775,000, or $1.94 per share. The
closing price for the Company's shares of common stock on
The Nasdaq Stock Market on November 12, 1999 was $2.94. If
DS&P exercises its right as general partner of Fund II to
purchase an additional 5,000,000 shares for $10,000,000 by
December 31, 2002, the net proceeds to be received by the
Company from such sale would be the entire $10,000,000
selling price, or $2 per share, since there will be no
additional finders fee or associated costs.
Use Of Proceeds From The Stock Sale. The principal uses of
the funds received from the stock sale are set forth at
"Management's Principal Reasons For Recommending Approval.",
above. Management's projections for the dollar amounts to
be expended in connection with each project and purpose are
as follows:
Rehabilitation of concentrating mill- costs remaining
to complete renovation of
new building, outside drainage system; crushing
and grinding machinery
costs; gravity and flotation circuits; dewatering
system; tailings disposal,
electrical; and sundry other costs relating to the
concentrating mill.
$577,000
Trixie Mine costs- define and develop resources,
exploration and development. 1,008,000
Homansville area- rehabilitation of shaft; underground
exploration and development; constructing an escape way and
a ventilation shaft and other costs associated with developing the
Homansville area. 3,850,000
Corporate overhead and working capital-
1,340,000
Net proceeds from sale of 3,500,000 shares of stock
$6,775,000
The foregoing amounts are estimates and projections, and the
actual amounts expended on each project or purpose may vary
and the priority of various corporate projects may change at
a later date depending upon then existing circumstances.
Financial Statements.
Form 10-KSB. There accompanies this Proxy Statement a
copy of the Financial Statements and other information
required at Item 7 of the Company's filing with the U.S.
Securities and Exchange Commission on the Commission's Form
10-KSB for the Fiscal Year Ended December 31, 1998. The
Financial Statements and other information for the Company
and Subsidiaries from Form 10-KSB so accompanying this Proxy
Statement are comprised of: Index to Financial Statements
for the Years Ended December 31, 1998 and 1997; Report of
Independent Public Accountants; Consolidated Balance Sheet
as at December 31, 1998; Consolidated Statements of
Operations for the Years Ended December 31, 1998 and
December 31, 1997; Consolidated Statements of Shareholders'
Equity for the Years Ended December 31, 1998 and December
31, 1997; Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998 and December 31, 1997; and
Notes to Consolidated Financial Statements.
These financial statements filed by the Company as part of
its U.S. Securities and Exchange Commission's Form 10-KSB
filing for the Fiscal Year Ended December 31, 1998 were
included as part of the Company's Annual Report for the Year
Ended December 31, 1998 that was mailed to shareholders of
the Company on August 31, 1999. The Company hereby
incorporates by reference in this Proxy Statement "Item 7.
Financial Statements." and the Index, Accountant's Report,
Financial Statements and Notes to Financial Statements that
comprise a part of the Company's Form 10-KSB for the Fiscal
year Ended December 31, 1998 filed by the Company with the
U.S. Securities and Exchange Commission.
Form 10-QSB. There also accompanies this Proxy
Statement a copy of "Part I. Financial Information" of the
Company's filing with the U.S. Securities and Exchange
Commission on the Commission's Form 10-QSB for the Quarterly
Period Ended September 30, 1999. The "Part I. Financial
Information" includes for the Company and Subsidiaries:
Unaudited Condensed Balance Sheet as at September 30, 1999;
Unaudited Condensed Statements of Operations for the Three
Months Ended September 30, 1999 and September 30, 1998;
Unaudited Condensed Consolidated Statements of cash Flows
for the Nine Months Ended September 30, 1999 and September
30, 1998; and Unaudited Notes to Condensed Consolidated
Financial Statements. The Company hereby incorporates by
reference in this Proxy Statement "Part I. Financial
Information" of its Form 10-QSB for the Quarterly Period
Ended September 30, 1999 filed by the Company with the U.S.
Securities and Exchange Commission.
Pro Forma Financial Statements. The following condensed
pro forma consolidated financial statements are presented in
order to reflect how the purchase of 3,500,000 shares of the
Company's convertible common stock by Fund II would appear
as part of the Company's financial statements if the stock
purchase had occurred on December 31, 1998 for the purpose
of the balance sheet presentation and January 1, 1998 for
the presentation of the statements of operation.
Condensed Pro Forma Consolidated Balance Sheet as at
December 31, 1998.
Condensed Pro Forma Consolidated Statement of
Operations for the year Ended December
31, 1998.
Condensed Pro Forma Consolidated Statement of
Operations for the Nine-Months Ended September 30,
1999.
These condensed pro forma consolidated financial
statements take into consideration the receipt of $7,000,000
cash, the issuance of 3,500,000 shares of a $.50 par value
convertible common stock, the issuance of 70,000 shares of
existing common stock to the finder, and cash payments of
$150,000 to the finder and $75,000 for direct costs
associated with the sale of the convertible common stock.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
Under the terms of the stock purchase agreement, the Company
will issue 3,500,000 shares of redeemable convertible common
stock and stock purchase rights for 5,000,000 shares of non-
redeemable convertible common stock at $2.00 per share in
exchange for gross proceeds of $7,000,000. The 3,500,000
redeemable convertible common shares carry a dividend rate
of 8 percent which is payable in non-redeemable convertible
common stock of the Company (based on the number of issued
redeemable convertible common shares). Fund II has the
right to put the redeemable convertible common stock to the
Company for redemption at $2.00 per share on or after
December 1, 2003. In connection with this transaction, the
Company will pay a finders fee of $150,000 in cash and
70,000 shares of common stock. Additionally, the Company
estimates that the additional direct costs of the offering
will be approximately $75,000.
The following unaudited condensed pro forma consolidated
balance sheet as of December 31, 1998 assumes the investment
occurred as of that date with pro form adjustments to give
effect to the sale of 3,500,000 shares of the Company's
redeemable convertible common stock and stock purchase
rights for 5,000,000 shares of non-redeemable convertible
common stock at $2.00 per share for $7,000,000.
The following unaudited condensed pro forma statements of
operations for the year ended December 31, 1998 and for the
nine-month period ended September 30, 1999 assume that the
investment occurred on January 1, 1998.
The pro forma results of operations are not necessarily
indicative of the results of operations that would have been
obtained if the offering had occurred as of January 1, 1998.
These unaudited condensed pro forma consolidated financial
statements should be read in conjunction with the historical
financial statements of the Company.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(Unaudited)
ASSETS
Pro
Historical Forma Pro
Adjustments Forma
CURRENT ASSETS:
Cash $92,229 $6,775,000 $6,867,229
U.S. treasury bills 743,224 743,224
Accounts receivable and other 4,486 4,486
assets
Total current assets 839,939 6,775,000 7,614,939
INVESTMENT IN CENTRAL
STANDARD CONSOLIDATED MINES 79,961 79,961
ADVANCES TO CENTRAL STANDARD
CONSOLIDATED MINES 26,650 26,650
MINING CLAIMS AND PROPERTIES 8,287,145 8,287,145
MACHINERY AND EQUIPMENT 58,670 58,670
RECLAMATION BOND DEPOSITS 143,240 143,240
Total assets $ 9,435,605 $6,775,000$16,210,605
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 92,103 $ 92,103
ACCRUED RECLAMATION COST 389,800 389,800
MINORITY INTEREST 2,502,107 2,502,107
REDEEMABLE CONVERTIBLE COMMON
STOCK - $3,186,071 3,186,07
SHAREHOLDERS' EQUITY:
Preferred stock 2,584 2,584
Common stock 3,630,871 35,000 3,665,871
Additional paid-in-capital13,660,357 170,625 13,830,982
(3,164,149)
(3,186,071)
Stock Purchase Rights - 3,186,071 3,383,304
Deferred compensation (12,900) (12,900)
Notes receivable from (82,370) (82,370)
shareholders
Accumulated deficit (10,746,947) (10,746,947
Total shareholders' equity 6,451,595 3,610,851 10,040,524
Total liabilities and
shareholders' equity $9,435,605 $6,775,000 $16,210,605
See Accompanying Notes to Unaudited Condensed Pro Forma
Consolidated Financial Statements
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
Pro Forma
Historical Adjustments Pro
Forma
REVENUES:
Interest $36,051 $36,051
Land sales and other 37,660 37,660
Total revenues 73,711 73,711
EXPENSES:
General and administrativ 807,131 807,131
Mining properties operating,
exploration and reclamation 1,061,998 1,061,998
costs
Taxes other than income taxe 16,035 16,035
Total expenses 1,885,164 1,885,164
LOSS BEFORE MINORITY INTEREST (1,811,453) (1,811,453)
MINORITY INTEREST 81,801 81,801
NET LOSS (1,729,652) (1,729,652)
REDEEMABLE CONVERTIBLE COMMON
STOCK DIVIDENDS:
Beneficial conversion feature - $(3,186,701) (3,186,071)
Eight percent stock dividend - (822,500) (822,500)
Accretion to redemption value - (953,482) (953,482)
NET LOSS APPLICABLE TO COMMON
SHAREHOLDERS $(1,729,652) $(4,962,053) $(6,691,705)
NET LOSS PER COMMON SHARE
(Basic and Diluted) $ (0.26) $(1.00)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(Basic and Diluted) 6,645,151 70,000 6,715,263
See Accompanying Notes to Unaudited Condensed Pro Forma
Consolidated Financial Statements
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999
(Unaudited)
Pro Forma
Historical Adjustments Pro
Forma
REVENUES:
Interes $10,453 $ 10,453
Land sales and other 2,033 2,033
Total revenues 12,486 12,486
EXPENSES:
General and administrative 250,605 250,605
Mining properties operating,
exploration and reclamation 64,704 64,704
costs
Taxes other than income taxes 13,191 13,191
Total expenses 328,500 328,500
LOSS BEFORE MINORITY INTEREST
(316,014) (315,014)
MINORITY INTEREST - -
NET LOSS (316,014) (316,014)
REDEEMABLE CONVERTIBLE COMMON
STOCK DIVIDENDS:
Eight percent stock dividend - $(616,875) (616,875)
Accretion to redemption value - (715,112) (715,112)
NET LOSS APPLICABLE TO COMMON
SHAREHOLDERS $(316,014)$(1,331,987)$(1,648,001)
NET LOSS PER COMMON SHARE
(Basic and Diluted) $ (0.04) $(0.20)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(Basic and Diluted) 7,948,634 350,000 8,298,634
See Accompanying Notes to Unaudited Condensed ProForma
Consolidated Financial Statements
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
On November 18, 1999, the Company and Fund II entered into
an agreement that provides for the sale of 3,500,000 shares
of the Company's redeemable convertible common stock in
exchange for gross proceeds of $7,000,000. The redeemable
convertible common shares carry a dividend rate of 8 percent
which is payable in non-redeemable convertible common stock
of the Company (based on the number of issued convertible
common shares). The Company will also issue stock purchase
rights to Fund II for the purchase of an additional
5,000,000 shares of non-redeemable convertible common stock
at $2.00 per share. In connection with this transaction,
the Company agreed to pay finders fees of $150,000 in cash
and 70,000 shares of common stock. Additionally, the
Company estimates that the additional direct costs of the
offering will be approximately $75,000.
B. PRO FORMA ADJUSTMENTS
(1) To give effect to the sale of 3,500,000 shares of the
Company's redeemable convertible common stock and stock
purchase rights to purchase 5,000,000 shares of non-
redeemable convertible common stock at $2.00 per share for
gross proceeds of $7,000,000. The gross proceeds have been
reduced by direct offering costs and allocated between the
redeemable convertible common stock and the stock purchase
rights as follows:
Gross proceeds $7,000,000
Less cash offering
costs:
Finders fees (150,000)
Other direct (75,000)
offering costs
Net cash proceeds 6,775,000
Less:
Value allocated
to stock purchase (3,383,304
rights
Fair value of
stock issued as finders fee (205,625)
Net proceeds $3,186,071
The Company agreed to issue 70,000 shares of common
stock with an estimated fair value of $205,625 at the
date of commitment (based upon quoted market price on
November 12, 1999 of $2.94 per share) as a finders fee.
The Company has estimated the value of the stock
purchase rights issued in connection with the sale of
the redeemable convertible common stock based upon a
Black-Scholes pricing model. The net proceeds from the
sale of the redeemable convertible common stock has
been allocated between the stock and related stock
purchase rights based upon their relative fair values
at the date of the stock purchase agreement.
Fund II has the right to put the redeemable convertible
common stock to the Company for redemption at $2.00 per
share on or after December 1, 2003. Accordingly, the
redeemable convertible common stock has been classified
outside of shareholders' equity in the accompanying
condensed pro forma consolidated balance sheet.
(2) On November 18, 1999, the quoted market price of the
Company's common stock was $2.94 per share which is greater
than the conversion price of the redeemable convertible
common shares to be issued, resulting in a beneficial
conversion feature. The convertible common shares are
convertible into common shares immediately upon the sale of
the redeemable convertible common stock. In accordance with
EITF 98-5, the intrinsic value of the beneficial conversion
feature has been recorded as a dividend to the redeemable
convertible common shareholders at the date of the sale.
(3) The net loss available to common shareholders has been
calculated by deducting dividends attributable to the
redeemable convertible common stock. Those dividends
consist of:
a) The intrinsic value of the beneficial conversion
feature (See note 2).
b) The eight percent dividend payable in non-redeemable
convertible common stock. The dividend is calculated based
upon the number of redeemable convertible common shares
outstanding. The fair value of the dividend shares that
will be issued in the future is unknown. Accordingly, the
dividend has been estimated based upon the quoted market
price of the Company's common stock on November 18, 1999.
c) The accretion of the redeemable convertible common
shares has been amortized on a straight-line basis utilizing
the difference between the carrying value at the date of
issuance and the redemption price of $7,000,000 at December
1, 2003. The straight-line basis is assumed to reasonably
approximate the effective interest method.
(4) The pro forma weighted average number of common shares
outstanding was calculated as follows:
Year Ended Nine-Months
December Ended
31, 1998 September 30,
1999
Historical weighted average number
of common shares outstanding 6,645,151 7,948,634
Add:
Shares issued as a finders fee 70,000 70,000
Weighted average shares issued as a
dividend on the redeemable - 280,000
convertible common stock
Pro forma weighted average number of
common shares outstanding 6,715,151 8,298,634
Effect Of Dividends On Percentage Limitation Of Ownership
and Stock Warrants. Annual dividends will be paid to DS&P,
as general partner of Fund II, in shares of convertible
common stock on the 3,500,000 shares purchased. Similarly,
if DS&P exercises its right to purchase 5,000,000 additional
shares, annual dividends in shares of convertible common
stock will also be payable to DS&P, as general partner of
Fund II, on the 5,000,000 shares. No cash dividends will be
paid by the Company on the convertible common stock. If
DS&P converts shares of convertible common stock into shares
of existing common stock (convertible on a one-for-one
basis) prior to the end of a year with respect to which the
dividend is to be paid, DS&P's right to receive dividends on
the shares so converted will cease at that time. During the
years 2000 through 2002, shares of convertible common stock
representing the annual 8% dividend will be paid based on
the original 3,500,000 shares, without regard to additional
shares received as dividends. At the end of the three year
period, dividends with respect to the 3,500,000 share
purchase will begin to be paid based upon the cumulative
total number of shares held by DS&P at the time of dividend
payment, including the shares received as dividends during
the first three years. If DS&P exercises the right to
purchase the additional 5,000,000 shares under the stock
purchase agreement, the annual 8 % dividends will also be
paid in shares of convertible common stock based upon the
5,000,000 shares purchased and the dividends received
thereon.
As set forth above, DS&P will hold 30.4% of the Company's
outstanding shares upon its purchase of 3,500,000 shares.
Assuming no unrelated additional stock issuances by the
Company take place during the years 2000 to 2002 and if
DS&P, as general partner of Fund II, purchases the
additional 5,000,000 shares on December 31, 2002, DS&P would
receive 280,000 shares of convertible common stock as
dividends on the 3,500,000 shares in each of the years 2000
to 2002, which would result in DS&P holding a total of
9,340,000 shares of convertible common stock on December 31,
2002. The 9,340,000 shares would represent 53.8% ownership
of all outstanding shares of the Company at December 31,
2002. If DS&P did not purchase the 5,000,000 shares by
December 31, 2002, DS&P would hold 35% of all outstanding
shares of the Company on the latter date. The stock
purchase agreement provides that the maximum percentage of
capital stock ownership that Fund II shall own in the
Company shall be limited to 68% of the then issued and
outstanding stock of the Company. Under the terms of the
stock warrant, DS&P, as general partner of Fund II, would
have the right to purchase additional shares of the
convertible common stock at $2.25 per share in order to
bring its percentage of stock holdings of the Company's
outstanding shares up to a maximum of 68%; however, the
warrants can only be exercised if DS&P has purchased the
5,000,000 shares on or before December 31, 2002 and upon the
occurrence of one of the events described at "Description of
Stock Warrant Agreement-circumstances under which the
warrant may be exercised.", above. Since Fund II's
beneficial stock ownership percentage increases as
additional dividends paid in stock are received, the number
of shares that DS&P would need to purchase by exercise of
warrants to reach the 68% limitation are correspondingly
reduced. At such time as DS&P has reached the maximum 68 %
holdings, no further dividends would be paid. See
"Description Of Stock Purchase Agreement." and "Description
of Stock Warrant Agreement."
Approval of the transaction under Proposal 3 is required
under Chapter 10 of the Revised Arizona Statute and by the
Corporate Governance Requirements of The Nasdaq Small Cap
Market.
Accordingly, your Board of Directors recommends a vote FOR
the following resolution:
RESOLVED: that the Stock Purchase Agreement, Stock Warrants
Agreement and Stock Rights Agreement, all dated as of
November 18, 1999, providing for the transaction between
the Company and Dimeling Schreiber & Park ("DS&P"), as the
general partner of Dimeling Schreiber & Park Reorganization
Fund II, LP ("Fund II"), whereunder DS&P shall purchase
3,500,000 shares of a new class of convertible common stock
and shall have the right to purchase an additional 5,000,000
shares of convertible common stock from the Company, all
upon the terms and conditions set forth in said agreements,
which transaction is referred to and described in the
Company's Proxy Statement dated November 30, 1999, are
hereby approved, and the directors and officers of the
Company are hereby authorized to proceed to consummate the
transaction with DS&P under the terms of said agreements;
provided, however, that the shareholders of the Company also
approve at the meeting of shareholders of the Company held
December 29, 1999 or any adjournments thereof, Proposal 2 as
set forth in the said Proxy Statement.
Approval of Proposal 3 requires that a quorum of the
preferred shareholders and a quorum of the common
shareholders each be present at the meeting and that the
preferred shareholders and the common shareholders vote as
separate classes, with the votes cast in favor of Proposal 3
in each class exceeding the votes cast against Proposal 3 in
each class. MANAGEMENT INTENDS TO CAST ITS PROXY VOTES IN
FAVOR OF PROPOSAL 3.
PROPOSAL 4: THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP has been
recommended by the Board of Directors to serve as
independent public accountants for the Company for the
current fiscal year. No member of said accounting firm has
any direct financial or any material indirect financial
interest in the Company or any of its subsidiaries or any
connection during the past five years with the Company or
any of its subsidiaries in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
At the meeting of shareholders the selection of said
accounting firm will be proposed by management. Arthur
Andersen LLP has advised the Company that it does not expect
a representative to be present at the meeting.
Approval of Proposal 4 requires that the votes cast in
favor of Proposal 4 exceed the votes cast against Proposal
4. MANAGEMENT INTENDS TO CAST ITS PROXY VOTES IN FAVOR OF
PROPOSAL 4.
MEETINGS OF THE BOARD OF DIRECTORS AND
INFORMATION REGARDING COMMITTEES
The Board of Directors held three meetings in 1998.
All of the persons who served as directors at the time of
each meeting were present at all the meetings held in 1998.
The Board of Directors formed an Audit Committee in
1998, comprised of Paul Hines, a director, and James
Callery, a former director. The Audit Committee held two
meetings in 1998, at which both members of the Audit
Committee were present. Mr. Hines continues as a member of
the Audit Committee and is a director nominee . James
Callery resigned as a director of the Company in 1999 and no
longer serves on the Audit Committee. If Christopher A.
Arnold, a director nominee , is elected as a director at
this meeting, he will serve with Paul Hines on the Audit
Committee. The Board of Directors does not have a
compensation or nominating committee or committees
performing similar functions.
A copy of the Company's 1998 Annual Report, which
includes a complete copy of the Company's Securities and
Exchange Commission's Annual Report on Form 10-KSB
containing financial statements and financial statement
schedules for the year ended December 31, 1998, was mailed
to each shareholder of record on August 31, 1999.
Additional Annual Reports will be available upon written
request to the Company.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders' proposals intended to be presented at the
Company's 2000 Annual Meeting of Shareholders must be
received at the Company's offices at 500 Fifth Avenue, New
York, New York 10110, by March 30, 2000 for inclusion in the
Company's proxy statement and form of proxy relating to that
meeting. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange
Commission relating to shareholders' proposals.
OTHER MATTERS
The Company is not aware of any person who, at any time
during the year 1998 was a director, officer or beneficial
owner of more than 10% of the Company's common stock who
failed to file on a timely basis, reports required by
Section 16(a) of the Securities Exchange Act of 1934 during
1998 or prior years.
The cost of soliciting proxies will be borne by the
Company. The Company will solicit votes by mail, and
officers, directors and employees of the Company may solicit
proxies by telephone, telegraph or personal interview. In
addition, the Company has retained the professional
soliciting firm of Corporate Investors Communications, Inc.
to solicit proxies from banks, brokers, nominees and
institutions at a cost to the Company of $5,000 and
disbursements.
Management knows of no other matters to be presented
for consideration at the meeting by management or by
shareholders who have requested inclusion of proposals in
the Proxy Statement, other than the matters stated in the
Notice of Special Meeting of Shareholders in Lieu of Annual
Meeting. If any other matter shall properly come before the
meeting, the persons in the accompanying proxy intend to
vote on such matters in accordance with their best
judgement.
INFORMATION INCORPORATED BY REFERENCE
The following items are incorporated by reference in
this Proxy Statement:
"Item 7. Financial Statements." and the Index,
Accountant's Report, Financial Statements and Notes to
Financial Statements that comprise a part of the Company's
Form 10-KSB for the Fiscal Year Ended December 31, 1998
filed by the Company with the U.S. Securities and Exchange
Commission.
"Part I. Financial Information" of the Company's Form
10-QSB for the Quarterly Period Ended September 30, 1999
filed by the Company with the U.S. Securities and Exchange
Commission.
By Order of the Board of Directors,
Edward R. Schwartz
Secretary
November 30, 1999
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995:
This Proxy Statement contains statements which are not
historical facts, such as anticipated production,
exploration results and costs and therefore are "forward-
looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, and involve a
number of risks and uncertainties that could cause actual
results to differ materially from those projected,
anticipated, expected or implied. These risks and
uncertainties include, but are not limited to, the
following: the net proceeds from the sale of stock to be
received by the Company if Proposals 2 and 3 are approved by
the shareholders at this meeting are not sufficient for the
Company to complete the intended work and projects; even if
the amount of funds from the stock sale is sufficient to
complete the work and projects, the Company is unable to
initiate profitable mining activities at the Trixie Mine
and/or mining from the Homansville area is not commercially
feasible; Fund II does not exercise its right to purchase
the 5,000,000 shares by December 31, 2002 and, as a result,
the Company is unable to continue any mining operations or
continue to seek development of the Homansville area.
Refer to the Company's Form 10-QSB and 10-KSB reports filed
with the Securities and Exchange Commission.
EXHIBIT A
RESTATED
ARTICLES OF INCORPORATION
OF
CHIEF CONSOLIDATED MINING COMPANY
ARTICLE 1.
The name of this Corporation shall be and is the Chief
Consolidated Mining Company.
ARTICLE II.
(a) The name and address of this Corporation's
statutory agent in the State of Arizona is Corporation
Service Company, 3636 North Central Avenue, Phoenix, Arizona
85012. The principal place of business of this Corporation
outside the state of Arizona is 500 Fifth Avenue, Suite
1021, New York, New York 10110-1099.
(b) The name and address of each person who is serving
as a director of this Corporation until a successor is
elected and qualified is as follows;
Name Address
Christopher A. Arnold 1629 Locust Street, Philadelphia, PA 19103
Thomas Bruderman 1573 Bronson Road, Fairfield, CT 06430
William R. Dimeling 1629 Locust Street, Philadelphia, PA 19103
Paul Hines 12 Flying Cloud Road, Stamford, CT 06902
Robert E. Poll 225 West 86th Street, New York, NY 10024
Richard R. Schreiber 1629 Locust Street, Philadelphia, PA 19103
Leonard Weitz 500 Fifth Avenue, New York, NY 10110
ARTICLE III.
This Corporation is organized for the purpose of
carrying on and transacting a mining business and shall have
the following powers and rights as incidental to such
business:
(a) To explore for minerals, metals and ores of all
kinds in any state, territory or country.
(b) To purchase or otherwise acquire, hold, manage,
operate, sell or otherwise dispose of any mineral lands or
the products thereof in any state, territory or country.
(c ) To explore, develop, operate or work any and all
mines or mineral lands acquired by said Corporation, or in
which said Corporation may have any interest whatsoever, in
any State, territory or country, and to acquire and dispose
of in any manner whatsoever all machinery, supplies, and
materials necessary or convenient for use in connection
therewith.
(d) To purchase and sell, or otherwise acquire or
dispose of, stocks, bonds, notes, or obligations in any
other form, of any Corporation organized for mining purposes
under the laws of Arizona or any other territory, state of
country, including stock, bonds, notes or other obligations
of this corporation.
(e) To purchase or sell, or otherwise acquire or
dispose of, pipe-lines, tracks, water rights, roads,
tramways, canals, ditches, telephone or telegraph lines,
railroads or any other form of property, and to use, enjoy
and operate the same in any manner whatsoever, incidental to
or in connection with the carrying on of the mining business
of this corporation.
(f) To transact any business usually or properly
incidental or collateral or to allied with mining, including
the power and right to mine or otherwise produce, refine,
reduce, manufacture, acquire, sell, or otherwise dispose of,
deal in, ores, limerock or any other raw materials, or any
products or by-products derived from such ores, limerock or
any raw materials; to acquire, own, hold, sell, or otherwise
dispose of, letters patent or patent rights deemed useful in
connection with the business of the Company; to acquire,
hold, use, operate, sell, and dispose of, all property, real
and personal, necessary or proper to aid the corporation in
transacting any of its business; and to have and exercise
the power and right or eminent domain for the acquisition
of any real property, or the right to use same, in Arizona
or any other state within the United States of America.
(g) ADDITIONAL POWERS:
(1) To engage in business in all its forms and
branches.
(2) To purchase, or otherwise, acquire, own, hold,
lease, sell, exchange, assign, transfer, mortgage, pledge or
otherwise dispose of, to guarantee, and to invest, trade and
deal in and with personal property of every class and
description.
(3) To purchase, or otherwise acquire, own, hold,
lease, sell, exchange, assign, transfer, mortgage or
otherwise dispose of, and to invest, trade and deal in and
with real property, and any and all interests therein.
(4) To enter into any kind of contract or agreement,
cooperative or profit-sharing plan with its officers or
employees that the corporation may deem advantageous or
expedient or otherwise to reward or pay such persons for
their services as the directors may deem fit.
(5) To build houses or other buildings of every kind
and character, either for sale of lease or on contract or
otherwise; to lay out, subdivide, resubdivide and plat
tracts of land and sell same, either by such subdivision or
resubdivision; and to improve lands laid out, subdivide or
resubdivide, grade, oil and improve streets, alleys, parks
and other places, and sidewalk, curb, and otherwise improve
the same, and construct and maintain and operate sewers and
any and all other conveniences and matters in connection
therewith.
(6) To purchase, lease or otherwise acquire, in whole
or in part, the business, goodwill, rights, franchises and
property of every kind, and to undertake the whole or any
part of the assets or liabilities, of any person, firm,
association or corporation engaged in or authorized to
conduct any business similar to any business authorized to
be conducted by this corporation, or owning property
necessary or suitable for its purposes, and to pay for the
same in cash, in the stock or bonds of this company, or
otherwise; to hold or in any manner dispose of the whole or
any part of the business or property so acquired, and to
exercise all the powers necessary or incidental to the
conduct of such business.
(7) To lend money and to negotiate and make loans,
either on its own account or as agent or broker for others.
(8) To borrow money, to issue bonds, debentures, notes
and other obligations of this corporation from time to time,
for any of the objects or purposes of this corporation, and
to mortgage, pledge, hypothecate, and/or convey in trust,
any or all of its property to secure the payment thereof.
(9) To discount and negotiate promissory notes,
drafts, bills of exchange, and other evidences of debt, and
to collect for others money dues them on notes, checks,
drafts, bills of exchange, commercial paper and other
evidence of indebtedness.
(10) To enter into, make, perform and carry out
contracts of every kind and for any lawful purpose, without
limit as to amount, with any person, firm, association,
corporation, municipality, state, or government, or any
subdivision, district or department thereof.
(11) To acquire, and pay for in cash, shares of stock,
bonds or notes of this corporation, or otherwise, the assets
including the goodwill of any person, firm, association or
corporation, and to undertake or assume the whole or any
part of the obligations or liabilities thereof.
(12) To engage in and conduct any and all kinds of
manufacturing businesses.
(13) To do any and all such other acts, things,
business or businesses in any manner connected with or
necessary, incidental, convenient or auxiliary to any of the
objects hereinbefore enumerated, or calculated, directly or
indirectly, to promote the interest of the corporation; and
in carrying on its purposes, or for the purpose of attaining
or furthering any of its business, to do any and all acts
and things, and to exercise any and all other powers, which
a copartner or natural person could do or exercise, and
which now or hereafter may be authorized by law, and in any
part of the world.
(14) To buy and sell foreign exchange and the
currencies of any nation. To engage in foreign trade and in
this connection to purchase and sell goods, wares and
merchandise manufactured in foreign countries.
(h) It is hereby expressly provided that the foregoing
anumerations of specific powers, objects and purposes of
this corporation shall be in furtherance, and not in
limitation, of the general powers conferred upon a
corporation by the laws of the State of Arizona, it being
specifically provided that his corporation shall have and
may exercise all the rights and powers conferred by the
State of Arizona upon like corporations organized under its
laws, and that such specific objects, purposes and powers,
in any paragraph enumerated herein, excepting where
otherwise clearly indicated herein, shall not be limited or
restricted by reference to or inference from the terms of
any other clause or paragraph of these Articles.
ARTICLE IV
The total amount of the authorized capital stock of
this corporation shall be Twenty Five Million, Seven Hundred
Fifty Thousand dollars ($25,750,000), divided into One
Million Five Hundred Thousand (1,500,000) shares of
Preferred Stock, par value $0.50 per share, Twenty Million
(20,000,000) shares of Common Stock having a par value of
$0.50 per share, and Thirty Million (30,000,000) shares of
Convertible Common Stock, par value $0.50 per share. All
such stock, Preferred, Common, and Convertible Common, shall
have equal voting powers, each share entitling the holder to
one vote at all meetings of the stockholders on all matters
upon which stockholders are entitled to vote under Arizona
law, and, except as otherwise provided in the designation of
Convertible Common Stock set forth herein, all such stock,
Preferred, Common and Convertible Common Stock, shall
participate equally in all dividends declared; one share of
Preferred Stock shall receive the same amount of dividends
as one share of Common Stock and as one share of Convertible
Common Stock. In the event of any liquidation, dissolution,
or winding up of the corporation, the holders of the
Preferred Stock shall be entitled, before any of the assets
of the corporation shall be distributed among the holders of
the Convertible Common Stock or Common Stock, to be paid in
full the par amount of their shares.
Except as otherwise provided in the designation of
Convertible Common Stock set forth herein, the Board of
Directors may in their discretion from time to time and in
such amounts as they may determine, sell to any person
whomsoever the unsubscribed stock of the company,
Convertible Common, Common and Preferred, at not less than
its par value.
The amount, the voting powers, preferences and relative
rights and privileges and other rights granted to the Common
Stock and the Convertible Common Stock and the
qualifications, limitations or restrictions imposed thereon
be, and they hereby are as follows:
1. Rights and Privileges. The Common Stock and the
Convertible Stock shall be of equal rank and shall entitle
the holders thereof to the same rights and privileges,
except as hereinafter provided.
2. Designation and Amount. Thirty Million (30,000,000)
shares of the capital stock of the Corporation are hereby
designated as Convertible Common Stock.
3. Common Stock Outstanding. All common stock heretofore
issued and outstanding is Common Stock of the Corporation
without surrender or exchange of certificates therefor.
4. Certain Restrictions. Until the earlier of the date a
minimum of 8,500,000 shares of Convertible Common Stock is
issued and outstanding or December 31, 2002, the Corporation
shall issue no dividends other than the 8% annual dividend
on the Convertible Common Stock; and so long as any
Convertible Common Stock is outstanding, issuance of
additional shares of Convertible Common Stock is restricted
pursuant to the terms of that certain Stock Purchase
Agreement entered into by the Company and Dimeling,
Schreiber and Park, dated as of November 19, 1999.
5. Dividends and Distributions. Subject to certain
Restrictions set forth in paragraph 4 above, so long as
equivalent dividends and distributions are made to the
holders of Convertible Common Stock, and dividends in the
form of Convertible Common Stock are paid only to holders of
Convertible Common Stock, holders of Common Stock shall be
entitled to receive dividends and other distributions when,
as, and if declared by the Board of Directors out of funds
legally available for the purpose. The holders of the
Convertible Common Stock shall be entitled to receive when,
as, and if declared by the Board of Directors out of funds
legally available for the purpose, dividends at an annual
rate of 8%, payable annually solely in additional shares of
Convertible Common Stock. Such a dividend shall be payable
as a simple dividend for the fiscal years ending December
31, 2000 and 2001, and for all periods after the earlier of
December 31, 2002 or the Tranche B Closing, dividends paid
on the Convertible Common Stock shall be cumulative, and
rights shall accrue to the holders of the Convertible Common
Stock in the event that the Corporation shall fail to
declare or pay dividends on the Convertible Common Stock for
any fiscal year, whether or not earnings of the Corporation
for such year were sufficient to pay such dividends in whole
or in part.
6. Voting Rights. Holders of Convertible Common Stock
shall be entitled to one vote per each full share of Common
Stock into which the Convertible Common Stock they hold
could be converted, notwithstanding any restriction on
convertibility as to time, at the date a vote of
stockholders is taken or a written consent of stockholders
is solicited.
7. Redemption. The Convertible Common Stock is redeemable
pursuant to the terms of that certain Stock Purchase
Agreement entered into by the Company and Dimeling,
Schreiber & Park, dated as of November 19, 1999.
8. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution or winding
up of the Corporation, no distribution shall be made to
the holders of the Common Stock of the Corporation
unless first the holders of the Preferred Stock shall
have received an aggregate amount equal to $0.50 per
share of Preferred Stock then held, and then the
holders of the Convertible Common Stock shall have
received an aggregate amount equal to $2.00 per share
of Convertible Common Stock then held, plus an amount
equal to all declared but unpaid dividends thereon.
(b) In the event the assets to be distributed to
the holders of Convertible Common Stock shall be
insufficient to permit the payment to holders of the
full preferential amount aforesaid, then all the assets
of the Corporation to be distributed to the holders of
the Convertible Common Stock shall be distributed on a
pro rata basis in accordance with their respective
holdings of Convertible Common Stock.
(c) The rights of the holders of the Convertible
Common Stock to the liquidation preference are
subordinate only to the rights of the holders of the
Corporation's outstanding Preferred Stock to receive an
aggregate amount of $0.50 per share upon the
liquidation, dissolution or winding up of the
Corporation.
(d) In the event that assets of the Corporation
remain after distribution to holders of Preferred Stock
and the holders of the Convertible Common Stock to the
extent of their respective preferences, the holders of
each class of stock shall be entitled to distribution
of such assets on a pro rata basis in accordance with
their holdings.
9. Optional Conversion. Each share of Convertible
Common Stock shall be convertible at any time at the option
of the holder thereof, into one fully paid and non-
assessable share of Common Stock of the Corporation
("Conversion Rate"), subject to adjustment in the Conversion
Rate in accordance with paragraph 10 hereof.
10. Adjustments to the Conversion Rate. The
Conversion Rate for the Convertible Common Stock shall be
subject to adjustment from time to time, calculated as
follows:
(a) if the Corporation:
(i) pays a dividend or makes a distribution
on its Common Stock or Preferred Stock in shares
of its Common Stock;
(ii) subdivides its outstanding shares of
Common Stock into a greater number of shares;
(iii) combines its outstanding shares of
Common Stock into a smaller number of shares; or
(iv) issues by reclassification of its Common
Stock any shares of its capital stock;
then the Conversion Rate in effect immediately prior to
such action shall be adjusted so that each holder of
Convertible Common Stock thereafter converted may
receive the number of shares of Common Stock of the
Corporation which such holder would have owned
immediately following such action if such holder had
converted such shares of Convertible Common Stock
immediately prior to such action.
(b) if the Corporation:
(i) issues rights or warrants entitling
holders of Common Stock to subscribe for or
purchase shares of its Common Stock or securities
convertible into Common Stock; or
(ii) distributes to the holders of its Common
Stock or Preferred Stock any of its assets or debt
securities or any rights or warrants to purchase
debt securities, assets or other securities of the
Corporation;
then the Conversion Rate in effect immediately prior to
such action shall be adjusted so that each holder of
Convertible Common Stock thereafter converted may
receive the number of rights, warrants, assets or debt
securities to which such holder would have been
entitled immediately following such action if such
holder had converted such Convertible Common Stock
immediately prior to such action.
(c) If the Corporation shall consolidate with or
merge into any other corporation or transfer all of its
properties and assets as an entirely to any person,
then upon consummation of such transaction, each share
of the Convertible Common Stock shall automatically
become convertible into the kind and amount of
securities, cash or other assets to which the holder of
such share would have been entitled immediately after
such consolidation, merger or transfer if such holder
had converted such share of Convertible Common Stock
immediately prior to the effective date of such
transaction.
11. Mechanics of Conversion.
In the event of conversion at the option of the
holder of shares of Convertible Common Stock pursuant
to paragraph 9 hereof, the holder shall surrender the
certificate or certificates therefor, duly endorsed, at
the office of the Corporation and shall give written
notice to the Corporation of such holder's election to
convert same and shall state therein the number of
shares of Convertible Common Stock being converted.
Thereupon, the Corporation shall promptly issue and
deliver to such holder of Convertible Common Stock a
certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled.
12. Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the
conversion of the shares of the Convertible Common Stock,
such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all
outstanding shares of the Convertible Common Stock, and if
at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Convertible
Common Stock, the Corporation will take such corporate
action, as may be, in the opinion of its counsel, necessary
to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for
such purpose.
13. Restriction on Amendment: So long as any
Convertible Common Stock shall be issued and outstanding,
the Corporation shall not amend these Articles of
Incorporation without the affirmative vote of the holders of
Convertible Common Stock, voting as a class.
ARTICLE V.
The time of the commencement of the Corporation shall
be the date of filing a certified copy of these Articles of
Incorporation in the office of the Territorial Auditor of
the Territory of Arizona and the existence of the
Corporation shall be perpetual.
ARTICLE VI
The affairs of this Corporation shall be conducted by
the Board of Directors consisting of not less than three (3)
persons nor more than seven (7) persons who shall be
shareholders. The number of directors to serve shall be
fixed by the Board of Directors. All directors shall be
elected annually at a stockholders' meeting on the third
Tuesday of May of each year and shall hold office until
their successors are elected and qualify or as provided by
the By-laws of the Corporation.
The Board of Directors shall have full power to fill
all vacancies occurring in the Board from any cause, and to
appoint from their own number an executive committee, and
vest said committee with all the powers granted the Board of
Directors by these articles.
ARTICLE VII
The officers of this Corporation shall be a President,
two Vice-presidents, Secretary and Treasurer, and such minor
officers as the Board of Directors may see fit to appoint.
The President, Vice-president, Secretary and Treasurer shall
be elected annually by the Board of Directors at its first
meeting after the annual election of directors. The office
of Secretary and Treasurer may, in the discretion of the
directors, be held by the same person, and it shall not be
necessary for the Secretary and Treasurer to be a director
of the Corporation.
ARTICLE VIII
The Board of Directors shall have full power to borrow money
and incur such indebtedness as it shall see fit, and to
mortgage or pledge any or all of the property of the Company
to secure such loans and indebtedness.
ARTICLE IX
The Board of Directors may adopt by-laws for this
Corporation which may be repealed or amended by said Board.
ARTICLE X
The private property of the stockholders of this Corporation
shall be exempt from any and all liability for the debts of
this Corporation.
PROXY Preliminary Copy
(front)
CHIEF CONSOLIDATED MINING COMPANY
Special Meeting of Shareholders in Lieu of Annual Meeting
December 29, 1999
The undersigned, the holder of common stock or
preferred stock of Chief Consolidated Mining Company hereby
constitutes and appoints Leonard Weitz and Edward R.
Schwartz ( the Proxy Committee) and/or each of them
attorneys and agents with full power of substitution and
revocation to vote in accordance with the related Proxy
Statement in the name and as proxy of the undersigned at the
Special Meeting of Shareholders in lieu of Annual Meeting of
Chief Consolidated Mining Company to be held at the Doral
Park Avenue Hotel, 70 Park Avenue, New York, NY 10016 on
December 29, 1999 at 11:00 A.M., and any adjournment of
adjournments thereof according to the number of shares which
the undersigned would be entitled to vote if personally
present at the meeting on the following proposals in the
manner specified and upon such other matters as may properly
come before the meeting.
THIS PROXY IS SOLICITED BY MANAGEMENT OF CHIEF CONSOLIDATED
MINING COMPANY. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS SO MADE AND IF NO SPECIFICATIONS ARE SO
MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(Continued, and to be marked, dated and signed, on the
other side)
(back)
FOR WITHHOLD
1. ELECTION OF DIRECTORS ALL FOR ALL
Nominees: Christopher A. Arnold, Thomas Bruderman, William
R. Dimeling, Paul Hines, Robert E. Poll,
Richard R. Schreiber and Leonard Weitz as directors.
(The Board of Directors recommends a vote FOR ALL).
TO WITHHOLD VOTE FOR INDIVIDUAL NOMINEE(S): (Write that
nominee(s) name in the space provided below).
2. Approval of the proposal to amend and restate the
Articles of Incorporation of the Company.
(The Board of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
3. Approval of the sale by the Company to a private
investor of 3,500,000 shares of a new class of voting
convertible common stock, together with the right to
purchase an additional 5,000,000.
(The Board of Directors recommends a vote FOR)
FOR AGAINST ABSTAIN
4. ratification of the appointment of ARTHUR ANDERSEN
LLP as independent public accountants.
(The Board of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
5. The Proxy Committee in their discretion, considering
and acting upon any other matters which may properly come
before the meeting or any adjournments thereof. (The Board
of Directors recommends a vote FOR).
FOR AGAINST ABSTAIN
The undersigned hereby acknowledges receipt of a copy of the
notice and proxy statement of the Company for the meeting
referred to on the reverse side.
Signature(s) Dated
NOTE: Please sign as name appears, Joint ownership should
each sign. When signing as Attorney, Executor,
Administrator, or Guardian, please give full title as
such. If signer is a corporation, please sign with the
full corporation name by duty authorized officer or
officers.
Exchange Act 14A Preliminary Proxy Material Filing-Cover Letter
HOWARD WEITZ, P.C.
ATTORNEY AT LAW
51 EAST 42ND STREET
NEW YORK, NY 10017
TELEPHONE 212-661-4310
FACSIMILE 212-661-4314
November 19, 1999
United States Securities and Exchange Commission
Division of Corporation Finance
Washington, D.C. 20549
RE: Chief Consolidated Mining
Company
Commission File NO. 1-1761
Regulation 14A Proxy Material
Gentlemen:
The undersigned is counsel to the above named
registrant. There is been electronically filed this date
pursuant to Regulation S-T, copies of the Company's
following preliminary proxy material for a Special Meeting
of Shareholders in lieu of annual meeting of shareholders to
be held December 29, 1999:
1. Proxy
2 Notice of meeting and Proxy Statement
Reference to the documents incorporated by reference
are set forth at the end of the proxy statement. The
accountants consent will be submitted upon the filing of
definitive proxy material.
If the staff has any comments on the filed material, it
would be appreciated if the undersigned could be provided as
soon as possible.
Since I believe there is an eleven day notice day
period due to Thanksgiving day, registrant would propose to
have material printed on December 1, and mailed on December
3, 1999, if no comments are received from the staff.
Thank you for your consideration.
Very truly yours,
Howard Weitz, P.C.
